Pressure on terms for withdrawing from ownership triggers write-downs in the BEC data centre
The Danish Financial Supervisory Authority
Nasdaq Copenhagen A/S
31 October 2017
Pressure on terms for withdrawing from ownership triggers write-downs in the BEC data centre
In connection with new own funds requirements applying to Danish banks, the Danish FSA has challenged the compensation payable to data centres by a bank withdrawing from ownership in cases where it no longer complies with its capital requirements and winding-up measures need to be taken. The FSA has indicated that it believes compensation amounts for withdrawing from ownership will be considered a hindrance to a winding-up process and must therefore be discontinued for such situations.
The FSA's view would have the effect of challenging the business model applied by BEC, Vestjysk Bank's data centre, as the business model is based on the principle that a member withdrawing from ownership of the data centre at short notice is required to pay compensation to the remaining members to cover capitalised shared development costs, shared obligations to suppliers, etc.
Considering the FSA's view, Vestjysk Bank and the other owners of BEC have resolved to initiate a process intended to reduce the future financial obligations of a BEC member in the event a member withdraws from ownership as a result of the initiation of a winding-up process. Given the increased uncertainty regarding the expected future income streams resulting from the present situation, BEC has made a preliminary valuation assessment of its existing development assets.
As a result, BEC will take a partial write-down on its development assets in 2017, and BEC members' share accounts will be written off fully.
For Vestjysk Bank, this entails the injection of fresh capital to BEC in the fourth quarter of 2017 and a write-down of Vestjysk Bank's ownership interest in BEC by a total amount of DKK 29 million.
Given the strong performance of Vestjysk Bank's core earnings, the Bank maintains its current guidance of core earnings of DKK 400-450 million.
Vestjysk Bank will release its interim report for the nine months to 30 September 2017 on 22 November 2017.
Please direct any questions regarding this announcement to Jan Ulsø Madsen, CEO, on tel. (+45) 96 63 21 04.
Vestjysk Bank A/S
Vagn Thorsager Jan Ulsø Madsen
Chairman CEO
Vestjysk Bank A/S
Torvet 4-5
DK-7620 Lemvig
Denmark
Phone +45 96 63 20 00
CVR no. 34631328
www.vestjyskbank.dk
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