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Merckle offers more collateral to banks

One source described Merckle's concessions as a big step toward his lenders.

Another source said an extension of a debt moratorium seemed very likely. A new standstill agreement looked set to run through mid-December, the source added.

Merckle's investment vehicle VEM Vermoegensverwaltung, which owns generic-drug maker Ratiopharm and a stake in cement maker HeidelbergCement, was initially given a two-week moratorium that expired overnight to overhaul its finances, which were battered by dud bets on Volkswagen shares.

A VEM spokeswoman said that negotiations with banks were continuing, and declined to comment further.

Merckle's son Ludwig said on Tuesday the family had offered to put up ‘significant’ parts of its private wealth as collateral for bank loans needed to escape a liquidity squeeze.

Two people familiar with the matter told Reuters last week that Merckle, who in 2007 was ranked by Forbes as one of the world's 50 richest people, had pledged to sell at least parts of Ratiopharm as a precondition for the moratorium.

Still, no bank had so far been mandated to prepare a sale, according to banking sources.

VEM had said it had incurred losses of a ‘low three-digit million’ euro amount from put options on Volkswagen shares. Banking sources had specified that the loss amounted to 400 million euros ($507.2 million).

In addition, VEM had said it had shored up HeidelbergCement's equity capital using loans backed by shares as collateral. The market value of these shares had slumped amid the financial crisis, prompting banks to demand early redemption on their loans.

Shares in HeidelbergCement, were down 3.3 percent to 35.3 euros at 1036 GMT, while the German midcap index MDAX declined 0.9 percent.