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[DE] Hypo Real Estate Bank - Commercial

2008-10-04

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stories: bloomberg.com, bloomberg.com, iht.com, reuters.com, ft.com, hyporealestate.com

Bloomberg reported today that the German government's bailout plan of Hypo Real Estate, now revised to 50 billion euros ($68 billion), had been agreed upon with the country's banks and insurers. Quoting analyst Konrad Becker of Munich-based Merck Finck & Co., the article notes, "The need for an enlargement of the bailout has increased investors' concern that Hypo Real Estate will have to be wound-down eventually."

In a brief statement issued Saturday, October 5th, Hypo Real Estate said a 35 billion euro ($49 billion) government-backed rescue package has been withdrawn, renewing concerns that a bankruptcy may be unavoidable.

"The intended rescue package involved a liquidity line to be provided by a consortium of several financial institutions. The consortium has now declined to provide the line. The Group is now in the process of determining the consequences of this for the legal entities within the Group. Alternative measures are being investigated."

Cited as "Germany's No. 2 commercial property lender" in the International Herald Tribune, Hypo Real Estate was forced to seek the bailout after subsidiary Depfa Bank Plc "failed to get short-term funding amid the credit crunch," Bloomberg reported. The plan called for 20 billion euros to be contributed by the Central European Bank and Germany's Bundesbank, with an additional 15 billion from the consortium to secure a financing facility that would enable Hypo Real Estate to continue operations into 2009.

As explained in a Financial Times article, state aid under European Union (EU) rules "can last for up to six months. However, if assistance is needed beyond that point, a separate restructuring aid package must be submitted." But the bank's funding needs turned out to be more extensive than the 35 billion euro plan called for. Quoting German newspaper Die Welt, Bloomberg stated:

"Hypo Real Estate's financing needs exceeded the bailout plan guarantee, Germany's Die Welt reported earlier today, citing unnamed people in the finance industry. It will need 20 billion euros by the end of next week and 50 billion euros by the end of the year, according to the newspaper. As much as 100 billion euros may be needed to shore up the bank's finances by the end of 2009, Die Welt said."


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Comments:

DennisKline at 12:31 2008-10-09 said:
Hypo Real Estate is still in business.

It is not correct to label them as imploded. The bank has secured the backing of the German Government and it will not fail. Permalink

Robin at 13:30 2009-03-03 said:
It appears they may still be in business for the moment, but recent news indicates that Germany is moving closer to taking them over, after sinking 102 billion euros into the bank.

Reuters just reported: http://uk.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUKBAT00274820090303

"Germany sees no basis for talks at the moment with J.C. Flowers, the U.S. investor who holds nearly a quarter of the shares in stricken lender Hypo Real Estate (HRXG.DE), a finance ministry spokesman said.

"The position of Mr. Flowers would lead to a situation where the German government would not have full control over HRE," the spokesman said, adding this would prevent Berlin from pushing through a restructuring of the firm.

"Therefore there is no basis for talks at the present time," the spokesman added.

Chancellor Merkel signed off on a draft bill on 2-18-09 "paving the way for the first German bank nationalization since the 1930s." Even though it was to be a measure of last resort, that seems to be looming ever closer. From a Bloomberg article on 2-25-09: http://www.bloomberg.com/apps/news?pid=20601100&sid=aG0iSbfOQpJk&refer=germany
German Chancellor Angela Merkel said saving Hypo Real Estate Holding AG must be “justifiable and cheap” for the taxpayer, suggesting she still considers nationalizing the lender as a measure of last resort.

“We can’t nurse a bank back to health that should actually be bankrupt by now and watch the shareholders walk off with all the money,” Merkel said today at a political rally in Demmin, Germany. “We have to make it as justifiable and cheap as possible for taxpayers.”

Allowing Hypo Real Estate to go bankrupt could have the same “devastating consequences” as the collapse of Lehman Brothers Holdings Inc., Merkel said. While the German government is extending guarantees to save the bank, it is also “obliged to the taxpayer,” she said.

An expropriation of the bank would be the first in Germany since 1931, a move that could cast a shadow on the country’s image as a business location. Nationalization is only an option “after attempts to take a majority stake have failed,” Ulrich Wilhelm, Merkel’s spokesman, told reporters in Berlin on Feb. 16.

“We don’t have an interest in nationalization and expropriation,” Merkel said. “But let’s be honest. Looking at a bank like Hypo Real Estate -- it no longer has anything. We’ve helped it out 10 times already,” she said. “We’re doing something so that it doesn’t go broke, but apart from that, the bank has already been ruined by those who own it.”

Permalink
twalker at 00:03 2010-02-22 said:
I love the implode-o-meter! It shows, with one number, the problems in the american banking system. Keep it up. Permalink

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Important: This company is on our list of lending operations that have "imploded". However, please note that "imploded" is a somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or "firesale" acquisition. All information here is provisional, and may contain inaccuracies (especially newer information). If you are planning on doing business with this company or any other one listed on this site, you should inquire with them directly on whether they can still meet your needs. Many are still operating in some capacity.