[DE] Hypo Real Estate Bank - Commercial

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Saturday, October 5th, Hypo Real Estate said a 35 billion euro ($49 billion) government-backed rescue package has been withdrawn, renewing concerns that a bankruptcy may be unavoidable.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