The German bank Hypo Real Estate (HRE) was granted a last-minute “multi-billion euro” credit line from a consortium of German banks that allowed it to avoid declaring bankruptcy, it said yesterday.
A consortium has provided the troubled real estate lender “a major new credit facility which is designed to shield the company from the impact of the current malfunctioning of the international money markets,” a statement said.
The unspecified amount was “sufficient to cover the group’s funding needs well into the future,” it said.
WATCHDOG
The German central bank and the stock market watchdog BaFin said separately that they “felt that Hypo Real Estate’s viability was thus guaranteed.”
The lender had launched talks with unidentified German banks “in response to the extremely challenging conditions on the international money markets following the Lehman collapse and other market disruptions,” HRE said in reference to the bankrupt US investment bank Lehman Brothers.
Banks that normally borrow money on interbank markets have seen that source dry up since the US subprime mortgage crisis erupted more than a year ago.
Institutions that depended on regular refinancing of their debts have found themselves running into crisis.
RESCUE
The daily Financial Times Deutschland reported yesterday that private German banks had been trying “feverishly” to find a way to rescue the institution, hit hard by the US subprime loan crisis that began in August last year.
The report said the bank, which is listed among Germany’s 30 blue chip Dax index companies, had fallen victim to speculation by its German-Irish unit Depfa.
The newspaper said Depfa had pursued long-term projects with heavy loans and generally ensured refinancing only at the last minute, which because of the global credit crunch was no longer possible.
TAB
HRE would have to pick up the tab for the refinancing, estimated to be in the double-digit billions of euros range, according to the report.
“It is highly unlikely at the present time that HRE will be able to come up with that amount,” Financial Times Deutschland wrote ahead of the reported rescue package.
HRE, incorporated in October 2003 in Munich, operates in three sectors: commercial real estate; public sector and infrastructure finance; and capital markets and asset management.
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