GERMAN PROPERTY financier Hypo Real Estate (HRE) is considering dumping Depfa, its troubled Dublin subsidiary, as it struggles for survival – and another bail-out from Berlin.
The Munich-based bank, Germany’s second largest commercial lender, has received €92 billion in loans and state guarantees since last October to stay afloat.
After receiving another €12 billion guarantee on Tuesday, the bank confirmed yesterday it remains in “ongoing negotiations” for further assistance from the German bank stabilisation fund, SoFFin.
A source familiar with the talks told the Frankfurter Allgemeinenewspaper yesterday that a rescue "without a break-up will not be possible".
News that the bank may require another multi-billion guarantee has prompted speculation that the bank, considered too “big to fail”, will eventually be nationalised.
The bank has not needed to draw on the state guarantees secured to date.
But it continues to feel the effects of liquidity problems on the short-term credit markets used by Depfa in Dublin to finance long-term credit.
“Depfa is the focus of all talks and negotiations,” said another source, calling the bank “a millstone around HRE’s neck”.
A spokesman for HRE declined to confirm or deny speculation about Depfa’s future or a likely timeline for talks with SoFFin. Until now, Berlin has been cautious about getting involved in bank affairs.
It has created a bank guarantee fund and acquired a 25 per cent share of Commerzbank.
It is also considering assistance to the highly leveraged Schaeffler Group.
But as HRE’s running tab approaches €100 billion, officials in Berlin are worried that the lender has become a bottomless pit.
Any state share in the bank may be dependent on HRE offloading Depfa, which it bought in 2007 for more than €5 billion.
Reports circulated yesterday that the government is putting pressure on HRE shareholders to agree to a state takeover.
That would hurt large stake-holders such as the consortium led by JC Flowers Co.
It bought a 24.9 per cent stake in the company last spring, becoming HRE’s largest shareholder.
Meanwhile the head of SoFFin rescue fund, Günther Merl, has resigned for “personal reasons”, becoming the second prominent figure to abandon the newly-created state institution.
Leading figures in the Frankfurt-based body have complained in recent weeks about a lack of transparency and interference from civil servants in Berlin.
The news comes as Chancellor Merkel’s federal government hurries to put in place a €500 billion economic stimulus programme.
