HYPO REAL Estate, the property lender bailed out by the German government, will get an additional €12 billion in debt guarantees as it negotiates a longer-term capital injection.
“Negotiations between Hypo Real Estate and Soffin regarding more extensive and longer-term liquidity and capital support measures for the group have not yet been finalised,” Munich-based Hypo said in a statement.
The new support brings total debt guarantees provided by Soffin, the administrator of Germany’s financial market bailout, to €42 billion. Hypo also got a €50 billion lifeline from the German government, the Bundesbank and financial institutions last October after its Dublin-based Depfa Bank subsidiary failed to get short-term funding amid the credit crunch.
“Yesterday’s extension is guaranteeing the short-term stabilisation of the company,” Martin Peter, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart who recommends selling the shares, wrote in a note to clients. “The anticipated capital increase will massively dilute earnings over the next years.”
Soffin boosted loan guarantees to Hypo Real Estate to €30 billion in December after approving an initial €20 billion on November 21st.
Hypo Real Estate said at the time that it was in negotiations with the fund about providing longer-term “comprehensive liquidity and capital support”.
Hypo Real Estate spokesman Oliver Gruss declined to comment on a timeframe for talks about those measures. Soffin spokeswoman Susanne Mehlhorn was not available for comment.
Hypo Real Estate would use the additional state guarantee at its commercial real estate unit to collateralise debt securities that must be repaid by June 12th, it said. The lender would pay Soffin a commission of 0.1 per cent for providing the guarantee and a 0.5 per cent fee on any portions used, it added. – (Bloomberg)
