GERMANY - Hypo Real Estate was granted an additional €10bn by the German Financial Markets Stabilisation Fund (SoFFin) last week, bringing the total bailout to €52bn.

The German mortgage lender will use the extension, which expires on 12 June 2009, to collateralise debt to cover the firm's short-term liquidity needs in order to repay inter-bank loans, bonds and consumer deposits that are due.

Hypo Real Estate will also use the liquidity to guarantee additional collateral to investors and central banks.

It will pay SoFFin a 50 basis points fee on guarantees drawn and a pro-rata commitment commission of 10bp on the portion of the framework guarantees which is not drawn.

That said, the Group revealed discussions between Hypo Real Estate and SoFFIn are still ongoing about more, longer-term liquidity and capital support measures.

Central banks have dictated that all market participants reduce the use of bank bonds as collateral, including those issued under the SpFFin guarantee, but this in turn means Hypo Real Estate must promise more SoFFin-guaranteed bonds to raise more liquidity.

The Group received an additional €12bn framework guarantee from SoFFin and was given a three-month extension on the previous €30bn guarantee until 12 April 2009.

If you have any comments you would like to add to this or any other story, contact Poppy Sketchley on + 44 (0)20 7261 4629 or email poppy.sketchley@ipe.com

Topics