GERMANY- Hypo Real Estate Group has received an extension on the €30bn framework guarantee granted by the German Financial Markets Stabilisation Fund (SoFFin) amid rumours that the German Government is considering taking a stake in the company.
The framework guarantee, originally approved until 15 January 2009, has been extended until 15 April 2009, however, negotiations between Hypo Real Estate and SoFFIn about more extensive and longer-term liquidity and capital support measures are currently under way.
Hans Obermeier, head of group corporate communications for Hypo Real Estate, said: "We have never left a doubt that we need further support and more long-term support."
Hypo Real Estate declined to say how much more liquidity and capital support the firm was hoping to negotiate but did not rule out the prospect of the German government taking a stake in the company to square its balance sheet.
"That could be one way for the German government to support the capital base of Hypo Real Estate," said Obermeier.
"The advantages would simply be if we have a broader capital base, as with all banks, that would allow us in an easier and cheaper way to tap the financial markets for our re-financing. The financial markets simply do not accept banks anymore that have capital that the markets consider to be too low."
It is not known when the German government will reach a decision, however Hypo Real Estate may face certain restraints on its business practice if it does decide to take a stake.
"We would have to see. The German programme, like the UK, is linked to certain restrictions, for example regarding management compensation, dividend policy and business strategy," Obermeier said.
SoFFin, Germany's bank rescue fund, increased its loan guarantees to Hypo Real Estate by 50% last month, from €20bn to €30bn.
Hypo Real Estate Bank AG, a subsidiary of the Hypo Real Estate Group, will have to pay SoFFin a pro-rata commitment commission of 0.1% of the undrawn portion of the framework guarantee and 0.5% for the drawn guarantees, down from the previous 1.5%.
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