HRE capital increase clears way for full nationalisation

Soffin, the German financial market stabilisation fund, will hold 90% of Hypo Real Estate (HRE) following a EUR 2.96 bn capital increase which was approved by a majority of HRE shareholders on Wednesday. The capital raising exercise clears the way for a complete takeover of the ailing property financier, Soffin said in a press release.

At an extraordinary general meeting of shareholders, nearly 74% of HRE shareholders approved the capital increase. The shares are to be issued at EUR 3 per share, excluding the subscription rights of the other shareholders in favour of Soffin. As planned, Soffin will now initiate a squeeze-out under German stock corporation law in order to proceed with the restructuring of HRE once the takeover of the company has been finalised.

Hannes Rehm, Chairman of the Soffin Management Committee, said: "We are relieved that we do not have to resort to the option of expropriating shareholders. I would like to thank all the shareholders who accepted the takeover offer and approved the resolution on the capital increase, thereby clearing the way for a quick and unproblematic stabilisation of HRE.'

The nationalisation of HRE comes after the financier experienced acute financial problems last September in the wake of the credit crisis. In view of the size of HRE’s balance sheet and the scope of its derivatives book, a collapse of the bank would have had substantial effects on the German and international economy. To avoid jeopardising confidence in the German financial sector, the German government launched a EUR 50 bn rescue operation.