Hypo merges its two real estate banks

Troubled Hypo Real Estate Group has announced the completion of the merger between its two real estate banking units, Hypo Real Estate Bank International and Hypo Real Estate Bank.

The merger becomes effective upon registration of the consolidated entity, Hypo Real Estate Bank, in the commercial register at Munich district court. The economic effect will be backdated from 1 January 2008.

Frank Krings, chief operating officer of Hypo Real Estate Holdings, described the merger as an important initial step in the process to simplify and integrate the group's structures. 'At the end of which a more streamlined and less complex Hypo Real Estate Group will exist,' he said.

Hypo Real Estate, the second largest property lender in Germany, nearly collapsed in October as the global financial crisis strained its liquidity position to breaking point. The group managed to secure a EUR 50 bn public-private lifeline after its initial request for EUR 35 bn proved to be inadequate.

But Hypo is not out of the woods yet. The company said last week that it plans to ask the government for a further bailout on top of the EUR 50 bn lifeline.

The commercial property lender also announced that it was granted a EUR 20 bn framework guarantee from Soffin, the German bank rescue fund, to shore up its capital structure. Hypo RE can use the guarantees to collateralise debt securities, which are due for repayment by 15 January 2009 at the latest.