Hypo RE avoids collapse with last-minute EUR 35b credit facility

Munich-based Hypo Real Estate Group has avoided a refinancing squeeze thanks to a EUR 35 bn short-term and mid-term credit facility from a consortium of Germany's financial sector and Germany's Finance Ministry, the group announced on Monday.

The consortium will participate in the first tranche of the guarantee and the state will provide the second. The company said it had entered into talks with the consortium 'in response to the extremely challenging conditions on the international money markets following the Lehman collapse and other market disruptions.'

'The new credit facility is a far-reaching and innovative approach which allows us to adjust our funding structure in order to accommodate the current malfunctioning of the international money markets. Hypo Real Estate Group will not need to go back to the unsecured money market for its refunding in the foreseeable future,' said Hypo Real Estate's chief executive Georg Funke.

Germany's financial regulator is also satisfied with the credit facility, said BaFin spokesman Ben Fischer: 'We think that Hypo Real Estate will now have enough liquidity for their needs and to enable them to function properly,' he said.

With US lawmakers expected to vote later today on a $700 bn government buy-up of bad mortgage debt, the contagion of collapsing banks is now spreading to Europe. Yesterday, Belgium was forced to part-nationalise Fortis, the Belgian-Dutch banking and insurance group. Belgium, the Netherlands and Luxembourg will inject EUR 11.2 bn into the troubled group in a bid to prevent it becoming the first major victim of the credit crunch in continental Europe. Bradford & Bingley, the biggest buy-to-let operator in the UK, was also taken into public hands today. The UK government will take control of its £41 bn of mortgages and loans, with the lender's savings and branch network being sold to Spanish bank Santander.

Click on the link below to read: Two executives resign from struggling Hypo RE Group