Depfa says it won't make payments on €500m bonds
DUBLIN-based Depfa bank, part of the giant German bank Hypo Real Estate (HRE), said it will not make any payments on €500m of its subordinated bonds when payment falls due on March 21.
The decision was announced in a statement on the Irish Stock Exchange, where Depfa's bonds are listed and traded.
The news means Depfa joins Irish banks, including AIB and Bank of Ireland, in not being allowed to pay interest to holders of risky bonds while relying on their governments for financial support.
Depfa became the biggest bank in Ireland during the credit boom after moving its headquarters to Dublin from Germany back in 2002.
It operates from the IFSC where its main business is lending to governments and local government projects around the world.
That kind of lending tends to be very safe, but Depfa funded its long-term lending activities by borrowing short-term finance in the financial markets.
Depfa was bought by German property bank Hypo Real Estate (HRE) in 2008, just in time to save the Government having to rescue the bank from near collapse when the Lehman Brothers crisis shut down the market for short-term bank finance.
Thanks to its German parent, HRE had to turn to the German government for help and was not included in the Irish bank guarantees.
HRE had to be nationalised by the German government under a €102bn bailout deal in 2009.