Tuesday 21 November 2017

Hypo asks German government to take €210bn assets into 'bad bank'

Hypo: applied to dump assets into 'bad bank'. Photo: Getty Images
Hypo: applied to dump assets into 'bad bank'. Photo: Getty Images

Joe Brennan

Hypo Real Estate has applied to the German authorities to dump up to €210bn of assets into a 'bad bank' -- mainly made up of portfolios from its Dublin-based Depfa bank unit.

The Munich-based lender, which was fully nationalised last October, a year after the near-collapse of its Depfa arm, expects the transfer of the assets to take place in the second half of this year.

Depfa, a specialist lender to governments and local authorities, transferred its headquarters from Germany to the IFSC in 2002, before being taken over by Hypo in 2007 in a €5bn-plus deal.

Depfa, which was highly reliant on the unsecured funding markets, faced a massive liquidity problem just weeks after the collapse of Lehman Brothers.

Hypo received an initial €35bn loan guarantee from the German government and a group of German banks on September 29, 2008.

The bailout took place just hours before Irish ministers and banking executives were forced into emergency talks, leading to the unveiling of our Government's €440bn banking guarantee scheme.

Hypo was forced to rely on tens of billions of euro of debt guarantees and capital from the German government as its credit losses mounted, particularly in the legacy Hypo part of the business.

It ended up being 100pc nationalised three months ago as minority shareholders, including US private equity firm JC Flowers, were squeezed out.

Hypo has been planning for some time to offload non-strategic assets, including parts of the public finance and real estate finance books of its Depfa and Deutsche Pfandbriefbank units.

Yesterday, it formally asked Germany's financial markets stabilisation agency to establish a bad bank to take over Hypo operations that are no longer strategically important. These would be run down or disposed of over time.

Hypo chief executive Axel Wieandt said that the development was "a key milestone in the group's realignment process".

It is envisaged that Hypo will continue to manage assets, from both Ireland and Germany, in the bad bank.

The group doesn't expect to return to profit before 2012 and plans to cut 1,000 jobs by the following year. A spokesman said 260 people were working for Depfa in the IFSC at the end of last month, down 30 from the end of 2008.

He declined to say how Irish-based staff might be affected by plans to downsize the group, adding: "We are in the process of deciding the details."

Irish Independent

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