Germany’s government and financial regulators on Sunday agreed a second bail-out package for Hypo Real Estate after the abrupt failure of a first attempt to rescue the property lender. A collapse of HRE – which, with a €400bn ($550bn) balance sheet, is one of Europe’s biggest commercial property lenders – would shake Europe. The original rescue package for HRE broke down at the weekend after a consortium of banks that pledged last week to support HRE with extra liquidity learnt its funding needs were far greater than the €35bn first announced. The move forced officials and bankers into talks for a second successive Sunday, in efforts to agree a rescue before markets open Monday. Under the new deal, a consortium of banks will contribute €50bn in aid, up from the earlier €35bn, said officials. But, the German government said it would not raise its credit guarantee from the €25.6bn detailed in the first scheme. HRE gained emergency liquidity lines from banks and the German Bundesbank because it could not get enough short-term, unsecured finance to support Depfa, its Ireland-based public sector lending arm. Lex says HRE “did much to contribute to its current predicament”, including acquiring Depfa last year.

This entry was posted by Gwen Robinson on Monday, October 6th, 2008 at 5:41 and is filed under Capital markets. Tagged with Depfa Bank, Hypo Real Estate. Edit this entry.