Monday October 5, 01:27 PM
Germany's Hypo RE 'needs five years to repay aid'
MUNICH, Germany (AFP) - Troubled German property financier Hypo Real Estate (Xetra: 802770 - news) (Hypo RE) will need until 2015 to repay about 100 billion euros (146 billion dollars) of state aid, chief executive Axel Wieandt said Monday.
"The group will not be in a position to repay the liquidity support facility in full before the year 2015," Wieandt told an extraordinary meeting of Hypo RE shareholders in Munich, southern Germany.
"The group's existence as a going concern in the foreseeable future will remain contingent upon the continued availability" of external sources of cash, but could make a profit again by 2012. he added.
Hypo RE needs around 10 billion euros in fresh cash to cover losses for 2009 and the following years, in addition to 78 billion euros in loan guarantees already provided by the government, Wieandt said.
The bank has been provided with up to 98 billion euros in loan guarantees by the German financial market stabilization fund SoFFin.
Hypo RE faces several threats to its survival, including high costs for refinancing and restructuring, a sharp devaluation of its assets and the need to take higher provisions against bad loans.
The specialist in real-estate lending was hammered when US investment bank Lehman Brothers (NYSE: LEH - news) collapsed in September 2008.
Hypo RE was privatised since then by Berlin to prevent a collapse that authorities say would have threatened the entire German banking sector.
The state now owns 90 percent of Hypo RE and shareholders are expected to approve a squeeze-out option that will allow the bank to become fully state owned.
That would mark the final step in the first nationalisation of a German bank since the republic was formed in 1949.
In addition to its real-estate operations, Hypo RE plays a pivotal role in the issuance of "Pfandbriefe," bonds in which small investors, savings banks and insurance companies have placed large sums.
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