German state provides Hypo another €12bn

The German commercial real estate lender, partially owned by private equity firms JC Flowers and Grove International, has drawn down on €42bn of guarantees from the German government.

Hypo Real Estate will receive another €12 billion from the German government bailout plan – taking its total to €42 billion.

The struggling commercial real estate lender said in a statement it would use the additional guarantees to “collateralise debt securities to be issued, which must be due for repayment by 12 June 2009 at the latest”.

In December, Soffin, the German Financial Markets Stabilisation Fund, guaranteed €10 billion of additional liquidity for Hypo, one of Germany’s and Europe’s largest commercial real estate lenders.

The banking group narrowly escaped collapse in October 2008 after securing a lifeline from the German government and a consortium of private banks and financial institutions. The original €30 billion lifeline offered the company had to be increased to €50 billion when the full scale of Hypo's problems were realised.

Hypo is partially owned by private equity and real estate firms JC Flowers and Grove International. In June 2008, JC Flowers and Grove, working with Japanese financial institution, Shinsei Bank Limited, invested €1.1 billion in Hypo for up to 24.13 percent of the firm’s shares.

The consortium offered €22.50 a share for the stake. Hypo's share price has plummeted 92 percent over the past year and was around €1.80 at the time of press.