Hypo Real Estate not to be 'dismantled'

The troubled German real estate lender today clarified its situation, suggesting comments by the German finance ministry had been misinterpreted.

Hypo Real Estate, the German-based real estate lender which received a €35 billion ($50 billion) bail out from German financial groups yesterday, is not to be “dismantled” or wound-down.

The bank issued a statement today in response to some media coverage, insisting it was wrong to say the bank was to be “wound down in an orderly manner.”

“The Bank wishes to make it clear that there is absolutely no intention or agreement by either the bank’s management board or the bank’s supervisory board to dismantle or wind-down Hypo Real Estate Bank,” it said. “The Bank believes that the reports are based on a misinterpretation of the statement by the German Finance Ministry. The bank has agreed to reduce its assets by €50 billion but in an orderly way, without deadline and without fire sales.”

Hypo’s attempts to calm the markets came after shares collapsed 70 percent yesterday. At one point they had fallen to a 52-week low of €3.28. By 2.30pm in Germany today, shares in the group had slightly recovered to €4.40.

As well as clarifying its predicament, Hypo also revealed today that Bo Heide-Ottosen, a board member and the man responsible for long term funding and treasury within its Dublin-based infrastructure and public lending subsidiary, DEPFA, had resigned with immediate effect. The chief executive of DEPFA, Paul Leatherdale, has also left with immediate effect in the second head to roll.

Yesterday the troubled bank said a consortium from the “German financial sector” had provided it and subsidiary DEPFA bank with the facility, the size of which was not disclosed. Georg Funke, chief executive, said that the credit facility would allow Hypo to adjust its funding structure in order to “accommodate the current malfunctioning” of the international money markets. “Hypo Real Estate will not need to go back to the unsecured money market for its refunding in the foreseeable future,” he added.