Billion-Euro Bailout
October 31, 2008
The troubled German property lender, caught in a liquidity crunch which worsened after US investment bank Lehman Brothers declared bankruptcy in September, will use the SoFFin guarantee to cover a bank bond that it will use as collateral to get cash from the central Bundesbank and maintain its current operations.
The liquidity guarantee is expected to be in place by mid-November, a HRE statement said.
While other regional banks in Germany have said they are considering requesting help from the government's rescue plan for the banking sector, including BayernLB which has applied for 5.4 billion euros ($6.8 billion) in aid, HRE is the first private German financial institution to take advantage of the rescue package.
The German government revealed the rescue package, which includes 400 billion euros in loan guarantees and up to 80 billion euros in capital injections, earlier this month.
HRE bailout the biggest in German history
HRE is already the subject of a rescue plan worked out by the government, the German central bank and a financing consortium that's worth 50 billion euros. The short-term guarantee unveiled late on Thursday will keep HRE going until the full sum is available.
The real-estate lender became the subject of the biggest financial rescue in German history earlier this month after its inability to refinance the debts of its Depfa subsidiary dragged it into the global financial turmoil.
The German-Irish subsidiary, which specializes in financing of public works projects, was acquired by HRE in October 2007.