Bailout bank

Shareholders in the German bank Hypo Real Estate have until midnight Monday to sell their stock to the German government at a price of 1.39 euros per share. Otherwise, the government has threatened to expropriate shareholders to secure a controlling stake in the troubled moneylender.

As this share buyout deadline looms, the German Handelsblatt newspaper reports that HRE's financial woes continue. According to the German business paper, HRE has lost roughly 500 million euros ($664 million) in the first quarter of 2009, meaning that the struggling bank has not yet turned a corner despite three separate government bailouts. HRE is scheduled to post its first quarter results on Tuesday.

Berlin has already shored up HRE with loan guarantees and cash injections totalling 102 billion euros, and now wants control of the bank.

The US private equity firm JC Flowers & Co, which owns an estimated 22 percent of HRE, has rejected the government's share offer, saying it is too low. The group has threatened legal action if Berlin tries to seize its shares.

Germany's finance minister Peer Steinbrueck has described the offer, which is 10 percent above the legal minimum, as "very fair", and has said that the government will expropriate shareholders if they refuse to sell. The German government passed temporary legislation allowing it to seize private stocks in February, before providing a third set of financial aid to HRE.

The government is thought to own almost 23 percent of HRE, making it a slightly bigger stakeholder than JC Flowers & Co. Berlin's stake in the bank is rising all the time as more and more small shareholders accept the 1.39 euro offer. The remainder of HRE stock is held in small quantites by assorted hedgefunds and private investors.

msh/rm, reuters/dpa