Hypo Real Estate bank to get new €12bn guarantee
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Germany's Hypo Real Estate bank, which has already had 50 billion euros in state aid and 30 billion euros in guarantees, will receive another 12 billion euros in guarantees.
AFP - The German state will provide another 12 billion euros (15 billion dollars) in guarantees to struggling Hypo Real Estate bank, bringing the total to 42 billion euros, HRE announced Tuesday.
HRE, the biggest German victim of the global financial crisis, has already had 50 billion euros in state aid and 30 billion euros in guarantees.
"The German Financial Markets Stabilisation Fund has extended its framework guarantee granted to Hypo Real Estate Group by an additional 12 billion euros, bringing the aggregate guarantee amount to 42 billion euros," the bank said.
The bank said it "can use the additional guarantees ... to collateralise debt securities to be issued, which must be due for repayment by June 12, 2009 at the latest."
HRE was a frontline casualty when the high risk US subprime mortgage market collapsed, putting the global financial system under unprecedented stress.
Even with the huge aid given has not been enough to get HRE back on its feet.
A spokesman for Chancellor Angela Merkel's CDU party said last week the government could buy one third or more of the troubled property lender.
The government has already partially nationalised the second biggest German bank, Commerzbank.
In December, HRE said it would slash its workforce by almost half in three years, part of a series of draconian moves to save it from bankruptcy.
HRE posted a net loss of 3.1 billion euros in the third quarter of 2008 and said it expects additional losses in its fourth quarter and annual results.
Berlin has set up a banking sector rescue package that is to provide up to 80 billion euros in cash injections and 400 billion in loan guarantees to prevent a collapse of the financial sector.
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