Hypo Real Bad Bank Reduces Guarantees by EU47 Billion

(Corrects figure to 47 billion euros in headline.)

FMS Wertmanagement, Hypo Real Estate Holding AG’s bad bank, said it cut the amount of liquidity guarantees it needed from Germany’s Soffin bank-rescue fund by 47 billion euros ($62 billion).

The remaining guarantees total 53.5 billion euros, Munich- based FMS said in an e-mailed statement today. The bad bank reiterated that it plans to reduce the amount “step by step” by the middle of next year at the latest, and replace them by issuing its own bonds that won’t need Soffin’s backing.

Hypo Real Estate, led by Chief Executive Officer Manuela Better and also based in Munich, on Oct. 1 completed the transfer of loans and securities with a nominal amount of about 173 billion euros to its bad bank. FMS is in charge of winding down the assets over a period of 10 years and in October cut 23.5 billion euros of Soffin guarantees.

Hypo Real Estate needed a total of 10 billion euros in capital and as much as 142 billion euros in credit lines and debt guarantees from the state and financial institutions to save it from collapse after its Dublin-based Depfa Bank Plc unit couldn’t raise financing in 2008 following the bankruptcy of Lehman Brothers Holdings Inc.

Hypo Real Estate is fully owned by Soffin, which took over the lender in 2009 following a squeeze-out that forced minority investors, including U.S. investor J. Christopher Flowers, to sell their remaining shares.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net;

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net

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