Germany Scraps Depfa Bank Sale and Orders Lender’s Wind-Down

Germany’s government abandoned plans to sell bailed-out lender Hypo Real Estate Holding AG’s (HRS) Dublin-based Depfa Bank unit, choosing instead to wind down the unit.

Depfa’s assets, which stood at 49 billion euros ($67 billion) of assets at the end of December, will now be moved to state-owned bad bank FMS Wertmanagement AoeR, or FMS-WM, the German Finance Ministry said in an e-mailed statement. German taxpayers, who own Hypo Real Estate, would achieve “a higher value” by running down the unit than by selling it, it said.

“We have created very good options by preparing the sale of Depfa ready for signing,” said Manuela Better, chief executive officer of Hypo Real Estate in a separate statement. “It goes without saying that the decision not to sell, but to wind down Depfa under FMS-WM, is that of the owner.”

Leucadia National Corp. (LUK), the investment firm run by Wall Street banker Richard Handler, and Massachusetts Mutual Life Co. were picked last month as preferred bidders, after offering as much as 350 million euros ($479 million) for Depfa, people with knowledge of the matter said on May 7. The German finance ministry said at the time that the unit would only be sold if a deal offered an “economically viable alternative” to winding it down under state control.

Hypo Real Estate agreed to sell Depfa, a provider of public-sector finance, by the end of the year under a restructuring plan approved by the European Union in 2011. The EU review was triggered after Germany injected 10 billion euros into Hypo Real Estate in a rescue program.

Transferred Assets

Depfa transferred about 131 billion euros of non-performing and non-strategic assets to FMS-WM in 2010, according to Hypo Real Estate.

Depfa reported a 20 million-euro pretax loss last year compared with a 68 million-euro profit in 2012, according to a presentation on its website on April 3. Its total assets shrank to 49 billion euros at the end of December from 73 billion euros a year earlier.

A group led by Daniel Loeb’s Third Point LLC and an offer involving Oswald Gruebel, the former CEO of UBS AG and Credit Suisse Group AG, and Mead Park Holdings LLC, a New York-based hedge-fund firm, were also on the short list as potential buyers, people familiar with the matter said in March.

To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Angela Cullen, John Simpson

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