Germany moves to nationalise troubled property lender Hypo

09 April 2009

The German government offered to buy property lender Hypo Real Estate Holding AG, moving closer to the country's first bank nationalisation since the 1930s.

The government's bank rescue fund Soffin offered €1.39 ($1.84) per share of the commercial property lender, above the stock's closing level in Frankfurt Wednesday of €1.20. It did not give a total value for the offer.

Hypo Real Estate gained 16 per cent to €1.39 in Frankfurt trading by 9:06 a.m. local time. The stock has declined 55 per cent this year, valuing the lender at €319 million.

The government moved last month to take an initial 8.7 per cent stake in Hypo Real Estate, buying new shares in the Munich-based company for €60 million. The bank said then that it was "a prerequisite for the intended recapitalization of Hypo Real Estate" that the government ''gains full control."

''With its public offer and the chosen offer premium Soffin underlines that it wishes to stabilise the financial market using a market-oriented approach if possible and by adhering to existing market practice,'' said Hannes Rehm, chairman of the fund.

A new law signed this week by President Horst Koehler would allow the government to expropriate shareholders if voluntary efforts to secure stock fail. It has until 30 June to do so. So far the government has provided the bank with loan guarantees of about €87 billion.