The worldwide scenario of real estate sector is, without a doubt, trembling and the real estate banks are no exceptions. However, amid this, the noted but incapacitated real estate bank of Munich, Germany, Hypo Real Estate Group has gained to a certain extent. How? The real estate bank has secured an additional asset of euro12 billion ($15.6 billion) in loan guarantees from the State of Germany and that has brought its total to euro42 billion. Many are terming this as a wonderful gesture of the German government.
It should be remembered, that the Hypo Real Estate Group, after being incorporated in October 2003 in Munich, Germany, commenced as a bank with an explicit concentration on the sphere of international commercial real estate lending. The group also added feathers through the acquisition of DEPFA Bank Plc in 2007 and has emerged as a prominent provider of public and infrastructure finance by now.
Hypo Real Estate Group, it is worthwhile to mention that, had received an enormous euro50 billion loan from the government to ward off its liquidation at first. The only reason was that it was almost crushed by the subprime and subsequent credit crises. What has been the reaction of the bank therefore? The bank has affirmed that it can make use of the latest round of loan guarantee funds from the government’s Financial Markets Stabilization Fund to pledge as collateral the debt securities to be issued and which are due for repayment by June 12, 2009.
In addition, the Hypo Real Estate Bank AG has come out with important revelations. What is its decision? The bank has stated categorically that it will pay the stabilization fund a commission of 0.1 percent on the undrawn portion of the new framework guarantee. In addition it will also pay a 0.5 percent fee per annum on guarantees drawn upon.
It is hoped, on the word of observers and stockholders, that the emboldened financial position will enable Hypo Real Estate Group to combat any crisis, if there is any more.
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