Hand that giveth
June 2, 2009
Hypo Real Estate (HRE) shareholders will decide whether to allow the government's Financial Market Stabilization Fund (SoFFin) to extend its stake in the company from 47.3 percent to 90 percent in return for a capital injection of 5.64 billion euros ($8 billion).
HRE Chairman Axel Wieandt told the Frankfurter Allgemeinen Sonntagszeitung that the stricken lender could not continue without government support.
"Even after the capital injection, to be discussed at Tuesday's extraordinary general meeting, there will be a need for further funds," he said, though he did not give any figures.
The government already provides the bulk of the 102 billion euros in guarantees currently preventing Hypo Real Estate (HRE) from collapse and triggering potentially devastating consequences across the sector.
But there is shareholder opposition to Berlin's plans.
A leading shareholder, who advises a consortium of some 500 investors, has previously threatened to hold on to his stocks and challenge any effort to divest him.
American billionaire J. Christopher Flowers, who was not present at Tuesday's meeting in Munich, told the Welt am Sonntag newspaper that he was not sure whether his representatives would abstain or vote against the proposals. He added that while he was open to a capital increase, he opposed Berlin’s plans to force out remaining shareholders.
Shareholders sympathetic to Flowers control 14 percent of HRE.
If investors sanction SoFFin's takeover-offer, Berlin would be entitled to force the remaining ten percent of shareholders out of their stock.
SoFFin boss Hannes Rehm told the Sueddeutsche Zeitung that he would seek to re-privatize HRE as soon as possible.
tkw/AP/Reuters
Editor: Trinity Hartman