German bank Hypo Real Estate (HRE) announced Saturday that a planned 35 billion euro (48 billion dollar) rescue had collapsed after the banking consortium involved pulled out of the deal. The rescue bid was the biggest in German history and came after HRE was sucked into the global financial turmoil through its exposure to bad debt.
HRE said in a statement that a consortium of German banks lined up for the rescue had "refused to provide liquidity lines" and that it was seeking new measures. The real-estate lender said it was in the process of "determining the consequences" of the consortium''s withdrawal on various divisions and that it would seek other solutions.
Earlier in the day, the Welt am Sonntag newspaper had said in a report to appear on Sunday that the bailout plan would have to be renegotiated because the bank''s cash needs had been underestimated. The biggest German Bank, Deutsche Bank, had reportedly evaluated that HRE would need 20 billion euros in fresh capital by the end of next week.
Deutsche Bank warned in addition that "by the end of the year, there will be a shortfall of up to 50 billion euros and even of 70 to 100 billion by the end of 2009," the newspaper said. Deutsche Bank issued the warning late Friday during a telephone conference with representatives of the German banking and insurance sector, the report said.
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