German bad bank speeds up wind-down of Dublin's Depfa

FSM Wertmanagement buys €5.6bn of Depfa’s bonds and shrinks bank’s assets by 25%

Depfa made a €49 million net loss last year, having turned in a €187 million loss in 2014. Illustration: Getty Images

Depfa made a €49 million net loss last year, having turned in a €187 million loss in 2014. Illustration: Getty Images

 

A German state bad bank has accelerated the wind-up of Dublin-based lender Depfa Bank, after buying back €5.6 billion of its bonds from the market so far this year.

The move by bad bank FMS Wertmanagement (FMS-WM) to mop up Depfa Bank’s liabilities in the market comes as it also shrinks the lender’s assets at pace.

A spokesman for FMS-WM in Munich said the wind-down is currently being carried out “faster than planned”. However, he declined to say when the bank would ultimately be wound down.

Depfa, a provider of public-sector finance, was bought by Munich-based property lender Hypo Real Estate (HRE) for €5.7 billion in 2007. However, a little over a year later HRE was force to turn to the German government for help after the collapse of Lehman Brothers when Depfa was unable to fund itself in the market.

HRE, which required a €10 billion capital injection from Berlin during the financial crisis, agreed under an EU state-aid restructuring plan to sell Depfa by the end of 2014.

While a preferred bidder – a joint offer from US investment firm Leucadia National and Massachusetts Mutual Life Insurance – was picked, the German government abandoned a sale two years ago saying it would get more money by running it down itself.

Depfa was subsequently transferred to FMS-WM at the end of 2014. It managed to shrink Depfa’s asset base by about 25 per cent in 2015 to €37 billion. It is believed that the assets have continued to be run down quickly during the first half of this year.

Depfa made a €49 million net loss last year, having turned in a €187 million loss in 2014.

Following the bond buybacks so far this year, FMS-WM intends to “conduct further purchases of securities”, Stephan Winkelmeier, spokesman of the executive board of the wind-down agency said late last week.