BC P3 banker embroiled in Italian bond scandal

by mike_yvr | January 5, 2009 at 10:08 am

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Depfa Bank, a major lender to public infrastructure projects in British Columbia, has found itself embroiled in a major bond scandal involving Italian local governments, according to The Telegraph newspaper.

The city of Milan is considering legal action to recover losses they face over derivatives contracts arranged with a group of five banks including Depfa.

Italian police have raided the banks as part of an investigation into the matter though the newspaper report did not specify if the offices of all five banks were raided.

Depfa -- a subsidiary of Hypo Real Estate (HRE) -- is involved in the private financing of three so-called public-private partnership (P3) infrastructure projects in BC: the Royal Jubilee Hospital expansion, the Surrey Outpatient hospital and the Golden Ears Bridge.

HRE offices in Germany have been raided by German prosecutors as part of an investigation into allegations of insider trading, and the bank is facing a law suit by disgruntled investors.

HRE received a bailout package of $76 billion from the German government and German banks in November after Depfa was unable to secure credit to meet its obligations.

There are a number of stories about Depfa and HRE at NowPublic -- just follow the tags at the bottom of this story.

According to some estimates, Italian authorities could be sitting on €35bn (£33bn) of liabilities relating to bonds they took out in the 1990s, which could turn into Italy's biggest financial scandal since the Parmalat fraud.

Milan has said it is considering legal action against a group of lenders – Deutsche Bank, JP Morgan Chase, UBS and Dublin-based Depfa, part of Germany's Hypo Real Estate. The group struck a deal to help Milan manage repayments on €1.7bn of bonds it bought to finance public spending.