Embattled B.C. P3 lender to be cut loose by German parent

by mike_yvr | February 2, 2009 at 09:06 am

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Depfa Bank PLC, a key source of credit to several British Columbia public-private partnership projects and a financial sink hole for its German parent, will be cut loose according to media sources.

The Dublin-based bank is involved in funding construction of the Royal Jubilee Hospital expansion, the Surrey Outpatient Hospital and the Golden Ears Bridge.

Depfa's inability to secure short-term credit to meet its international obligations forced parent company Hypo Real Estate -- the second biggest mortgage lender in Germany -- to seek a massive bailout from the German government and other banks.

Now it appers that HRE will be nationalized and that Depfa will be cut loose to fend for itself.

It's not clear what impact that will have on its hospital and transportation projects in B.C.

Last week, the B.C. Liberal government of premier Gordon Campbell was forced to bailout another major transportation project after the private financier was unable to raise all the required capital.

The Dublin bank, bought by HRE for €5 billion in 2007, will be separated from the rest of the group, according to government sources, regardless of whether a full nationalisation goes ahead.

A spokesman for the parent company in Munich declined to comment on ongoing negotiations with the German bank stabilisation fund, SoFFin. “It’s clear that Depfa is the source of the problem and it is not so difficult to remove what is standing in the way of a solution,” said one source familiar with the talks.

Berlin has not fully ruled out offering further liquidity guarantees on top of the €92 billion it has provided to the Munich bank in recent months. Depfa has been hit by problems on the short-term credit markets it uses to finance its long-term credit dealings in Dublin.

Talk of nationalisation has arisen from fears that, with its Dublin subsidiary in tow, the bank will remain a money pit for some time to come.