February 17, 2014 / 4:30 PM / 4 years ago

Hypo Real Estate 'bad bank' to privatize services unit

FRANKFURT (Reuters) - Germany’s FMS Wertmanagement, the bad bank of nationalized lender Hypo Real Estate, said it would start the sale of its services business in the second quarter of this year.

According to an advance notice published on its website, FMS will shortly launch a tender for the privatization of FMS Wertmanagement Service GmbH, which is tasked with winding down FMS’s assets.

The privatization of the unit also comes as a sign that Germany has decided against combining it with the business that manages the assets of ceased lender WestLB as was once considered, a person familiar with the matter said.

FMS Wertmanagement Service, which employs 400 staff, has long-term contracts to manage the former Hypo Real Estate assets including loans, securities and derivatives with a face value of 137 billion euros ($188 billion) as of end-2012.

Some 49 percent of the portfolio are loans to public entities, while 27 percent are structured products such as asset-backed securities or collateralized debt obligations. Commercial real estate loans and infrastructure-related loans account for 12 percent, each.

Germany nationalized ailing Hypo Real Estate in 2009 after it injected 10 billion euros of capital and provided 145 billion euros in liquidity guarantees.

As part of the bailout terms agreed with the EU, Hypo Real Estate is currently divesting its public finance specialist Depfa and has already attracted binding offers from several private equity groups and hedge funds, according to people familiar with the transaction.

($1 = 0.7307 euros)

Reporting by Arno Schuetze

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