German Credit Firms to Sell $6.1 billion in Bad Loans

LONDON – Hypo Real Estate and Dresdner Bank will dump around 5 billion euros ($6.1 billion) of bad German loans in an end-of-year sale, exploiting a frenzy of buyer interest, sources close to buyers and sellers said this week.

German banks’ problem loans have increased following a post-reunification boom that never happened and have worsened as economic stagnation set in. Corporate insolvencies have risen every year since 1999 to reach 19,500 in the first half of 2004, according to research consultants Creditreform.

Some banks have tackled the problem by putting their defaulting, or so-called non-performing loans (NPLs), up for sale. Their desire to put these loans behind them is raising the prospects for big deals.

“There’s generally a tendency to sell when year-end comes,” said one Frankfurt-based bidder. “Come September, October, banks can foresee what the year-end results will be and what write-off bill they can afford.”

Bidders are now optimistic of a multi-billion euro deal from Hypo Real Estate, which spun out of HVB Group’s real estate arm last October.

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