Proposed framework agreement with Rheinhyp-BRE Bank Hipoteczny SA (Rheinhyp-BRE) under which the EBRD would agree to buy a portion of its issued mortgage bonds subject to certain conditions. The Bank will participate as an anchor investor in the first private placement of mortgage bonds in Poland. In addition, it will provide Rheinhyp-BRE with financing to continue to grow its commercial and residential mortgage portfolio.
The Bank’s investment will encourage participation of commercial investors (banks, pension and investment funds), increase investors’ comfort in the new financial instrument and contribute to the underdeveloped fixed income non-sovereign securities market in Poland.
By supporting the issuance of a mortgage bond that will lower Rheinhyp-BRE’s cost of funds and therefore make lower cost, long-term funding available for residential mortgages, the Bank also supports the development of the Polish mortgage market. The creation of a thriving mortgage market is a key contribution to the sustainable growth of a Polish middle class and is an important element of the transition process.
The transition potential of this project also relates to increased competition in the commercial and residential mortgage market and to furthering the development of the mortgage lending business, especially to retail (residential) clients.
Rheinhyp-BRE, a recently created Polish mortgage bank that is 50 per cent / 50 per cent owned by Rheinhyp-Rheinische Hypothekenbank AG (Rheinhyp) and BRE Bank SA (BRE). Both shareholders are controlled by Germany’s Commerzbank AG, which holds 50 per cent of BRE and 98 per cent of Rheinhyp. In late October 2001, Rheinhyp announced its plans to merge with Deutsche Bank’s mortgage bank and Dresdner Bank’s mortgage bank.
A framework agreement with Rheinhyp-BRE under which the EBRD would consider buying a minimum portion of each upcoming issue of Rheinhyp BRE’s Polish mortgage bonds under its two USD/EURO denominated bond programs subject to (i) the existing demand by other institutions to buy such bonds and (ii) the pricing of the bonds. The framework would allow the EBRD to invest a maximum amount of up to €54 million equivalent over the next three years. Each bond issue would need to have a minimum credit rating assigned by the local rating agency Fitch Polska and would need to be in a minimum amount. The Bank will not crowd out existing demand for the mortgage bonds by commercial investors (banks, pension and investment funds) and will only purchase the bonds that have not been syndicated to third party investors.
Rheinhyp BRE has launched a US$ 50 million as well as a €100 million mortgage bond programme. The Bank will purchase mortgage bonds up to a maximum of €54 million equivalent or 35 per cent of both programmes.
The project was screened FI. Potential environmental issues associated with mortgages include e.g. soil/groundwater contamination, exposure to flooding, and compliance of properties with applicable health, safety and environmental regulations and standards. Rheinhyp-BRE will introduce basic environmental screening for mortgage applications in order to identify any environmental risks associated with the property. If external advisers are used to value property, Rheinhyp-BRE will require them to cover environmental risks in property surveys.
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