Freshfields Bruckhaus Deringer, Hogan Lovells and Mayer Brown have taken lead roles on the transfer of €173bn (£152bn) in distressed debt from German bank Hypo Real Estate (HRE) to a specially-created 'bad bank'.

The deal sees the portfolio of loans and securities transferred to FMS Wertmanagement, which was set up to take on distressed assets from HRE, one of Germany's largest commercial property lenders.

FMS, which was advised by Hogan Lovells, was established earlier this year by the Financial Market Stabilisation Authority (FMSA) to allow for an orderly wind down of HRE.

The Munich-based HRE was bailed out by Germany's central bank in 2008 at the height of the banking crisis and went through full nationalisation the following year.

Hogan Lovells fielded a team for FMS led by Frankfurt-based banking partners Tim Brandi and Sven Brandt.

Brandi commented: "The transfer was the largest of its kind in Germany to date and marks a milestone in the restructuring of Hypo Real Estate. It was interesting because of the unique know-how required to advise these hybrid institutions – there were countless regulatory issues involved."

HRE was advised by German leader Hengeler Mueller, whose team was led by corporate partner Johannes Adolff.

The FMSA was advised by Freshfields Frankfurt-based tax partner Andreas Bartsch. DEPFA Bank, which is a subsidiary of HRE, was advised by Mayer Brown Germany managing partner Joerg Wulfken and corporate partner Carsten Flasshoff.

The deal comes amid mounting international attention on the strength of Europe's banks, with German institutions facing criticism for failing to deal with exposure to distressed commercial property debt.

In September, Freshfields and Cleary Gottlieb Steen & Hamilton were instructed to advise on Deutsche Bank's plans to raise €9.8bn (£8.1bn) to strengthen its balance sheet.

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