August 18, 2007 (LPAC)--After the close of Friday trading yesterday, it was disclosed that the German financial regulatory agency BAFIN had arranged a 17.3 billion euro (about $23 billion) bailout loan for the Saxony state bank LB Sachsen, from the German Savings and Loan Association, Saechsische Zeitung reports.

Just two days ago, LB Sachsen was still pretending that its Irish-based Ormond Quay Fund, with 82 percent of its assets in U.S. mortgages, was in no difficulty, saying that most of the U.S. loans were AAA-rated. But AAA has turned to junk. The 17.3 billion euro emergency credit is equal to Ormond Quay's total exposure.

In a related German development, the Atradius insurance firm warns that German firms taken over by private equity funds run a high risk of defaulting on payments. The funds' high exposure to the U.S. mortgage markets makes these German firms hostage to the crisis, Peter Ingenlath of Atradius warned, according to today's Sueddeutsche Zeitung.