Germany May Offer Temporary Funding to Prop Up Sale of WestLB — Reuters

The German government may provide more temporary funding to secure the sale of WestLB, two people close to the bank told Reuters. Sources said the funding would help suitors interested in acquiring only parts of the bank. Apollo and Blackstone submitted indicative bids, according to two financial sources.

(Reuters) – The German government may supply billions of euros more to secure a sale of ailing public-sector lender WestLB (WDLG.UL), two people close to the bank told Reuters.

The government may step in to provide temporary funding, aiding potential suitors interested in buying only parts of the bank, in case the bank is broken up, the sources said on Wednesday.

The lender, partially owned by the German state of North Rhine-Westphalia and local savings banks, was put on the auction block at the request of the EU as a condition for approving state aid granted in the financial crisis.

Several bids have been received.

According to two financial sources, private equity groups Apollo (APOLO.UL) and Blackstone (BX.N) are among the companies that have handed in indicative bids.

But investment bankers consider it unlikely that the bank will find a buyer for all of its operations and expect it to be broken up.

“One option being discussed is a sale of the corporate finance and project financing units to external investors, while the remaining core bank is to be merged with Helaba (HLHTG.UL) and Deka (DSUGUD.UL),” one source close to one of WestLB’s owners said, referring to two other German public sector financial institutions.

Another source close to the sales process said that refinancing problems might occur if the sale of one of WestLB’s units to a private equity investor dragged on for months.

“In this case, one option is that the German government supplies guarantees for the time until a deal is closed,” the source said.

The amount necessary to secure the intermediate funding could easily run into billions of euros, the sources said.

Earlier this year sources familiar with the matter had said that the German government may also inject more capital — possibly around 1 billion euros — into WestLB.

Germany’s bailout fund Soffin granted WestLB 3 billion euros in the financial crisis, although there had been talk at the time of the fund giving as much as 4 billion.

As yet no final decision on the future of WestLB has been taken and it is not expected that the bank’s steering committee — which consists of the bank’s managers, its owners and the German government — will come to a decision at its meeting on Thursday, the sources said.

The private equity investors, the German government, WestLB and its owners declined to comment.

The lender is hoping to strike a deal with the EU on its restructuring by Feb. 15.

Brussels has demanded that WestLB, which a regional politician said is worth at least 10 billion euros ($13 billion), must find new owners by the end of this year. (Note: $1= .7707 euros.)

The WestLB owners are lobbying for a merger of the bank with fund manager Deka, public-sector bank Helaba and potentially even Landesbank Berlin (BEBG.DE). — Reporting by Arno Schuetze and Matthias Sobolewski; Editing by Greg Mahlich