HSH Nordbank nears sale of debt portfolio, Macquarie tipped to buy, say sources: Reuters

State-owned German lender HSH Nordbank is close to concluding the sale of parts of its 3.2 billion euro ($3.4 billion) loan portfolio and Australia’s Macquarie Group is expected to be among the buyers, sources familiar with the matter said.

HSH and Macquarie declined to comment.

HSH’s owners – the German states of Schleswig-Holstein and Hamburg jointly hold 85 percent – have to privatise the bank under European state-aid rules by the end of February 2018 and have been trying to offload parts of its business.

Four finance sources said HSH were close to selling 800 million euros in aviation loans to Macquarie with another buyer set to pick up real estate loans.

“This is an important milestone for HSH,” one source said.

The total aviation portfolio on sale was close to 1 billion euros, 750 million of it non-performing and the remainder performing debt, two sources said.

The two sources said there were also 2 billion euros of real estate loans on sale – mostly non-performing – and assets in Britain including near London’s financial district as well as in Germany and other parts of Europe.

Another source said HSH was expected to conclude the sale of of around 1.6 billion euros of energy and real estate assets of the overall 3.2 billion euros by mid year.

However, due to low offers HSH has dropped efforts to sell 500 million euros of shipping loans in this sales process, the sources said.

Many segments of the global shipping sector are struggling with their worst ever market conditions, caused by a glut of ships and slowing global trade, which have battered earnings and led to the collapse of companies including South Korean container line Hanjin last August.

“The appetite was low for this segment of the book and shows how toxic the debt on sale was. Shipping is in a distressed state at the moment,” another source said.

In October, sources told Reuters 20 bidders were in talks for the portfolio which included Deutsche Bank, Credit Suisse and Citigroup C.N, together with asset managers Apollo Global Management, KKR and Oaktree Capital Group.

German lenders – among the biggest backers of shipowners over the past 20 years – are estimated to be behind up to a quarter of the world’s $400 billion of outstanding shipping loans and are struggling with an estimated tens of billions of dollars in troubled loans.

Earlier this week HSH launched the planned sale of the overall bank. Two sources said fellow state-backed regional bank NordLB was planning to make an indicative offer and to take a look at HSH’s books.