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HSH Nordbank privatization attracts private equity offers, say sources: Reuters

The owners of Germany’s HSH Nordbank [HSH.UL] received binding offers from private equity groups Apollo (APO.N), Cerberus [CBS.UL] and J.C. Flowers by a deadline on Friday as part of its EU-enforced privatization, people close to the matter said.

The owners of HSH Nordbank, which required a state rescue after being hit by the slump in the shipping industry, confirmed in a statement on Sunday that they have received binding offers for the bank but did not elaborate further.

According to the people close to the matter, Apollo, Cerberus and J.C. Flowers have put in binding final offers for Nordbank, which the German states of Schleswig-Holstein and Hamburg must privatize by the end of February under European state-aid rules.

The two states jointly hold 89 percent of HSH, while local savings banks hold 6 percent and J.C. Flowers owns 5 percent.

HSH’s owners aim to sell the bank as a whole, but are open to divest it in pieces as buyers have signaled they would be interested in parts but not all of the bank.

If no buyer emerges for some of the assets, Hamburg and Schleswig-Holstein could wind the remainder down, possibly by using a vehicle that was set up to transfer HSH’s toxic assets.
However, the two states are not allowed to take on any losses in order to avoid new state aid proceedings. The EU allows the current state owners to retain a stake of not more than 25 percent for up to four years.

HSH, had total assets of 79 billion euros ($92 billion) as of June and reported flat pretax profits of 173 million euros for the first half of this year, sought backing from its owners after risky assets turned sour in 2008.

The bank, which became the world’s largest ship lender in an aggressive expansion strategy in the 2000s, got badly hit by the slump in global trade after the financial crisis. The core bank currently has 6 billion euros in ship loans on its books, while its “bad bank” wind-down unit has 8.7 billion euros’ worth.

In recent months, HSH has benefited from first signs of recovery in the shipping market, which is emerging from the worst slump on record.

The European Commission, HSH and its owners negotiated for years over a plan to restore HSH to health and avoid future state aid after two consecutive bailouts.

The bank has been restructuring and selling assets in recent years and targets reducing its non-core operations to 15.9 billion euros by the end of the year.

It has also beefed up its corporate client business as well as financing of infrastructure and real estate assets. But overall, 14.6 percent of its assets are classified as non-performing.