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UPDATE 1-Three rivals vie to buy Germany's HSH Nordbank
November 29, 2017 / 3:17 PM / 19 days ago

UPDATE 1-Three rivals vie to buy Germany's HSH Nordbank

* HSH posts 10 pct pre-tax profit rise in first nine months

* Privatisation of HSH enters final stretches

* Peer NordLB returns to profit, nears asset sale (Adds details on sales processes)

By Arno Schuetze, Klaus Lauer and Jonathan Saul

FRANKFURT, Nov 29 (Reuters) - Three rival groups are competing to buy German state-backed HSH Nordbank, people close to the matter said on Wednesday, as the EU-enforced privatisation of the ailing lender enters the home stretch.

HSH, which became the world’s largest ship lender in an aggressive expansion strategy in the 2000s before its investments turned sour, expects flat 2017 pre-tax profit.

Chief Executive Stefan Ermisch said that the bank would continue to support its owners’ sales effort “to the best of our ability”, adding it has established a good basis for private ownership.

A consortium of private equity groups Cerberus and J.C. Flowers is vying for the bank’s assets with buyout groups Apollo and Socrates, who are both bidding on their own, people close to the matter said.

Talks on the possibility of Apollo joining the Cerberus and J.C. Flowers consortium have also taken place, but that has so far not materialised, they said.

The owners have singled out Socrates’ bid as compelling, but are far from taking a decision as any buyer has to make sure HSH’s business is gauged as viable in the longterm, they added.

A sale of parts of HSH is an option, but to avoid new state aid proceedings HSH’s state owners are not allowed to absorb any losses if they wind down assets on their own.

HSH, its owners and the bidders declined to comment or were not immediately available for comment.

HSH, which required a state rescue after a slump in the shipping industry, must be privatised by the end of February, although the EU would probably extend the deadline if the sale is nearing an end by then.

RISING TIDE

HSH reduced its total assets by 13 percent to 76.5 billion euros ($91 billion) and reported a 10 percent rise in pre-tax earnings to 201 million euros in the first nine months. In the full year 2016, it posted 121 million euros in pre-tax profit.

The bank still has non-performing and non-strategic ship loans worth 6 billion euros in its internal bad bank, but aims to cut its exposure to 3.6 billion by the end of 2018.

Like its peers, HSH has benefited from first signs of recovery in the shipping market in recent months.

That also lifted local rival NordLB‘s, which on Wednesday reported a pre-tax profit of 326 million euros in the first nine months after a loss of 624 million in the year-earlier period.

NordLB said that it aims to reduce its non-performing ship portfolio to 5 billion by end-2019 from 9.1 billion euros now.

As part of NordLB’s restructuring, the lender has put its property lender Deutsche Hypothekenbank up for sale.

Peers Aareal and Deutsche Pfandbriefbank (PBB) are expected to hand in final offers for Deutsche Hypo on Thursday, sources familiar with the matter said, adding that it remained unclear whether LBBW would also submit a binding bid.

The bids will likely value Deutsche Hypo at more than 0.7 times its book value of about 700 million euros, people close to the matter said.

NordLB, Aareal, PBB and LBBW declined to comment. ($1 = 0.8436 euros) (Editing by Adrian Croft and Keith Weir)

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