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Report: US PE firms to acquire HSH Nordbank's bad loans via separate vehicles

U.S. private equity groups Cerberus Capital Management LP and J.C. Flowers & Co. LLC plan to acquire HSH Nordbank AG's core operations and nonperforming assets through separate vehicles, "people close to the matter" told Reuters.

The troubled German lender is set to be sold without the less than €7 billion of soured debt sitting in its internal bad bank, in order to meet EU demands on the viability of HSH Nordbank after a sale. However, the bulk of the bad assets will nevertheless be bought by the U.S. firms using one or more platforms, according to the sources.

This would allow the bank to decrease its NPLs to about 2% of its portfolio, from 11.7% as of Sept. 30, as well as allowing HSH Nordbank to be included in the German bank deposit protection scheme once it leaves a similar scheme for landesbanks like itself and savings banks.

Cerberus and J.C. Flowers, which have reportedly agreed to acquire HSH Nordbank AG for up to €1 billion, are in the final stages of exclusive discussions with the German states of Hamburg and Schleswig-Holstein, which own 85% of the bank, according to the report, which added that a deal announcement is expected to take place Feb. 28.