Shipping finance provider HSH Nordbank began meeting potential buyers in London this week ahead of the German lender’s planned privatisation next year, people close to the matter said.
HSH managers will hold further meetings over the next few days, including with Chinese banks such as Bank of China as well as buyout firms including Apollo and Lone Star, the people said.
While the sale of the bank in one piece is the favoured option for HSH’s owners, a divestment in two slices – the core bank and a portfolio of non-performing loans – is also a possibility, they added.
HSH and the potential suitors declined to comment or were not immediately available for comment.
HSH’s owners – the northern German states of Schleswig-Holstein and Hamburg jointly holding 85 percent – have to privatise the bank by the end of February 2018 and have mandated Citi to organise the process, which will kick off in early 2017.
HSH, which said last year that new owners could include other landesbanks, is due to appoint a separate advisor, the sources said.
China has been actively scouting for shipping assets in Europe.
China Merchants bank, whose biggest shareholder has been a driving force in the consolidation of the industry in China, earlier this year bid for RBS’ Greek shipping assets and for the Baltic Exchange, the global hub for shipping benchmarks.
Separately, China’s COSCO, which owns the world’s fourth-largest container shipping fleet, this year bought a majority of Greece’s biggest port Piraeus.
HSH, which had total assets of 90 billion euros and posted a profit of 160 million euros as of June, sought backing from its owners after risky assets turned sour in 2008, and it got hit further by the slump in global trade after the financial crisis.
The EU Commission, HSH and its owners negotiated for years over a plan to restore HSH to health and avoid future state aid.
Ahead of the privatisation, HSH is selling a 3.2 billion euro loan portfolio, with a deal for half of that expected this year and the remainder in early 2017, the sources said.
A listing of HSH on the stock exchange looks unlikely given the market’s weak appetite for banking assets the people said, pointing to low trading multiples of German peers such as Deutsche Bank and Commerzbank.
HSH Chief Executive Ermisch said in the summer that he did not think that the whole bank offered an interesting perspective for a financial investor.
HSH relies mainly on wholesale funding, benefiting from its owners’ triple A rating. Putting the funding on a new footing is seen as a challenge for a private equity group, the people said.
Fees and capital requirements linked to mandatory membership of one of Germany’s deposit protection schemes is also seen as a challenge for a potential private equity owner.
If a sale or listing of HSH fails, its owners would be forced to wind down the lender with a likely bail-in from creditors.