HSH Nordbank has started preparations for a privatisation, several people familiar with the matter said, as the struggling German public-sector lender awaits a final decision from the European Commission on its bailout by tax-payers in the financial crisis.
The ship financier’s owners have collected pitches from investment banks vying for roles in the privatisation by a Monday deadline, the sources said, adding that advisors were unlikely to be mandated before the end of the first quarter.
The European Commission said in October that HSH’s owners – the German states of Schleswig-Holstein and Hamburg jointly hold 85 percent – would have two years to privatise the lender, pending the final EU decision in the first half of 2016.
HSH and its owners declined to comment.
Privatisation may officially be launched as soon as the final EU verdict has been published, and a key motivation for starting the process early is to avoid key staff and clients jumping ship, the sources said.
A decision on a sale or initial public offering (IPO) may, however, be delayed until after state elections in Schleswig-Holstein in spring of 2017. HSH turned to its owners after risky assets turned sour in 2008, and it got hit by the slump in global trade in the wake of the financial crisis.
The Commission, HSH and its owners negotiated for years over a plan to restore HSH to health and to avoid the need for new state aid in future. “Key issues will be the performance of the three main business segments shipping, real estate and corporates as well as the timing of any deal within the shipping cycle,” one of the sources said.
Any trade buyer or investor in a potential IPO will scrutinise the capitalisation of the bank, for which its owners want to see a positive purchase price, the person added. Asian banks, which are strong in ship financing as most of the shipyards are situated in countries like Korea and China, are seen as potential buyers.
Investment banks that have advised landesbanks on privatisations or divestments, include Morgan Stanley, Citi, Lazard, BNP Paribas and UBS . HSH, which said last year that new owners could include other landesbanks, is expected to appoint a separate advisor, the sources said.
If a sale or listing of HSH fails, its owners would be forced to wind down the lender in a move that would likely include a bail-in from creditors. That would mark the second liquidation of a public-sector bank induced by the European Commission after the WestLB case in 2012.