German shipping lender Nord/LB has turned down an investment bid from two private equity funds — but it could have a new solution for its restructuring.
Cerberus Capital Management and Centerbridge Partners had offered to buy 49.8% of the core assets of the state-owned lender and would pump in more than $1bn.
Cerberus was one of the buyers of HSH Nordbank last year.
But Nord/LB said on Monday it had put this process on hold while it examined a new proposal from the German Savings Banks Association (DSGV).
Focusing on DSGV offer
It said: "After in-depth assessment of a joint offer by two financial investors submitted as part of a bidding process, the bank and its owners are turning down this option for the moment to focus on a joint solution with the DSGV under public law."
DGSV will contribute to a "solution for strengthening its capital", it added, calling the plan a "suitable basis" for its realignment and the further development of its business model.
Further talks are planned with the banking supervisory authority and the European Commission to clarify "outstanding issues" quickly so that the measures can be implemented as soon as possible, Nord/LB said.
Reuters reported that the bank's state owner, Lower Saxony, will pump in €1.5bn ($1.7bn) and provide €1bn in guarantees, in addition to the €1.2bn DSGV will provide.
The shipping lender also said "decisive progress" is being made in running off its ship-financing portfolio.
Chairman Thomas Burkle said the non-performing loan (NPL) portfolio, which groups together the problem assets from ship financing, should be almost completely gone by 2020.
Big loan deal agreed
As part of this, the bank has agreedto sell one of its ship-financing portfolios to an unnamed external investor for about €2.7bn.
The deal comprises 263 ships with an NPL portion of 90%.
The transaction was preceded by a confidential bidding process which was carried out separately and independently from the bidding process involving the minority stake.
However, Cerberus was said to have been in separate talks to snap up the bank’s shipping loan portfolios and has now been tipped as the buyer.
Nord/LB was believed to be marketing two ship loan portfolios — denominated Big Ben and Tower Bridge — worth €2.5bn and €4bn, respectively.
Its NPL book stood at €7.3bn as of 30 September.
The bank is also working hard on further measures aimed at swiftly reducing this portfolio
Nord/LB
"The bank is also working hard on further measures aimed at swiftly reducing this portfolio," it said.
It is now expecting risk provisioning for 2018 of up to €2.5bn.
The banking supervisory authority was informed that Nord/LB’s capital ratios will temporarily drop below the minimum requirements and has requested a detailed capital plan in the following weeks.
Burkle said: “With the bank carefully extricating itself from legacy transactions and reinforcing the capital base on a sustainable basis, we will preserve and strengthen Nord/LB as a bank that has firm roots in its local region of northern Germany and the savings bank organisation, as well as international expertise."
