HSH to be sold to private equity firms

A consortium including Cerberus and JC Flowers will buy the German state-owned bank.

Germany’s HSH Nordbank, which has been reducing its pre-crisis real estate loan portfolio, is to be sold to a consortium led by two US private equity firms.

The state-owned bank will become a corporate bank with entirely private shareholders, including affiliates of Cerberus European Investments, JC Flowers, GoldenTree Asset Management, Centaurus Capital and BAWAG.

The deal marks the first successful privatisation of a federal state bank in Germany. The agreement, which is subject to approvals, was made by the states of Hamburg and Schleswig-Holstein and the Savings Bank Association of Schleswig-Holstein. The deal is expected to close during the second half of this year.

In October 2015, as part of a rescue deal with the EC, it was decided the Hamburg-based bank, which was hit hard during the downturn by its exposure to shipping loans, would be split into a holding company and an operating company, with the latter to be sold by 2018.

Since then, the bank has been selling non-core assets in a bid to boost its balance sheet ahead of a sale. In February 2017, it sold a real estate loan portfolio with a face value of €540 million to Bank of America Merrill Lynch as part of a wider €1.64 billion sale of its non-performing exposure.

During 2017, the bank reduced non-performing exposures by more than half to around €6 billion. As part of the sale, nearly all remaining legacy assets will be carved out and transferred to a vehicle owned by the buyer consortium.

The bank has also set about rebuilding its core real estate lending book. In its most recent results, it said that it increased new business in the real estate segment to €3.4 billion by the end of Q3 2017.

“Our future owners are among the world’s most experienced financial investors in the banking sector, particularly in Germany and continental Europe,” chief executive Stefan Ermisch said in today’s announcement of the sale agreement.

“We believe Germany is a highly attractive place to invest and the long-term opportunities in corporate banking are particularly strong,” added David Teitelbaum, head of Cerberus’s European Advisory Offices.