Private equity groups battle it out for HSH Nordbank
The majority owners of German lender HSH Nordbank, the federal states of Hamburg and Schleswig-Holstein, have received ‘several binding bids’ for the bank by the deadline of 27 October, they announced this weekend.
The latest round of bids follows indicative bids made in March and June this year. US private equity groups Apollo and J.C. Flowers have submitted a joint bid, someone close to the deal told REFIRE. Socrates Capital, a London-based asset manager, is also believed to have bid, as is US private equity group Lone Star. HSH Nordbank declined to comment on the bids received.
‘These binding bids take us a big step closer to a successful privatisation solution,’ said Stefan Ermisch, CEO of HSH Nordbank. ‘In the future, we will support our federal state owners to the best of our ability because we regard this firm investor interest as both an affirmation and an incentive.’
In return for the €13bn bailout the bank received from the German state in 2009, the EU Commission requires the sale agreement to be signed by 28 February 2018. Should no deal be struck by February’s deadline, HSH would suffer the same fate as Düsseldorf-based WestLB, which the EU Commission instructed Germany to wind down in 2012.
Nonetheless, HSH has had a good year. It witnessed an increase in group profit to €173m before taxes as of 30 June 2017. New business rose about 10% to €6.4bn, up from €5.8bn in the same period last year. It plans to release its final nine-month figures on 29 November 2017.
The lender has also sought out new ways to differentiate itself in recent years. According to Michael Windoffer, head of real estate cross border business at HSH, his group ‘doesn’t win deals via pricing, that’s not our thing’: ‘We are reliable, fast and deliver tailor-made financing structures – that’s what our clients appreciate,’ he told REFIRE at EXPO REAL this month. ‘At the moment, we have €20bn in loans in the pipeline globally. We did €4.6bn in new business last year and €2.3bn in the first six months of this year.’
Construction finance also accounts for a much bigger slice of new business, at around 40%, Windoffer said. ‘Our pre-letting requirements depend on location, LTC and the sponsor’s track record,’ he said. ‘We’re starting to look outside Germany, too, at Paris and London, for example. We’ve also lent more in B and C cities in Germany in the past year. For us, the lending hotspots are northern Germany and the metropolitan regions, especially Berlin and Frankfurt. The question is not how much is the LTV but what is the exit LTV and how do we get there?’
Germany’s seven Landesbanken – of which HSH Nordbank is one – have run into difficulties since the European Commission stripped them of government guarantees, along with access to cheap funding, in 2005.
In its heyday back in 2008, HSH’s balance sheet stood at €208bn, following an expansion strategy that propelled it to become the biggest shipping lender in the world. Today, its balance sheet has shrunk to €79bn. Ermisch has signalled that his goal is to reduce it yet further to €60bn by the end of this year. The lender has managed to reduce the number of bad loans on its books by 20% to €11bn since last year.