February 2, 2019 / 7:02 PM / 6 months ago

UPDATE 1-NordLB says owners accept recapitalisation plan of states and savings banks

(Adds details, background)

By Arno Schuetze

FRANKFURT, Feb 2 (Reuters) - NordLB’s owners have formally decided to go ahead with a plan to recapitalise the ailing German public sector bank with money from two regional states as well as from a group of savings banks, the lender said in a statement on Saturday.

The plan had won the backing of its majority owner, the regional state of Lower Saxony, as well as Saxony Anhalt, effectively sidelining a rival offer by private equity groups Cerberus and Centerbridge.

German savings banks had earlier this week agreed on the plan, capping months of discussions during which a stake sale to private equity interests had seemed more likely.

The two regional states which together own 65 percent of NordLB will pump 1.5 billion euros ($1.7 billion) into the lender and provide 1 billion euros in guarantees, in addition to the 1.2 billion the savings banks will inject.

NordLB said its owners had also decided to sell a non-performing 2.7 billion euro shipping portfolio to an unnamed investor and it would wind down its remaining non-performing loan portfolio almost completely by year end.

People close to the matter said the buyer of the portfolio, dubbed Big Ben, is private equity firm Cerberus. Cerberus declined to comment.

The expected writedowns on NordLB’s soured shipping loans were the main reason the lender had to seek fresh capital and will result in NordLB posting a record loss for 2018.

The lender said it expects to post a 2018 net loss of 2.7 billion euros, cutting the bank’s capital ratio to between 6 and 6.5 percent and temporarily breaching thresholds set by supervisors.

With the help of the capital injection, the capital ratio will rise to about 14 percent, compared with 11.8 percent seen in September.

Under the restructuring plan NordLB’s balance sheet will shrink from a total of 150 billion euros to below 100 billion in the medium term. Parts of NordLB, such as its retail unit Braunschweiger Sparkasse, could be spun off.

One other shipping portfolio, dubbed Tower Bridge, may be transferred to a rundown vehicle to minimise writedowns, NordLB’s chairman said earlier this week.

NordLB had entered exclusive talks with Cerberus over the two shipping portfolios in December, but made clear that a signature on that deal was dependent on the outcome of talks on the recapitalisation of the bank.

$1 = 0.8731 euros Reporting by Arno Schuetze Editing by David Holmes

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