German state-owned HSH Nordbank sold to consortium of U.S.-dominated investors

BERLIN, Feb. 28 (Xinhua) -- The German state governments of Hamburg and Schleswig Holstein have agreed to sell their combined share of 94.9 percent in the troubled regional lender HSH Nordbank to a U.S.-dominated consortium of international investors on Wednesday.

U.S. private equity firms Cerberus and J. Christopher Flowers will receive around 80 percent of HSH Nordbank in the privatization deal.

While smaller shares are held by the U.S. asset management company Golden Tree, British investment firm Centaurus Capital and the Austrian retail bank Bawag P.S.K., which is also owned by Cerberus.

The investors will pay around 1 billion euros (1.22 billion U.S. dollars) for the takeover of the bank, although the final figure could be lower depending on the extent to which the new ownership of HSH Nordbank makes use of credit guarantees worth 10 billion euros provided by Hamburg and Schleswig-Holstein.

According to media reports, the transaction foresees the early termination and pay-out of these guarantees to the investors in exchange for a compensatory payment of 100 million euros.

Both state governments have waived their rights to retain a minority stake. As a consequence, HSH Nordbank would be completely privately-owned when the transaction is finalized.

Considered to be the world's largest provider of maritime finance, the Hamburg-based bank was heavily-hit in the 2007/08 financial crisis, leading the emergency provision of government funds and the launch of a far-reaching corporate restructuring program.

HSH Nordbank was originally formed in a fusion of the state banks of Hamburg and Schleswig Holstein in 2003. The private equity firm J.C. Flowers first acquired a share of 5.1 percent in the financial institution in 2006, prior to the outbreak of the financial crisis.

Following an investigation into the institution on suspicion of having received illegal state aid from German authorities, the European Union's (EU) Commission ruled in 2016 that HSH Nordbank must be privatized.

Although Hamburg and Schleswig-Holstein already signed a formal sales contract on Wednesday, the acquisition by the international investor consortium must still be approved by delegates in the regional parliaments of the two states, as well as the Federal Agency for Financial Services Supervision (BaFin), the European Commission and the European Central Bank.

The successful conclusion of the transaction is consequently anticipated to take several months.

Nevertheless, Daniel Guenther, governor of Schleswig-Holstein, described the announced sale on Wednesday as an "important milestone" in the privatization of HSH Nordbank.

The sale of HSH Nordbank for around one billion euros will translate into to an estimated combined loss of between 13 and 14 billion euros for the state budgets of Hamburg and Schleswig Holstein. It is also likely to lead to the loss of hundreds of jobs at the financial institute as the new owners move to downsize its balance sheet. Enditem