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UPDATE 1-Suitors eye Commerzbank UK property loans-sources
* UK commercial real estate loans portfolio for sale
* Portfolio classified as "higher risk" by Commerzbank
* Portfolio was once part of real estate unit Eurohypo
FRANKFURT, March 12 (Reuters) - Private equity firms and property lenders have expressed interest in bidding for a 5 billion pound ($7.5 billion) UK property loans portfolio put up for sale by Commerzbank, a person familiar with the matter said on Tuesday.
Germany's second-largest lender, which received a state bailout in the 2009 financial crisis, is exploring ways to cut the size of its balance sheet as a way to fulfil stricter bank safety rules known as Basel III.
A source told Reuters on Monday that Commerzbank was exploring a sale of the UK property loans business of its mortgage unit Hypothekenbank Frankfurt International, formerly known as Eurohypo.
In a presentation to investors in February, Commerzbank said its UK commercial real estate portfolio was the largest among those classified as "higher risk" with an exposure at default of around 5.2 billion euros ($6.8 billion).
In total, Hypothekenbank Frankfurt's exposure at default to commercial real estate is around 56 billion euros and its exposure to public finance is around 80 billion euros, a presentation from September shows.
Commerzbank's move follows similar steps by other troubled banks. Allied Irish Banks Plc and Anglo Irish Bank Corp Ltd have also sold portfolios, including billions of dollars worth of loans on U.S. properties.
The Financial Times had on Monday cited people familiar with the matter as saying Barclays was managing the sale. It also said U.S. investment firms such as Blackstone Group LP , Lone Star Funds and Starwood Capital have expressed interest in buying all or parts of the portfolio.
The source close to the deal said on Tuesday that banks were also among the interested parties.
Wells Fargo & Co and JPMorgan Chase & Co have in the past been buyers of performing loans, while distressed debt and equity investor Lone Star Funds has snapped up non-performing debt.
The Financial Times reported that the UK property loans for sale had a nominal value of 5 billion pounds and that most of the loans were performing well.
The quality of the loan portfolio means a discount of less than 10-15 percent is likely, the source familiar with the matter said.
A sale is not the only option being considered, with Commerzbank preferring to hold the loans until maturity rather than sell at a steep discount, the newspaper said.
Commerzbank declined to comment.
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