Lone Star, Wells Fargo in talks to buy Eurohypo portfolio: source

FRANKFURT Thu Apr 18, 2013 8:27am EDT

A Wells Fargo sign is seen outside a banking branch in New York July 13, 2012. REUTERS/Shannon Stapleton

A Wells Fargo sign is seen outside a banking branch in New York July 13, 2012.

Credit: Reuters/Shannon Stapleton

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FRANKFURT (Reuters) - Private equity firm Lone Star and Wells Fargo (WFC.N) are in exclusive talks to buy a 4 billion pound ($6.09 billion) UK property loans portfolio, put up for sale by Commerzbank (CBKG.DE), a person familiar with the deal said on Thursday.

A deal could be struck as early as May, the source added.

Commerzbank, Wells Fargo and Lone Star declined to comment.

Germany's second-largest lender is selling the UK property loans business of its mortgage unit Hypothekenbank Frankfurt International, formerly known as Eurohypo as a way to cut down the size of its balance sheet.

Wells Fargo & Co is interested in acquiring the performing property loans, while distressed debt and equity investor Lone Star Funds has its eyes on non-performing debt, the source said.

Commerzbank's move to sell property loans follows similar steps by other troubled banks to shed risky assets. Allied Irish Banks Plc (ALBK.I) and Anglo Irish Bank Corp Ltd ANGLLN.UL have also sold billions of dollars worth of property loans.

Shedding the assets will help Commerzbank, which received a state bailout in the 2009 financial crisis, fulfill stricter bank safety rules known as Basel III. Balance sheets with fewer risky assets require less capital.

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.

The Financial Times on Wednesday reported that other prospective bidders including Blackstone, Apollo, Starwood Capital and Pimco have been informed their bids will not be accepted.

(Reporting By Edward Taylor, Alexander Hübner and Rick Rothacker; editing by Alex Smith and Elaine Hardcastle)

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