Private equity interested in Hypo Real's Depfa unit: sources
FRANKFURT (Reuters) - Several private equity groups and hedge funds have expressed interest in public finance specialist Depfa, which state-rescued German bank Hypo Real Estate HRESH.UL has put on the block, several people familiar with the situation said on Thursday.
Lone Star, Apollo (APO.N), J.C. Flowers, Cerberus, KKR (KKR.N) and Blackstone (BX.N) are among those who have handed in expressions of interest, the people said.
Separately, a consortium of hedge funds including Third Point, which approached Hypo Real Estate over Depfa in February 2012, continues to be interested, a person familiar with the investor group said.
Tentative bids are due in several weeks, although a signing of the deal is unlikely to happen this year, one of the sources said.
Hypo Real Estate, Citi (C.N) - which is running the sale - and the suitors declined to comment. Third Point was not immediately available for comment.
Hypo Real Estate has to sell Depfa by the end of 2014 and its pbb Deutsche Pfandbriefbank NUEG.UL unit by 2015 as a condition of the European Commission's approval of its state bailout.
Germany nationalized the stricken real estate lender, which collapsed in the aftermath of the Lehman Bros bankruptcy. Hypo Real Estate received a 10 billion euro capital injection in the wake of the financial crisis as well as 145 billion euros in liquidity guarantees.
Depfa, which has not underwritten new business since 2009, currently has a balance sheet total of around 73 billion euros.
Any buyer would get a large public finance portfolio. Of Depfa's borrowers, 26 percent are regional governments, 24 percent public sector enterprises and 22 percent sovereigns. About 24 percent of the portfolio stems from safe-haven Germany and 19 percent from the United States, while 8 percent is made up of Spanish and 5 percent of Italian debt.
Sector bankers said that Hypo Real estate is facing an uphill battle with the sale as any private equity investors - which unlike some big banks usually do not have cheap and easy access to bond markets - would have to shoulder relatively high refinancing costs.
"It is possible that we will see Depfa end like Austria's Kommunalkredit, which is being wound down after no buyer emerged," one of the bankers said.
(Reporting by Arno Schuetze and Alexander Hübner; Editing by Elaine Hardcastle)
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