Lone Star picks up €1.4bn German NPL portfolio

Dresdner Bank has sold a second portfolio of real estate non-performing loans to Lone Star, which has teamed up with Merrill Lynch.

Lone Star, the US private equity firm that specialises in buying distressed debt, has acquired its second portfolio of non-performing loans (NPL) from Dresdner Bank in seven months.

The firm is about to be granted a banking licence in Germany – the first private equity firm to do so – according to a report in today’s Financial Times.

In September last year, the firm acquired a €3.6 billion portfolio of real estate debt from German mortgage company Hypo Real Estate.

Lone Star teamed up with global investment bank Merrill Lynch to acquire a packet of corporate and commercial real estate loans from Dresdner worth €1.4 billion ($1.7 billion). No purchase price for the transaction was disclosed.

Last week, Merrills teamed up with US distressed investor Fortress group in Italy to acquire a €9 billion NPL portfolio from the country’s largest bank Banca Intesa for approximately €2 billion.

The German acquisition is Lone Star’s second involvement with Dresdner, the banking arm of global insurance group Allianz. In October, Lone Star purchased a €1.2 billion portfolio of 1,300 largely unsecured loans from Dresdner as part of the bank’s ongoing move to reduce its exposure to bad loans.

Lone Star has also had previous experience in the property-related debt market in Germany. In September last year, the firm acquired a €3.6 billion portfolio of real estate debt from German mortgage company Hypo Real Estate.

Merrills and Lone Star will be hoping for a pick-up in the German property market, which recently witnessed the largest-ever European private equity transaction. Two weeks ago London-based Terra Firma acquired German property group Viterra for €7 billion from parent utility E.On.

Last year, Lone Star closed a $5 billion fund for distressed investments in Asia and Europe and appears to be concentrating its focus on Germany. Germany’s NPL market is believed to be worth in the region of €300 billion, the second largest in the world behind China.

In April this year, Lone Star lost out to Goldman Sachs in the race to acquire a €2 billion portfolio of NPLs from German bank Delmora.