Lone Star snaps up German NPLs

The US private equity firm has consolidated its position as a keen acquirer of distressed debt in Germany by picking up a €1.2bn bad loan portfolio from Dresdner Bank.

Lone Star, the US private equity firm that specialises in buying distressed debt, has completed its second German acquisition in the last month with the purchase of €1.2 billion ($1.5 billion) worth of bad loans from Dresdner Bank.

Last month, Lone Star acquired a €3.6 billion portfolio of property-related debt from German mortgage company Hypo Real Estate. According to a report in The Financial Times, Lone Star has completed eight deals in Germany since last year, acquiring €6.2 billion worth of distressed debt in total.

The assets from Dresdner consist of approximately 1,300 loans to 300 customers, two thirds of which are reportedly unsecured. The move is part of a continuing strategy by Dresdner to lower its exposure to such assets. The bank's international restructuring unit has already reduced its portfolio of domestic bad loans from in excess of €9 billion to €4 billion in the last few months.

Lone Star is the leading distressed debt acquirer in Germany, a market whose non-performing loan (NPL) market is believed to be worth around €300 billion, the second largest in the world behind China.

Last month, it was reported that Lone Star was set to close its office in Beijing and scale down its operations in China as a result of the slow pace of disposal of the country’s $400 billion NPL portfolio by the banking community there.

Having recently raised a $5 billion fund for investments in Asia and Europe, Lone Star seems to be switching its focus away from China and concentrating particularly on the opportunities presented by the German market.

The firm is also reportedly in the running, along with global private investment house Fortress, to acquire Delmora Bank, a German holding vehicle which manages €2.3 billion in bad loans from SchmidtBank and Delbrueck Bank.