FRANKFURT-Following a ‘first wave’ of non-performing loans in Germany, a second is about to break as loans mature in 2011-2015 and these could bring up to $19 billion in volume into the marketplace for workout, Ruprecht Hellauer, managing partner of the structuring specialist Lohnbach Investment Partners here.

Hellauer said NPL trading activity increased over the last months. “These are either NPLs from the last wave - or little test balloons where banks have put together a couple of loans to just try to see and understand where the market is right now,” he said. “Broadly the institutions selling poorly performing assets fall into two groups - foreign banks, those without any strategic interest to stay in Germany and most motivated to run down their loan book and retrench to the home market and after this the German banks.”

Started in 2004, Lohnbach is funded by the management team and Grove International Partners, a private equity group. The Frankfurt firm arranges the acquisition and manages loans made against commercial property. It is currently working on some $754 million in face value, down from €1bn. Normally, portfolios are bought from banks via its investment vehicles at 40% to 50% of nominal value. PriceWaterhouseCoopers recently estimated NPLs on bank books in Germany were as high as $276 billion at end-2009. It cited Bundesbank data that see write-downs on loans of between $63 billion and $94 billion, mainly due to rising insolvencies.