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

Hellauer said NPL trading activity increased over the lastmonths. “These are either NPLs from the last wave - or little testballoons where banks have put together a couple of loans to justtry to see and understand where the market is right now,” he said.“Broadly the institutions selling poorly performing assets fallinto two groups - foreign banks, those without any strategicinterest to stay in Germany and most motivated to run down theirloan book and retrench to the home market and after this the Germanbanks.”

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