By Arno Schuetze and Klaus Lauer
FRANKFURT/BERLIN, Dec 18 (Reuters) - German public sector bank NordLB is in exclusive talks to sell the last of its soured shipping loans to Cerberus, while also talking to Cerberus and rival Centerbridge about a potential investment in the bank, sources close to the matter said.
Private equity firm Cerberus is the last remaining suitor for a 3.9 billion euro ($4.4 billion) portfolio of non-performing shipping loans called "Tower Bridge", two sources said.
Last month, it entered into exclusive talks over the sale of a 2.5 billion euro portfolio dubbed "Big Ben".
A deal for the ship loans is contingent on an agreement NordLB aims to strike in February to shore up its balance sheet and cover writedowns on the value of any loans it sells, the sources added.
NordLB and the suitors declined to comment.
The bank and its shareholders, which include regional savings banks, want to restructure NordLB in a way that complies with EU state aid rules that could force a complete sale.
"I want NordLB to be fit for capital markets," Lower Saxony's Finance Minister Reinhold Hilbers said on Monday. He also serves as NordLB's chairman.
Cerberus is one of two parties interested in a roughly 3.5 billion euro capital injection into NordLB, the sources said, adding Centerbridge was the second one.
While private equity groups generally prefer to buy majority stakes to ensure they can push through sweeping changes, NordLB's owners want to sell only a minority stake, the sources said. But the owners have promised to guarantee that a buyer will have a say on strategy, they said.
"NordLB has significant losses carried forward which are at risk in a majority sale. A minority stake sale with a shareholder agreement in which certain governance rights are defined is an option," one of the sources said.
Public-sector lender Helaba did not hand in a final offer for NordLB and is no longer part of the formal auction process, but talks between NordLB and Helaba stakeholders continue on whether a public-sector solution can be found, the sources said.
A sale of NordLB's business with German municipally-owned savings banks is an option being discussed, one of the sources said. A divestiture of NordLB's retail banking unit Braunschweiger Sparkasse is also under consideration.
While a direct cash injection into NordLB is not possible due to its legal structure, the private equity investors could either invest in a new holding company or NordLB could issue mandatory convertible notes to them, the sources said.
$1 = 0.8790 euros Editing by Maria Sheahan; Editing by Mark Potter