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Lone Star Mulls Buying Stricken German Banks

Lone Star is picking over German banks struggling through the credit storm and sees parts of stricken German lender IKB as worth buying, the private-equity group's country head told Reuters.

The investor, which specializes in acquiring distressed businesses, flagged its interest as German banks put the finishing touches to the second rescue of subprime casualty IKB in four months.

Comments from a senior government minister that IKB had further unresolved problems coupled with its biggest shareholder -- state bank KfW has a 38 percent stake -- saying it wanted out mean IKB's future is still uncertain.

Karsten von Koeller, who heads Lone Star's German business, said the global credit crunch was throwing up good investment opportunities in Europe's biggest economy and singled out IKB as a possibility.

Lone Star, which has snapped up portfolios with 12 billion euros ($17.7 billion) of credit so far in Germany, said IKB's 5 billion euro commercial property credit portfolio could be of interest.

"The ongoing finance crisis has hit German banks, which makes restructuring in the industry necessary. That will provide us with new opportunities," von Koeller told Reuters.

"In the course of such restructuring we could imagine, for example, buying a business in commercial property credit like that of IKB," he said, adding that it could be merged with a company Lone Star owns.

"We are an opportunity fund. If a good opportunity arises with the chance to get out again in a couple of years in a way that makes sense, we could imagine getting into financial institutions."

His comments, which pushed IKB's shares higher on Friday, are the first signs that private equity buyers are circling German banks rocked by the credit storm. IKB stock was up 6.3 percent at 8.45 euros.

The credit crisis, which started when higher-risk U.S. home owners were squeezed by falling property prices and rising interest rates, has shaken investor confidence and cost banks around the world more than $50 billion.

Germany has taken an especially hard beating. Two of its banks nearly collapsed under the strain.

IKB, a formerly little-known lender to small businesses, has become a by-word in Germany for the subprime crisis. The government-led rescue of that lender is set to cost more than 6 billion euros.

Regional bank SachsenLB was also saved by a last-minute rescue.

Earlier in the week, the country's largest state-owned regional bank, LBBW, said it expected problems linked to subprime mortgages to cost it around 800 million euros.