German state-owned lender NordLB and KKR Credit said they had reached an agreement by which KKR Credit will acquire a $1.5 billion portfolio of shipping loans from NordLB jointly with an unspecified sovereign wealth fund.

The portfolio of performing and non-performing loans will include up to 100 ships and will form the seed mandate for a portfolio management company that the buyers plan to set up.

NordLB is one of several German banks seeking to cut its ship loan exposure as the container and dry bulk shipping industries struggle with their worst downturn due to a glut of ships, a faltering global economy and weaker consumer demand.

Sources told Reuters last month that Germany’s biggest lender, Deutsche Bank, was looking to sell at least $1 billion of shipping loans to reduce its exposure to a sector whose lenders face closer scrutiny from the European Central Bank.

NordLB aims to cut its exposure to between 12 billion and 14 billion euros ($14-16 billion) within five years, from 18 billion euros now.

NordLB and KKR said they expected their deal to close in the fourth quarter. They did not disclose terms of the agreement.

Source: Reuters (Reporting by Maria Sheahan; Editing by Georgina Prodhan)