Reuters cited two sources who were familiar with the process that private equity firm Lone Star has hired Bank of America Merrill Lynch and Rothschild as their financial advisors for the proposed sale of IKB, a German corporate bank. The news agency said the bank sale is one of the highest-profile casualties in Germany due to the financial crisis, and will begin soon most likely. Mandatory bank health tests in the Euro Zone reportedly forced Lone Star to conduct an auction to find a buyer for the German lender.

IKB prior to the financial crisis was the top lender of mid-sized companies in Germany. It had been given a series of bailout packages from both the state of Germany and development bank KfW after its investment vehicles had problems in funding in 2007. After being rescued by KfW in a takeover deal, the latter sold IKB to Lone Star in 2008 for €137 million.

The news agency also added that the sale of IKB will spark interest in banks who are looking to expand their businesses with medium-sized companies in Germany. Potential buyers of IKB are said to be BNP Paribas, Societe Generale, Santander and HSBC, according to the sources.

One person who is close to the sale said, "Lone Star has shown that it is ready to exit German banking assets now."

When Reuters asked the banks involved in the reported sale of IKB and Lone Star, all of them refused to provide comment on the matter.

The US private equity investor owns a 91.5% interest in the German lender. Its latest exit was in December last year, when it sold property lender Corealcredit for €342 million or $464 million to Aareal Bank.

The European Central Bank and the European Banking Authority are running mandatory bank health tests this year, Reuters said. Banks will need to have a minimum Core Tier 1 equity capital, which is equivalent to 8% of risk-weighted assets by 2013 to pass the health tests. Bankers have said that IKB will be able to pass the stress test if sold to a peer with a strong balance sheet.