April 14 (Bloomberg) -- Deutsche Bank AG, Germany's biggest lender, is seeking buyers for its backlog of unsold leveraged buyout loans after amassing more of the debt than any of its rivals, two people with knowledge of the plans said.

The Frankfurt-based bank had a total 36.2 billion euros ($57 billion) of LBO loans on its books at the end of 2007, according to its annual report published last month. That included 15.3 billion euros it already lent and 20.9 billion euros it had promised. Deutsche Bank is looking to sell the loans it has already funded, said one of the people. Both declined to be identified because the plans are private.

Deutsche Bank has about a quarter of the $200 billion of leveraged buyout debt held by banks worldwide, according to a report last week by BNP Paribas SA. New York-based Citigroup Inc., which BNP says has the second-biggest share at $43 billion, has been in talks to sell $12 billion of loans at a loss to Apollo Management LP, Blackstone Group LP and TPG Inc., a person briefed on the matter said last week.

``It would be good news for Deutsche Bank if it succeeds in selling at least a significant part of its leveraged finance loan portfolio,'' Konrad Becker, an analyst at Merck Finck & Co. in Munich, said in a note to clients. ``It could mean that there is again a market for leveraged finance loans after months of nearly no activity.''

Oonagh Baerveldt, a London-based spokeswoman for Deutsche Bank, declined to comment. The Wall Street Journal earlier today said Deutsche Bank is trying to sell between $15 billion and $20 billion of loans and is in talks with New York-based Blackstone, Apollo in New York, TPG in Fort Worth, Texas, and Boston-based Bain Capital LLC's Sankaty Advisors. The paper cited two unidentified people with knowledge of the situation.

Bank Fees

Buyout firms borrow to finance about two-thirds of the cost of acquisitions. Banks that underwrite the loans earn fees to compensate for the risk of having to take on any debt they can't sell. Their fees shrink if the value of the debt falls below 100 percent of face value.

Leveraged, or high-yield, loans are rated below Baa3 by Moody's Investors Service and BBB- by S&P.

Private-equity firms frequently have arms that also invest in corporate loans and junk bonds. Sankaty, which Bain formed in 1997, has $25 billion in assets under management. Blackstone set up a debt advisory business in 1999 that had $9.2 billion in assets as of September. In January the buyout firm bought GSO Capital Partners for $930 million adding $10 billion of leveraged loan and distressed debt investments.

Loan Prices Fall

Deutsche Bank will sell the loans if it gets a price it considers fair, one of the people said. The loans are unlikely to be sold in one package, the person said.

The leveraged loan market seized up after losses on U.S. subprime mortgage bonds caused investors to shun all but the safest government debt. Prices for U.S. leveraged loans fell to a record low of 86.3 cents on the dollar in February, before rising to 90.4 cents last week, according to Standard & Poor's.

Banks in Europe are clearing a backlog of unsold buyout loans at a slower pace than in the U.S. because underwriters are assigning unrealistic prices to the debt, according to an S&P report last week. Investors in the U.S. on average were offered 0.5 percentage point more interest than their European counterparts in the second half of 2007, the analysts said.

European banks took five months to reduce their unsold LBO loans by 13 percent to 66 billion euros as of January, according to S&P data. In the U.S., banks cut their backlog by more than 36 percent to $152 billion in the same period, according to S&P.

Deutsche Bank led eight underwriters left holding as much as 8 billion pounds ($15.8 billion) of loans to finance the acquisition of U.K. drugstore chain Alliance Boots by Kohlberg Kravis Roberts & Co. after they couldn't find buyers for the debt in July.

The bank is also part of a lending group that has committed to finance the C$51.7 billion ($50.7 billion) buyout of BCE Inc. by an investor group led by the Ontario Teachers' Pension Plan.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Pierre Paulden in New York at ppaulden@bloomberg.net.

Last Updated: April 14, 2008 16:12 EDT