After sending out information packages earlier this month, Leoni's management is holding informal talks with potential bidders, they said. Preparations for a listing of the unit have been put on the backburner given market conditions, they added.
Leoni is hoping to whet the appetite of peers such as Huber+Suhner, Prysmian, Adient or Deren, they said, adding that private equity groups such as Triton, Bain or KKR were also being targeted.
Leoni needs to refinance Schuldschein notes worth about 200 million euros (£182.2 million) next year. It said in May that its liquidity had decreased by a quarter to 740 million euros at the end of March, of which 120 million was in cash holdings.
The company is expected to update investors on its liquidity when it releases second-quarter earnings figures on August 14.
Brokerage Hauck & Aufhäuser in May called the free cash flow development at Leoni "alarming", while analysts at LBBW at the time said that a valuation of only half of the company's book value was adequate and a capital increase conceivable.
Leoni said earlier this month that would explore a listing or sale of its Wire and Cable Solutions (WCS) business, which supplies the healthcare, factory automation, transportation and automotive markets.
"The wire and cable business with industrial clients will likely see robust demand, while interest in the unit catering to carmakers is limited," one of the sources said. Industrial clients account for roughly 40% of the unit's 2 billion euros in annual sales.
For private equity groups, Leoni is a difficult target as banks would struggle to finance such a buyout, another source said, adding that investors could always buy up debt and take control of the company in the event of a debt restructuring.
Deutsche Bank and UBS are advising Leoni on the unit sale, while Rothschild has been brought in as restructuring advisor, the people said.
In March, Leoni abandoned its 2019 profit targets, announced job cuts and said the company's finance chief would quit.
Reuters reported in December that Indian car wiring maker Motherson Sumi was in early talks with Leoni over a possible merger, but the negotiations never gained sufficient traction, people close to the matter said.
(This story corrects 8th paragraph to say industrial clients account for roughly 40% of the unit's 2 billion euros in annual sales, not roughly 2 billion euros of the unit's 5 billion in sales)
(Reporting by Arno Schuetze, Alexander Hübner and Edward Taylor; Editing by Jan Harvey)