HSH Nordbank in Deal to Reduce Exposure to "Crisis-Prone" Shipping Industry

by Ship & Bunker News Team
Wednesday October 21, 2015

HSH Nordbank, the world's largest lender for the maritime sector, says a debt restructuring deal its public sector shareholders and the EU Commission have reached to obtain state aid will result in a sustained improvement in its financial and risk profile.

Stefan Ermisch, deputy chairman of the management board and chief financial officer of HSH, said, "Our exposure to the shipping business, which has been crisis-prone for years, and thus also to the US dollar, will decrease significantly."

HSH's legacy loans of $7 billion will be offloaded at market prices to majority regional government shareholders Hamburg and Schleswig-Holstein, whose state parliaments have yet to approve the deal.

The company's operating body will pay "significantly lower fees" on the guarantee under its new structure, which in turn will strengthen its capital and risk profile.

Also, the EU will confirm its provisional re-authorization of a guarantee it first issued in 2013, from EUR 7 billion ($7.9 billion) to EUR 10 billion ($11.3 billion).

Upon a binding decision being reached by the EU in the first half of 2016, privatization of HSH's operating company will occur within 24 months; Hamburg and Schleswig-Holstein will be allowed to retain a 25 percent stake for up to four years.

HSH and other maritime lenders incurred billions of Euros of bad debt when the 2008 recession caused an excess in capacity in the container shipping business.

Last year, HSH, which had been paring down its number of non-performing loans, said it would keep shipping as a "core segment" of its business despite its risky shipping loans having prompted the European Central Bank to administer a stress test.