Bad Shipping Loans – HSH Nordbank to Ditch ‘Substantial Legacy Assets’

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May 29, 2015

By Nicholas Brautlecht

(Bloomberg) — HSH Nordbank AG, the German lender suffering from bad shipping loans, said it’s seeking to cut “substantial legacy assets” to help return to a healthy balance sheet after a 2009 bailout and Fitch casted doubt over its business model last week.

Shareholders, including regional states Hamburg and Schleswig-Holstein, and the European Union should pave the way for structural changes as they seek a final deal in state-aid proceedings in the next few months, HSH said in a statement.

“A successful conclusion to this dialog would free the bank of substantial legacy assets and enable it to continue the successful implementation of its business model,” the lender said in the statement. A new structure would facilitate “the wind-down or restructuring of risk-prone legacy assets, it said.

The biggest maritime lender after DNB ASA of Norway held 21 billion euros in shipping loans at the end of last year, about half of which were non-performing, HSH said in April.

Global trade plunged after the financial crisis, leading to an excess in capacity in container shipping that left HSH and other maritime lenders saddled with billions of euros of non- performing loans. That prompted Hamburg and Schleswig-Holstein to inject 3 billion euros ($3 billion) of capital and grant a 10 billion-euro guarantee to cover losses.

HSH was among six German state-owned Landesbanken downgraded by Fitch on May 19. ‘‘HSH has not demonstrated that it has a sustainable business model,’’ the rating company said.

The Hamburg-based bank said it still expects a profit in the full year after a drop of 4 percent to 206 million euros in the first quarter. Net loan loss provisions were at 113 million euros in the period compared with 52 million euros a year ago on the back of ‘‘restructuring measures in the ship portfolios,’’ according to the statement.

The supervisory board extended the contract of Chief Financial Officer Stefan Ermisch and capital markets board member Matthias Wittenburg by another three years, HSH said. The bank also appointed Ermisch deputy to Chief Executive Officer Constantin von Oesterreich.

©2015 Bloomberg News

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