Berenberg in $1.1 Billion Shipping Push With New Debt Fund

By Nicholas Brautlecht

(Bloomberg) — Joh. Berenberg Gossler & Co. KG will boost lending to the maritime industry by as much as 1 billion euros ($1.1 billion) through a new shipping fund for institutional investors seeking an alternative to record low bond yields.

The world’s second-oldest bank plans to draw insurers, pension funds and saving banks into shipping, promoting the debt fund as a counter-cyclical investment, said Andreas Schultheis, head of international shipping at Berenberg. The container industry is battling years of overcapacity and commodity shipping rates are near record lows.

“We plan to massively expand our shipping business, but with third-party money,” Schultheis said in an interview in Hamburg. “The first step will be a 100 million-euro portfolio in the first half of this year and we believe it may grow to 1 billion euros in the coming years.”

German maritime lenders including Hamburg-based HSH Nordbank AG, which holds 21 billion euros in shipping loans, are predominantly invested in container shipping. That market is battling a seventh year of overcapacity after a boom in ship deliveries coincided with the financial crisis. Saddled with billions of euros in bad debt, lenders including Commerzbank AG and Norddeutsche Landesbank curbed or halted lending to the industry, leaving room for new competitors to expand.

The yield for investors will be several times higher than the interest on corporate covered bonds such as the HSH Nordbank shipping paper issued this month, which carried an annual coupon rate of 0.5 percent, said Schultheis, who is presenting the new fund to investors at the Marine Money conference in Hamburg on Thursday. It will be domiciled in Luxembourg, he said.

Berenberg, which is managing assets totaling 30 billion euros, has focused on short-term lending for shipping and assisting the bigger carriers such as Hapag-Lloyd AG with bond issues.

The fund will consist of newly issued loans backed by vessels of various sizes and types, said Schultheis. “The worst case scenario is that a loan turns sour and then I need a vessel from a liquid market segment like a standard container or bulker vessel,” he said.