HSH Nordbank Spends 3 Billion Euros to Finance Ship Construction

HSH Nordbank AG, the world’s largest shipping finance bank, spent about 3 billion euros ($4 billion) since 2011 to help clients order new vessels and modernize their fleet.

The bank financed 56 vessels a year, about half dry bulk carriers and the rest product tankers, car carriers and a few container ships, said Christian Nieswandt, global head of shipping for domestic clients.

“We have a strong interest in a modern fleet that is able to compete,” Nieswandt told reporters in Hamburg, rejecting speculation that the bank stopped new ship financing.

The lender, controlled by the states of Hamburg and Schleswig-Holstein, needs to cut its core shipping loans to 15 billion euros from 16 billion euros by the end of 2014 to comply with a state-aid ruling by the European Union in 2011. HSH Nordbank has an additional 9 billion euros in a restructuring unit, or bad bank, Nieswandt said.

One precondition for financing new construction is that the vessels meet recent energy efficiency standards. About 90 percent of the vessels the bank financed are older models, he said, referring to ships built before the financial crisis started in 2008. Since then, high bunker prices and low charter rates have accelerated technological development, he added.

As of January 2015, shipping lines must comply with low sulfur fuel regulations in North Europe, the U.S. and Canada, obliging them to buy more expensive fuel or equip vessels with equipment to cut exhaust fumes.

This probably will result in more ship insolvencies in the next 12 months than in the previous, especially among companies with older, less competitive vessels that face additional costs meeting new environmental regulations, the executive said.

“There have hardly been any insolvencies of shipping companies, but what we have seen is insolvencies of closed-end shipping funds that have hit individual shipping companies to a greater or lesser extent,” Nieswandt said.

To contact the reporter on this story: Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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