Small German Shipping Firms to Fade on Credit Crunch, PwC Says

Germany, the country with the biggest container vessel fleet, will have fewer small shipping firms as European banks shun the industry and U.S. and Asian financiers focus on bigger peers, PricewaterhouseCoopers LLP said.

As ship owners face pressure to put more fuel-efficient vessels into service to get better charter prices, they will need to team up with peers in alliances or mergers to tap financing sources, according to Claus Brandt, a shipping analyst at the accounting and consulting firm.

“Smaller shipping companies will bid farewell to the market, because they don’t have access to financing sources,” he told reporters in Hamburg today. “Only companies of a certain size will get foreign capital.”

European lenders led by Germany’s HSH Nordbank AG, Commerzbank AG (CBK) and Norddeutsche Landesbank Girozentrale have curbed or stopped lending to shipping companies as vessel overcapacity persists and they face increased costs from non-performing loans. Germany’s mostly small- and medium-sized shipping firms hold an average of nine vessels, according to the VDR ship owners association.

Filling the gap, private-equity firms pumped more than $7.2 billion into the global industry last year, investing in distressed loans as well as new and used ships, according to newsletter Marine Money. China’s state-owned banks such as Industrial & Commercial Bank of China Ltd. (601398), the nation’s largest, are active “as never before” in Europe and prepared to take “hundreds of assets on their books,” Klaus Stoltenberg, head of shipping at Deutsche Bank, said on May 22.

Working Together

Some 51 percent of German shipping companies have joined forces with peers in areas such as vessel management and chartering operations, compared with 41 percent a year ago, according to a PwC study released today. About half plan more cooperation in the near future, according to the survey of 104 ship operators and owners in May and June.

Banks have also stepped up pressure on creditors to create alliances as the container vessel market struggles for a sixth year and the European Central Bank reviews the loan books of the euro area’s biggest lenders before it takes over as their regulator at the end of the year, said Brandt.

“Banks in some cases have given leeway to creditors during the six crisis years, but now we are seeing a clear tendency that banks seek bigger entities,” he said. “Creditors have had enough and push for vessel sales.”

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

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net David Risser, Robert Valpuesta

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