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HSH Nordbank May Scrap Dozens of Ships as Owners Default

Oct. 10 (Bloomberg) -- HSH Nordbank AG, the world’s largest shipping bank, may scrap dozens of ships seized from indebted clients should it fail to sell them.

“If a ship is no longer supported by its owners and we don’t find a buyer, then an insolvency or scrapping of the vessel may become the last option,” Rune Hoffmann, a spokesman for HSH Nordbank, said by telephone from Hamburg yesterday. “Potentially 30 to 40 of the 1,100 vessels in the restructuring unit might be affected.”

HSH Nordbank, controlled by the German states of Hamburg and Schleswig-Holstein, is seeking to reduce non-performing loans on its balance sheet. Some clients have failed to pay back debt as the financial crisis hit global trade and the industry battled a sixth year of overcapacity.

The company’s shipping loan loans total 25 billion euros ($33.8 billion), of which 9 billion euros are part of the restructuring unit established in 2009, according to Wolfgang Topp, who heads its operations. Some 15 percent or about 165 of 1,100 vessels in the unit are not salvageable, while the remaining 85 percent may be restructured, he said in an interview last month.

HSH Nordbank plans to sell salvageable ships to strategic investors about 10 vessels at a time to help reduce the stock of bad loans, it said last month. The structure of the transactions will resemble an agreement with Greek shipping company Navios Group in April.

Navios, based in Piraeus, Greece, said it paid $130 million for about 40 percent of loans associated with five tankers and five container ships, buying a “significant fleet at historically low values.” It guaranteed to operate them for at least six years. The remaining $170 million of debt was converted into a 10-year loan, in the course of which HSH Nordbank is due to receive 80 percent of the returns generated by the ships, excluding operating and capital costs.

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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