NordLB-Backed Fuerstenberg’s Bonds Tumble After Coupon Warning

Bonds issued by a Norddeutsche Landesbank-backed entity plunged after holders were told they may not get coupon payments next year because of potential losses at the German shipping lender.

Fuerstenberg Capital International Sarl’s 290 million euros ($325 million) of 5.625 percent perpetual notes fell 12 cents on the euro to 86 cents, according to data compiled by Bloomberg. That’s the biggest decline since August 2011.

The special entity may not pay 2017 coupons if NordLB posts a loss this year, according to a May 19 statement. Hamburg-based NordLB this week reported a first-quarter loss and forecast a “negative result” for 2016 due to a collapse in sea-freight markets.

“Their shipping business is clearly underwater,” said Lutz Roehmeyer, who helps manage about $12 billion at Landesbank Berlin Investment GmbH. “Two months ago they said earnings in 2016 will be fine, and clearly everything is not fine.”

Still, Roehmeyer bought some of the Fuerstenberg Capital notes on Friday because he believes the market reaction is overdone, he said.

NordLB, which is controlled by the German state of Lower Saxony, said on May 18 the first-quarter loss was partly because shipping markets had “deteriorated further.”

The lender intends to shrink its about 19 billion-euro shipping-loan book to between 12 billion euros and 14 billion euros within five years, Chief Executive Officer Gunter Dunkel said April 7.

Fuerstenberg’s $500 million of 10.25 percent notes were little changed on Friday. These notes will be redeemed at face value on June 30, according to a May 16 statement.

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