HSH Nordbank is reportedly wiping clean approximately US$900 million of European shipping debt as part of its restructuring plan facilitated by taxpayer bailout, reported Lloyds List Finance.
The shipping, real estate and private equity conglomerate Norddeutsche Vermögen Holding will receive the biggest debt relief, with approximately $600 million in bad debts being forgiven; other beneficiaries have not been revealed to the public
Political consequences are expected, as Bernd Kortüm, owner of Norddeutsche, remains one of the wealthiest men in the city of Hamburg and other shipping companies have faced bankruptcy and asset sales; this may begin a trend of bad debt forgiveness amongst banks and creditors.
In early October, 2016 Investment Europe raised concerns about the volatile nature of shipping debt for German banks, explaining that it has been one of the biggest challenges for them, especially in the recent market.
The sale of debts by independent creditors and the scarce oversight and trading standards surrounding them has caused an even more volatile financial situation; at the end of 2013 it was reported that the shipping debt to just 19 German lenders amounted to approximately US$100 billion, about a third being non-preforming loans.
In an already escalating shipping crisis, the extra financial pressure caused by the aggressive lending and selling within the debt market is only going to make things worse, creditors gave up on Hanjin Shipping and forced it into bankruptcy, and other shipping companies are scrapping younger and younger ships, cutting staff and even shutting services.
In early October, 2016 PTI published Drewry’s Z-score carrier financial stress index, stating that it had sunk to its lowest ever point following the first-half 2016 results. The decline in the Z-score index has coincided with the heavy reduction in container freight rates that dropped to historical lows in the second-quarter; Drewry had warned carriers that failure was still an option despite market opportunities freed by Hanjin’s collapse.
There are some small success stories, however, as despite the cuts being made by top shipping companies in an ailing industry, a brand new shipping line, Viasea, began operations in northern Europe in the week of October 31, 2016.