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HSH Bank to sell Shipping Portfolios

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Troubled German public-sector bank HSH is in talks to sell two shipping portfolios to investors in a bid to reduce high-risk loans that prompted the bank to seek an additional bailout earlier this year.

“Two deals are in the making, one regarding tankers, the other regarding bulkers”, Chief Executive Constantin von Oesterreich told Reuters on the sidelines of a banking congress in Frankfurt.

“Both deals involve a handful of ships and have a volume of several hundred millions of euros, but they will not yet be finalized this year – mostly because of the high complexity of these deals”, he added.

Banks are increasingly looking at forced sales of ships to recoup some of the loans owed to them by shipping companies hit by a four-year sector slump, the worst on record.

The two HSH deals would follow a move by the bank earlier this year to cut its exposure to bad shipping loans by persuading struggling debtors to transfer ownership of some vessels to U.S.-listed shipping company Navios.

HSH has financed 2,800 ships in total and has 25 billion euros ($35 billion) worth of shipping loans on its books. Of these loans, 9 billion euros, equivalent to 1,100 ships, have been transferred to its restructuring unit.

“The goal is that buyers will operate the ships more successfully than the current owners”, Oesterreich said, regarding the deals currently in the making.

He added HSH would not dump the portfolios at any price.

“There is always an element of speculation involved (from a buyer’s perspective). But the buyers are not going to get them for a song,” Oesterreich said. “We need to make sure we safeguard our upside potential.”

He declined to disclose the bidders’ names but said that a combination of shipping groups, which have the knowhow to operate ships, and private equity groups, which have the financial resources, made a lot of sense.

He referred to the example of private equity investor Oaktree Capital which has formed a joint venture with Greek shipping group Petros Pappas’ Oceanbulk.

Oesterreich also said he does not expect the shipping sector to pick up before the end of 2014, adding that he still sees HSH breaking even next year.

Separately, Oesterreich said he expects HSH to pass a European banking health check by the European Central Bank and the European Banking Authority without asking its owners for extra capital.

“We will do fine in the asset quality review and stress test,” Oesterreich said, adding that nonetheless it would be a challenge for HSH.

“We have a belt and braces”, he said, referring to additional state aid received by its owners earlier this year

Copyright Reuters 2013.  By Marex

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