Bruce Barnard | Aug 26, 2009 9:50AM EDT
The city state of Hamburg on August 25 agreed to an additional capital injection for Hapag-Lloyd, boosting the ailing ocean container carrier's chances of securing $1.7 billion in loan guarantees from the German government.
The port city's government agreed to a $1.32 billion cash injection, $320 million more than previously pledged by the carrier's shareholders, including Hamburg, earlier this month.
The increased cash infusion will stabilize Hapag-Lloyd and should fulfill the requirements for the carrier to receive loan guarantees from the federal government, Hamburg's finance department said.
Hapag-Lloyd needs a cash injection of at least $2.8 billion to survive the downturn in container shipping, according to TUI, its largest single investor with a 43.3 percent stake.
The Hamburg-based carrier raised $472 million in emergency funding in July with the sale of a 25.1 percent stake in Hamburg's CTA container terminal to its shareholders.
TUI contributed over $300 million with the remainder raised by the Albert Ballin consortium -- including the city of Hamburg -- which owns 56.7 percent of Hapag-Lloyd.
The cash injection still needs the approval of the Hamburg parliament and European Union competition regulators.
The German government will decide on Hapag-Lloyd's application for state loan guarantees by the end of September, the maritime industry minister Dagmar Wohrl said last week.
Hapag-Lloyd, the world's sixth largest ocean carrier, posted a $275 million second quarter loss against a year-earlier profit of $164.5 million, swelling first half losses to $622 million from $190 million in the same period in 2008.
Contact Bruce Barnard at brucebarnard47@hotmail.com.