Hamburg to Decide on Aid to Hapag-Lloyd

The city state of Hamburg, Hapag-Lloyd's second largest shareholder, is due to decide July 28 how much cash to inject into Germany's biggest ocean carrier to help it survive the slump in the container shipping market.

The city's budget committee is expected to vote for phased aid of $383 million on condition other shareholders make pro rata contributions totaling around $1 billion.

A positive decision by the city state, which owns 23 percent of Hapag-Lloyd as part of the Albert Ballin consortium, is seen breaking the current deadlock in talks between tourism group TUI, the biggest single shareholder, and the other members of the consortium.

Former Hapag-Lloyd parent TUI owns 43.3 percent of the carrier and the Albert Ballin consortium 56.7 percent.

Shareholders are under increasing pressure to reach an early agreement on an aid package amid reports the carrier could soon experience cash flow problems.

Hapag-Lloyd, like other ocean carriers, is seeking cuts in ship charter rates in a bid to align costs with weakening liner freight rates and shrinking cargo volumes.

The world's sixth largest carrier charters 64 ships of 219,437 TEUs and owns 62 vessels of 265,331 TEUs, according to AXS Alphaliner, the Paris-based consultant. Many of the chartered ships are German-owned.

Shareholders injecting cash will receive as collateral Hapag-Lloyd's 25.1 percent share in HHLA's Altenwerder container terminal in the port of Hamburg, according to the Hamburger Abendblatt newspaper. HHLA, Hamburg's biggest container stevedore, is majority owned by the city state.

Hamburger Abendblatt also reported Hapag-Lloyd is open to a merger or partnership with rival ocean carriers following a review of its operations by Roland Berger, a consultant.

The most likely partners are France's CMA CGM or APL, a unit of Singapore's Neptune Orient Line, it said citing sources in Hapag-Lloyd.

NOL was involved in the early bidding for Hapag-Lloyd but pulled out claiming the price was too high. The carrier eventually was sold to the Albert Ballin consortium for around $6 billion in late 2008.

Hapag-Lloyd also is said to be seeking $1.4 billion in government-guaranteed loans from German banks.

Contact Bruce Barnard at brucebarnard47@hotmail.com.