German shipowners are bracing for a mass fire sale of container ships in the coming months after banks asked top shipping company Claus-Peter Offen to sell 14 vessels it manages because they aren’t earning enough to service their loans.
The owners of the ships, which have capacities between 1,800 and 2,800 20-foot-equivalent units, have been asked to agree to a sale by Feb. 18, according to Hamburg-based Claus-Peter Offen, which is aiming for an interim deal under which creditors and new investors will buy the vessels.
The vessels were bought by a KG shipowning fund — MPC Offen Flotte — for $630 million five years ago with 177 million euros ($235 million) from 7,000 individual investors, 20 million euros ($26.6 million) from Offen and the remainder in bank loans.
The ships were chartered to major ocean carriers for five years at a daily rate of $19,000. Following the expiration of their leases they have been trading in the spot market, currently earning around $6,000 a day, some $12,000 a day short of covering their operating and financing costs and resulting in combined annual losses of $55 to $60 million.
Selling the ships is unlikely to raise sufficient cash to repay loans to the three banks — HSH Nordbank, Commerzbank and DnB — that helped finance their construction, meaning the equity investors will lose all their cash.
MPC Offen Flotte attempted to raise additional equity from its investors to finance a restructuring but failed to obtain more than a quarter of the 24 million euros ($32 million) it required.
Banks and investment funds likely will push for further fire sales in the coming months even as secondhand ship prices weaken, in a bid to recover some of the loans to their owners.
Claus-Peter Offen, owner of the company that bears his name, has been quoted as saying that between 500 and 1,000 ships are in the same situation as the 14 vessels it is selling.
Germany controls the world’s biggest container ship fleet, many of the vessels ordered during the liner shipping boom before the 2008 global financial downturn led to sharply lower trade volumes and a collapse in ship charter rates.
Commerzbank’s announcement last year that it plans to quit ship financing and reduce its ship loan book to 14 billion euros ($18.6 billion) from 20 billion euros ($26.6 billion) by 2016 fueled fears of a wave of fire sales.
The crisis in the industry deepened last week after Moody’s downgraded HSH Nordbank, saying the world’s largest ship financier is in a “fragile” situation and would probably have to seek further aid from its two major shareholders, the federal states of Hamburg and Schleswig Holstein.
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