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Tuesday, August 04, 2009

German ship financing faces its deepest crisis

Tuesday, 04 August 2009

The system that financed a third of the world’s container ships is facing its biggest crisis after the industry slump has eliminated or slashed many specialist shipping funds’ earnings. More than 20 of Germany’s 1,600 Kommanditgesellschaft – or KG – shipping funds have been forced into insolvency or other restructuring, according to Deutsche Zweitmarkt, which runs a secondary market in fund shares.
Hundreds more funds could be forced to ask investors for extra capital if the crisis in the container ship sector is as prolonged as most analysts expect.
About 40 funds have already asked investors for more capital, according to Björn Meschkat, a director of Deutsche Zweitmarkt.
More than 20 already face insolvency, restructuring or forced ship sales. Up to 400 might have to seek more capital if the sector crisis continues until late 2010.
Mr Meschkat said investors “are not very appreciative about it”.
Some companies that organise KG funds, known as “emissions houses”, face potential liquidation if banks call on their guarantees to raise finance for new ships.
Tobias König, managing partner at König & Cie, a large emissions house in Hamburg, the sector’s centre, said the crisis was not the first for the KG system, set up in the early 1970s. But it was the first to coincide with a banking crisis.
“It’s the first time the banks are not there to bail us out,” he said.
Shipowners that arrange crewing and chartering for KG funds’ ships, the banks that have lent to those involved and shipyards could all be affected as well.
“It’s shipowners; it’s shipyards and emissions houses,” Mr König said.
KG funds are popular with Germans investing in many different asset types for their significant tax advantages.
Shipping KG funds raised €33.1bn ($46.8bn), mainly from private investors, between 1992 and 2008, according to Deutsche Zweitmarkt, and long delivered consistent returns.
They have focused heavily on container ships, where German companies now manage 35 per cent of the world fleet.
However, in the face of container shipping’s sharpest downturn, most lines are ending charters with outside owners whenever possible. Even where operators renew charters, the rates on offer barely cover operating costs.

Source: Financial Times