German shipping lender HSH seeks more state aid as slump lingers

Wed Feb 6, 2013 4:52pm EST

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* HSH seeks to hike state guarantees to 10 from 7 bln euros

* Private investors can also supply guarantees

* HSH expects to post 2013 loss, to break even in 2014

FRANKFURT, Feb 6 (Reuters) - German HSH Nordbank, one of the world's biggest shipping financiers, is seeking additional state aid as it continues to suffer from a four-year slump in the shipping industry, one of the worst on record.

The lender will ask its public-sector owners to hike their guarantees to 10 billion euros ($13.5 billion) from 7 billion euros, HSH Nordbank said in a statement on Wednesday.

Private investors can also offer to supply guarantees, it added.

The move will restore a level of guarantees the lender had secured at the height of the financial crisis. While HSH last year returned 3 billion euros anticipating an improvement in business, it later realised that it may have to revise the step to cope with high provisions bad ship loans.

HSH also said in the statement that it expects to post a loss this year but is likely to break even in 2014.

Ship charter rates have fallen below breakeven levels as a slew of new vessels, ordered during the boom years, are hitting the waters. That has already bankrupted several major players and driven others into restructuring as they found themselves unable to service their debt.

Last year, the lender projected a spike in loan loss provisioning requirements until 2014 as well as much higher default rates from legacy ship loans from years prior to 2009.

HSH, like other regional state-owned German lenders known as landesbanks, lost billions of euros on risky investments in the financial crisis, forcing its owners to prop it up with a capital injection and an additional 10 billion euros in loan guarantees.

The bank currently has an arrangement whereby it absorbs the first 3.2 billion euros in losses, while its owners - the regional states of Hamburg and Schleswig-Holstein - have provided a so-called second-loss guarantee. ($1 = 0.7387 euros) (Reporting by Arno Schuetze; Editing by David Gregorio)

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