* Lloyds failed to sell $10 bln shipping book in one go
* Shipping sector woes seen worsening in 2012
* RBS looking to cut "non-core" ship book
By Steve Slater and Jonathan Saul
LONDON, Jan 25 Lloyds Banking Group
is unlikely to sell its $10 billion portfolio of
shipping loans to a single buyer and aims to parcel up loans for
sale as European banks continue to retreat from the maritime
sector, industry sources say.
Lloyds, 41 percent owned by the UK government, has held
talks in the past year to sell its shipping finance book but not
reached any deal. A single deal is now unlikely, but the bank is
looking to sell blocks of the loans to single buyers, ship
industry and banking sources told Reuters.
"They are trying to parcel it off and sell it in bits," a
senior ship industry source said.
Shipping companies, especially in the oil tanker and dry
bulk sectors, hit by weak earnings and an oversupply of vessels
ordered in the good times, are facing a growing funding squeeze
as banks pull back from heavy industry sectors as the euro zone
debt crisis deepens.
Lloyds' loan book has been reduced by individual asset sales
and the agreed repayment of loans by borrowers and that will
continue, a source familiar with the matter said.
A spokesman for Lloyds, which is being advised by Goldman
Sachs, said a strategic review by its new Chief Executive
Antonio Horta-Osorio last June identified that shipping finance
"would no longer be a core activity... and we are continuing to
reduce the size of our shipping exposure".
"They want to get rid of it and appears there are banks
interested," another ship industry source said. "With Basel III
coming now, these organisations have no choice but to get rid of
Banks are particularly keen to shed dollar-denominated
assets, such as shipping and trade finance loans.
Royal Bank of Scotland has a shipping loan book
almost twice the size of Lloyds. About 35 percent of RBS's
shipping loans, or some $6.9 billion, has been put in its
"non-core" portfolio, which are up for sale or will be run down,
a source familiar with the matter said.
The remaining $12.8 billion of RBS's shipping finance has
been kept in its core banking business, typically because the
bank has a relationship with the borrower.
Shipping sources said they were aware that RBS was looking at
shrinking their shipping loan book.
RBS, 83 percent owned by British taxpayers, has aggressively
cut the size of its balance sheet and continues to do so.
In its 2010 annual report the bank said 2.8 billion pounds
of its shipping loans were subject to a "heightened level of
monitoring", though it said there had been no material
impairments charges to date.
Tightening credit lines are hitting the shipping sector at a
time when it struggles with a worsening world economic crisis.
Danish shipping company Torm A/S said this month its
banks had agreed to extend a deferral of instalments on its $1.8
billion of debt and hoped to reach a comprehensive financing
solution to secure its future.
In December the world's biggest independent oil tanker
operator Frontline issued a restructuring plan.
Separately, in November General Maritime Corp filed
for bankruptcy protection.
"Credit is expected to be very constrained this year and as
European banks have been quite significant in shipping, it's
going to be a problem," a ship industry source said. "European
banks are retreating from shipping and the sector is being
reclassified as risky along with aviation."
France's second-biggest listed bank Societe Generale
has decided to exit or strongly reduce property,
shipping and aircraft financing activities, a memo seen by
Reuters this month showed.
Separately, France's biggest listed bank BNP Paribas
is also aiming to exit or reduce non-core activities
such as shipping. Similar moves are being examined by smaller
French rival Natixis, bank memos showed.