UPDATE 1-German shipping company Rickmers files for insolvency

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HAMBURG, Germany, June 1 (Reuters) - German shipping firm Rickmers filed for insolvency on Thursday, a day after its largest lender HSH Nordbank rejected a restructuring plan, the company said.

Rickmers is the most high-profile casualty in Germany’s shipping sector and another example of the deepening turmoil in a global container industry struggling with an oversupply of vessels and sluggish trade growth.

Rickmers, which has 114 ships and employs about 2000 people, had proposed a restructuring plan under which owner Bertram Rickmers would cut his equity stake to 24.9 percent, giving bondholders, HSH and potentially another bank 75.1 percent.

But the German company said late on Wednesday that HSH had “highly surprisingly” rejected that plan. HSH, which owns about half of Rickmer’s debt, said the plan was not viable.

“The insolvency application was filed this morning, and the court has confirmed that it has received it,” Rickmers said in a statement, adding it could not predict future developments.

Rickmers debtholders had haggled over different restructuring plans drafted by One Square Advisors and Houlihan Lokey.

According to ship valuation company VesselsValue, the company’s shipping assets are worth about $661 million. If they were sold for scrap, they would only get an estimated $244 million, according to VesselsValue data.

The longest shipping industry downturn on record claimed South Korean line Hanjin last year. It has also prompted mergers such as Maersk and Hamburg Sued, and Hapag Lloyd and UASC, in a bid to lower costs.

Banks have written off billions of euros lent to shipping companies and HSH was forced to take a second bailout from its public sector owners because of provisions for bad ship loans.

HSH is also in the midst of a privatisation process and was unwilling to throw Rickmers a lifeline as writedowns might weigh on already faint interest from potential buyers.

The bank increased its provisions for bad loans to shipping companies by 3 billion euros in 2015 and 2 billion last year. Its total exposure to the sector stands at 17 billion euros, of which 750 million euros is in loans to Rickmers.

The shipping company’s losses in 2016 more than doubled to 341 million euros ($382 million) on sales of 483 million euros as freight rates fell. An attempt to merge with rival E.R. Capital Holding last year failed. ($1 = 0.8917 euros) (Additional reporting by Arno Schuetze; writing by Maria Sheahan; editing by David Clarke)