FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) may provide financing for a struggling ship fund run by investment manager Lloyd Fonds AG L10G.DE, two people familiar with the plans said on Wednesday.
The Hamburg-based investment manager has said it wants to bring 16 ships into a special vehicle for problem financing and hopes this will make it easier to find further financing for its fleet.
Prospects have become uncertain for the shipping industry, where a glut of vessels and a credit squeeze is making life difficult for even the strongest shipping groups, with Deutsche Bank one of the few lenders still entertaining new business.
It has been working to develop the concept, known as “Ocean 16” and stood ready to grant a large loan to the vehicle, the sources said, speaking on condition of anonymity. They said the deal had not yet been finalised.
Deutsche Bank and Lloyd Fonds declined to comment, though a Lloyd spokesman said the fund manager was still talking with several potential investors.
A slew of European banks have slashed their commitments to the volatile and capital-intensive ship financing business as they work to shore up their post-crisis balance sheets and prepare for stricter bank capital rules being phased in over the next few years.
In June, Germany’s second biggest lender Commerzbank (CBKG.DE) said it would wind up ship finance altogether, leaving Deutsche, DVB Bank and NordLB as the dominant players in the German market.
In reporting first half results last week, Lloyd Fonds said it was working with a “renowned banking partner” to develop a viable restructuring model for distressed ships.
“At the same time, we must keep our eyes on the long term and will be returning to shipping when market conditions permit,” Lloyd said in its quarterly report.
The Financial Times Deutschland newspaper on Wednesday also reported on the possible financial support from Deutsche Bank for the Ocean 16 project but said there were still obstacles to a deal.
“The previous investors unfortunately are unwilling to make any concessions,” the paper quoted Lloyd Fonds Chief Executive Torsten Teichert as saying.
One banker who has been following the sector for years said the idea of pooling struggling investments with stronger ones could bring stability but added that equity capital providers in the successful funds were unlikely welcome the prospect.
Under the Lloyd plan, individual funds would sell their ships to the restructuring vehicle, with existing investors — who must approve the deal — receiving shares in Ocean 16, one of the persons told Reuters on Wednesday.
The ships would then be used as collateral for the financing from Deutsche Bank and other possibly other lenders, the source added.
Reporting by Andreas Kroener and Kathrin Jones; writing by Jonathan Gould; editing by Patrick Graham