The city of Bremen and the small, state-owned bank Bremer Landesbank are the latest victims of the downturn in the global shipping industry.
Its troubles focus on one particular cargo ship, the MV Hudson River.
Bremer Landesbank, partly owned by the city of Bremen itself, has repeatedly accommodated the owner of the MV Hudson River and five identical sister ships when it had problems servicing its debt.
But this patience was not rewarded and in the spring of 2015, the cargo ships, each capable of carrying 1,100 containers, were handed over to a restructuring firm.
Bremer Landesbank expects adjustments on shipping loans to come in at high nine-digit figures this year.
On Wednesday, ratings agency Moody’s downgraded one of Bremer Landesbank’s ratings by four grades from B1 to Caa2. The bank, however, has not had a contractual relationship with Moody’s since the start of 2014. The bank has not commented on the move.
Even hard-boiled industry insiders, who have already endured several cycles, are uneasy about the current state of affairs. “We need to face the facts. The shipping crisis is entering its eighth year, and there is no end in sight,” the head of a German private bank also active in the ship financing business told Handelsblatt. He preferred to remain anonymous.
A glut of container ships, combined with a collapse in global trade following the 2008 financial crisis, has hit shipping companies, and the banks that lend to them, hard.
The consequences are especially drastic for small German banks, part-owned by northern towns clustered round the country’s main ports.
As well as Bremer Landesbank, NordLB and HSH Nordbank, banks where the ship loan portfolio makes up a relatively large share of total assets, are also suffering.
Commerzbank was also once one of Germany’s largest ship financiers, but it withdrew from the business years ago and is now merely liquidating its inventories of about €8 billion ($9.1 billion).