Deutsche Bank is looking to sell at least $1 billion in shipping loans, Reuters reported last week (6 July) citing banking and finance sources familiar with the matter.
In late June, Reuters also reported that the European Central Bank (ECB) had launched a review of bank lending to the shipping sector, asking banks for details on their shipping loans and the status of their loss provisions as an initial step in a broader review, a request that one source labelled as “very extensive”. News of this inquiry prompted fears of a potential increase in capital requirements for future loans to the industry.
In last week's report, Reuters' source said scrutiny from the ECB is playing a role in Deutsche Bank's decision to sell some of its shipping loans. The bank was reported to have between $5 billion and $6 billion in total exposure to the shipping sector, so the sale would be only a fraction of the bank's involvement in the sector.
Banks in the US and Europe have lately been shedding loan portfolios in an effort to comply with ever stricter government restrictions on lending. Distressed assets, non-performing loans and other instruments seen as “risky” often get sold off by banks. Earlier this year, TPG Special Situations Partners bought a distressed debt portfolio away from Credit Suisse for $1.27 billion.
A Deutsche Bank representative declined to comment.
While the shipping industry as a whole is seen as being widely distressed, the ongoing retreat of banks is thought to be inspiring some increased interest among alternative lenders in the shipping sector.
PDI sources report that there is some uncertainty regarding the makeup of the loans on offer from Deutsche Bank and that the bids and ask prices for the portfolio are very far apart.
Last year, Davidson Kempner Capital Management reportedly paid $500 million for part of the shipping portfolio of the Lloyd's Banking Group.