For many years, ship financing, traditionally a strong sector in Germany, was extremely successful thanks to the so-called KG model. From 2009, however, this changed dramatically in the wake of the shipping crisis. In many cases, shipowners were unable to earn back the capital costs of existing financing schemes for long periods of time due to low freight and charter rates that often barely covered costs. What is more, the equity requirements for ship financing banks have been tightened significantly in recent years, in part as a consequence of stricter regulations for the banking sector. Overall, this development has made the once highly attractive German ship finance segment largely unattractive to business banks.
In the meantime, Commerzbank, the former HSH Nordbank (now: Hamburg Commercial Bank) and NordLB, the three most important financiers of the German fleet, have completely or at least largely abandoned this sector. At HSH and NordLB alone, around 2,600 ship loans were affected – dramatic figures, as every ship that goes abroad and is no longer managed from the country is equivalent to a smaller medium-sized company leaving Germany.
The withdrawal of many German financial institutions and private equity investors in particular has significantly restricted the shipping industry’s financing options in Europe in general, and those of smaller and medium-sized shipping companies in particular. The effects are considerable: maritime expertise is at risk of disappearing, with potential consequences for the entire maritime industry in Germany.
However, there are also new, positive developments, most recently driven by the fact that the shipping markets have recovered significantly in some cases: private investors are now more willing to enter into long-term investments jointly with shipowners. International private equity capital is also beginning to rediscover ship newbuilding, and European commercial banks are once again showing growing interest in shipping. The market is changing. New ideas are needed to ensure that the necessary modernisation of the fleet can continue, particularly in view of the industry’s ambitious environment and climate protection targets. Ultimately, it is about finding sustainable ways to finance one of the key sectors of the German economy. Together with other maritime industry associations, VDR is committed to ensuring a stronger role for ship finance in Germany. VDR is urging political players at the national and European levels to find sustainable solutions and support important decarbonisation measures through funding programmes.
