German Government and Banks Complete Financial Rescue of Meyer Werft
Meyer Werft, one of the premier cruise ship builders, reports it has completed the required financial bailout to maintain the operations of the company’s shipyard in Papenburg, Germany. In a statement issued today, September 17, the company said all the necessary agreements with the state, federal government, and banks have now been reached.
September 15 had been reported as the required date for concluding the financial aid package to avert a crisis at the shipyard. Government officials from the state of Lower Saxony where the yard is located highlighted the speed at which the package came together. They said it was an efficient partnership between the state and federal government and private industry to complete the rescue in time and protect the jobs at the shipyard.
Meyer said that it had found itself in a financial emergency due to the consequences of the coronavirus pandemic, the Russian war against Ukraine, and soaring commodity prices. The shipyard had been expanding operations before the pandemic to be able to deliver two large cruise ships each year as well as possibly one smaller vessel. The company extended its delivery dates working with customers to maintain existing orders after the onset of the pandemic but work levels declined and deliveries were delayed sometimes for months. None of the existing orders were lost but the shipyard did not book a new large cruise order till 2024.
In addition, to the increased costs Meyer reports that 80 percent of the construction price of a cruise ship is usually only paid when the ship is delivered. The shipyard must finance the construction with loans paying for the material and labor costs.
The rescue package is structured in two tranches. The federal government and the state of Lower Saxony are jointly investing 400 million euros and will acquire around 80 percent of the shares in Meyer Werft. The Meyer family will continue to own 20 percent and as part of the agreement will have a first right to reacquire the shares. No timeline was set, but the government only intends to be a shareholder while the business is stabilized. The banking syndicate reportedly required the new capital investment to cover past losses.
The state and federal governments will each also guarantee approximately one billion euros in loan guarantees. The company says this will be used to finance the current orderbook.
“We have developed a viable concept and a restructuring plan that now needs to be implemented,” said Ralf Schmitz, a restructuring expert who joined the management team for the shipyard. “There is a considerable amount of homework to be done in the coming months and years to get Meyer Werft back on track and secure its future and that of all employees in the long term.”
Meyer currently has orders worth 11 billion euros due for delivery through 2031 and reports that it remains in demand internationally. Recently the yard booked new orders from Disney Cruise Line and earlier this year Carnival Cruise Line ordered two 180,000 gross ton cruise ships. Current work includes one ship due for delivery in the coming months to Disney, a second vessel under construction for Disney, and a cruise ship for Japan’s NYK Group. The yard has also made its first efforts to diversify including building converter platforms for the offshore wind energy sector.