NordLB to Recapitalize Bremen LB as Ship Loans Sour
German Landesbank NordLB may take 95 percent ownership of Bremer Landesbank (BLB), which recently announced that it may lose in the "mid-hundred millions" this year due to souring shipping loans.
BLB is 54 percent owned by NordLB already, and among the recapitalization options on the table is NordLB's purchase of (or stock swap for) the city of Bremen's 41 percent stake – making BLB nearly a wholly owned subsidiary of NordLB and giving it additional liquidity to cover its mounting losses. The bank’s owners have all agreed to keep BLB's capital intact. "The form and size of the capital increase are currently being intensively discussed," the city of Bremen and NordLB said last week. "The necessary decisions will be carried out by the end of 2016."
“We agree that Bremer Landesbank should continue to be an active, valuable member of the NordLB group, and should keep its own identity,” said NordLB CEO Gunter Dunkel, speaking to the FT. “Negotiations must now begin immediately, so that we can get to a result that its satisfactory for all by the end of the year.”
The ratings agency Moody's has downgraded BLB four grades, from B1 to Caa2.
Many German banks with interests in shipping have been hit hard by the downturn. NordLB itself has already set aside $450 million for bad shipping loans; competitor HSH Nordbank is selling over $3 billion in soured debt in shipping and other industries; and Commerzbank has been in the process of liquidating its $9 billion in loans in the sector for some time, reducing its exposure.
The loss provisions for BLB are swiftly turning into a local scandal: the bank also reportedly made a series of credit default swaps that became money-losing propositions, prompting some local officials to call for a public explanation.