Bloomberg News

Lloyds Remains in Talks to Sell Portfolio of Shipping Loans

June 10, 2011

(Adds amount of loans in third paragraph.)

June 10 (Bloomberg) -- Lloyds Banking Group Plc, in which the U.K. government has a 41 percent stake, is still in talks to sell its shipping loans.

“We are still in discussions with various parties about a potential sale,” Emile Abu-Shakra, a London-based spokesman for the bank, said by phone today. “No decision has yet been made, and we will only sell if we decide it is in the best interests of the group.”

The shipping loans are valued at about $7.5 billion, according to two people familiar with the debt, who declined to be identified because the information isn’t public. The bank had about 592 billion pounds ($961 billion) of loans to customers last year and ship financing will “remain challenging” in 2011, Lloyds said in its 2010 annual report.

The London-based bank is selling assets after a 20 billion- pound taxpayer-funded rescue. Lloyds plans to reduce its balance sheet by 200 billion pounds by 2014 and Chief Executive Officer Antonio Horta-Osorio is scheduled to announce the results of a strategic review June 30. The company set aside 3.2 billion pounds last month to settle claims that clients were improperly sold loan insurance.

The shipping industry faces a shortfall of about $10 billion a year in bank funding until 2013 because owners need to spend more on vessels than the financiers will have available to lend, a Bank of Ireland Plc official said this week. That may increase the amount of investment from private equity firms, two financiers said.

Fredriksen’s View

Ship prices will collapse within a year or two, John Fredriksen, the billionaire chairman of Frontline Ltd., the world’s biggest supertanker operator, said in an interview in Oslo last month. He plans to “buy up what’s there” once that happens, the 67-year-old said.

The cost of a five-year-old supertanker has fallen to $82 million from as much as $162 million in 2008, according to the London-based Baltic Exchange, which publishes daily rates for more than 50 maritime routes. A secondhand capesize ship, a typical hauler of coal and iron ore, slumped to almost $44 million from about $154 million in 2008, the data show.

Rates have tumbled as fleets expand more quickly than demand. Vessels ordered in 2007 and 2008, when freight costs were peaking, are still leaving shipyards.

The 25 biggest bank lenders to the industry had about $333 billion of outstanding loans in 2009, of which $49.3 billion was held by Hamburg-based HSH Nordbank AG, according to estimates from ship-finance consultant Eurofin International.

--With assistance from Jon Menon in London. Editors: Dan Weeks, John Deane.

To contact the reporters on this story: Michelle Wiese Bockmann in London at; Alaric Nightingale in London at

To contact the editor responsible for this story: Alaric Nightingale at

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