Germany guarantees Hapag-Lloyd loan

THE German government has approved, in principle, the loan guarantees of ?1.2Bn for Hapag Lloyd last week, a move that is required to ensure the continued viability of the German carrier.

The loan guarantee will be used to cover 90% of the credit risk of the bank loans to be provided by HSH Nordbank, HVB and KfW. The city state of Hamburg had earlier approved the guarantees, which will be split equally between Hamburg and the federal government in Berlin.

However, the owners of Hapag-Lloyd, Albert Ballin KG (56%) and TUI AG (43.3%), would be required to provide new capital totalling ?1.86Bn, which will include new cash and the conversion of shareholder loans into equity. The company will also need to implement cost cutting measures of over ?1Bn over the next three years, which would include a freeze on dividend payments, staff reductions and restrictions on executive pay.