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Hapag-Lloyd unity needed to nail loans

September 3, 2009

GERMANYGermany showed with retailer Arcandor that the government won’t write blank cheques. This lesson is not being lost on the owners of Hapag-Lloyd who are seeking 1.2 billion euros in state loan guarantees for the German container shipping firm.

There is no time to waste. Some estimate that the shipper will run out of cash in October and needs almost 2.0 billion euros ($2.9 billion) in financial support. Rainer Feuerhake, chief executive of TUI, the travel company that is among Hapag-Lloyd’s shareholders, is banking on Berlin granting the guarantees this month.

TUI and the Albert Ballin consortium, which owns 57 percent of Hapag-Lloyd and includes Swiss-based German billionaire Klaus-Michael Kuehne and the city of Hamburg, appear to have overcome their differences despite mutinous murmurings from Kuehne earlier in the process.

They have agreed to convert existing credit lines into equity or hybrid loans while unwinding an earlier deal to sell Hapag-Lloyd’s 25 percent stake in Hamburg’s Altenwerder container terminal. This should pave the way for the German government to make the loan guarantees available.

Kuehne — who owns 55.8 percent of Swiss logistics firm Kuehne & Nagel — has bigger plans for Hapag-Lloyd, pushing the idea of a tie-up between Germany’s largest container shipping company and a European or Asian peer.

Kuehne’s instincts are probably right in the longer term. He clearly knows the business and how to run a successful logistics company. But it was necessary to paper over the differences between shareholders in order to keep the German government onside.

After all, the case of retailer Arcandor, which was allowed to collapse into insolvency, shows Berlin will walk away if it doesn’t get the reassurances it wants. With a general election fast approaching, the government may be feeling more generous. Hapag-Lloyd’s shareholders should not let the opportunity pass.

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