Turning Screws & Boiling Frogs

A year ago this very day, we saw reports of RBS’ (Royal Bank of Scotland) intention to sell its Greek shipping loan book. Fast-forward to last month, and RBS was receiving bids from the likes of Credit Suisse and China Merchants. Now, barely three weeks later, Credit Suisse has halted the due diligence process on the RBS book, leaving China Merchants on the dance-card. Apparently Credit Suisse likes not what they see, as reported by David Osler on Lloyds’ List. It was only this past April that Credit Suisse surpassed RBS as the biggest lender to said Greek shipping sector.

Also in the last week, Deutsche Bank has flagged $1bn in shipping loans for the block. HSH Nordbank, Kommerzbank and NordLB have joined the parade, and all are adjusting to the glare of the recently announced European Central Bank’s review of shipping loans. Interesting politics there; HSH is German state-owned and RBS’ majority shareholder is the British government. As a result of the Brexit vote, the Brits shelved plans to sell off some of their whopping 73% RBS stake.

“The market can stay irrational longer than you can stay solvent.” said John Maynard Keynes. Let’s put it another way, ship-watchers; given the number of times the heat’s been turned up recently, which frogs are about to be boiled?

Update:
Further to the dance in the shipping loan business, Splash247 reports that now Deutsche Bank is “interested” in the RBS shipping loans. I mentioned the RBS “shipping loan book” previously, but apparently RBS is offering up the entire business, not just the notes. RBS suitors are indeed wise to seek not only the loan paper, but the resources behind it to collect on the bills.
I can also imagine there’s pressure on European banking institutions to pick up this business in the face of China Merchants interest. In the past, the rush to build in the Chinese greenfield shipyards was intense, but perhaps there’s more reticence on the financial front. Also in today’s news; China’s rejection of the South China Sea ruling by the Permanent Court of Arbitration in the Hague………. just sayin’…….
“We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow…” : Lord Palmerston – speech to the British Parliament, 1844.

Posted on tonmiletrader.com , JUL 11& 12, 2016

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Update on Tue, September 20, 2016 at 10:19 by Dave Walker

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Warning: morbidity ahead.

So, it would appear that after all the speculation and parade of potential suitors, RBS’ shipping loan business is to be wound up. No national interests, no politicized transactions, maybe just a long, convoluted shut-down. As of April 2016, their number of non-performing shipping loans had doubled. That was just their Greek exposure, followed in August by an attempt to ditch their Turkish shipping loans. Add the sinister rumblings at Deutsche Bank (a potential buyer), and those events may have been the last crank-up of the heat. “Wound up”, as in a shroud. It would appear that this frog might have boiled to death some time ago, and had merely joined the ranks of zombie assets……then again, by the time these assets get chopped up, it may just be a frog in a blender. Too much? (No frogs were harmed in the preparation of these comments)