As I wrote several weeks ago, the shipping sector is in tatters. Even juggernaut Maersk took a massive write-down last year. So at the end of nearly every ship is a lender. Many lenders to the shipping industry are specialists. Nord LB was looking to bail in Bremer LB beyond the 54.8% it already owns. Bremer LB has to write off €400m of its shipping portfolio.
This puts Chancellor Merkel in a bind. She can’t very well tell the Italians that their wish to prop up Italy’s ailing banks is unacceptable when those same problems are so close to her shores. The €50mn Bremen LB 8.5% coupon perpetuals blew out from 6.47% yield to 18.73% this month alone. Will Merkel be forced to come to the realisation that Italian and German banks share common ground and rescue them because it appears markets aren’t waiting?