KG crunch

Konig & Cie's boss says his company has shifted its liquidity strategy after banks began canceling credit lines for vessels owned by German KG limited partnerships that have paid off their debt.

Speaking to TradeWinds WebTV in New York, Tobias Konig also expressed concerns that liner operators are headed for the edge if freight rates do not improve.

"The situation with the banks has changed dramatically," Konig said on the sidelines of the Marine Money Week conference in New York.

In what the executive hopes is a rare situation, Konig says KGs have been surprised to find that after they paid off debt on a ship, the credit line had been cancelled.

"Now, if there's a situation where extra money is required the bank just says, 'Well, there's no business relationship going on, the debt is paid back, so this will be new credit, and as your situation right now is very bad, we're not interested in working with you,'" the KG veteran said.

Click here to see the interview with Tobias Konig.

When the situation impacted one of Konig & Cie's vessels, Konig said the affected KG was able to resolve the situation through equity moves.

But it has led to a new strategy at the decade-old emissions house.

Previously an advocate of paying off debt early, Konig now says that doing so can hurt KGs in the current circumstances as banks rarely are willing to inject new cash and are pressuring KG owners to recall equity from fund investors.

"So you have to keep the liquidity within the company, reduce any dividend payments and just make sure you have your own, let's say, 'in-house credit facilities' available to make it through the downturn," he said.

Also, after telling conference-goers that the container shipping industry "is close to bankruptcy," he warned that unsustainable freight levels is poised to hurt shippers and operators alike.

"If the situation does not improve in the near future, we will have a huge problem worldwide, because container carriers will start going out of business," he told TradeWinds WebTV.

If a rebound does come, however, Konig said he expects it to take place among smaller vessels, rather than larger containerships.

With $4.25bn assets under management and 77 funds, Hamburg-based Konig & Cie controls 55 tankers, containerships and multipurpose ships.

Printable version Newsletter sign up