The German shipyard, a competitor of Fincantieri and Chantiers de l’Atlantique, has a rich order book but is struggling to finance the construction of the next cruise ships
The German shipbuilding group Meyer Werft is facing a growing financial crisis that will require a recapitalization or at least a refinancing of the company by mid-September.
The shipbuilding company, despite having an abundant order book, is feeling the effects of the pandemic period and the increase in material costs.
According to various local media reports, talks began at the beginning of June with the government of the German region of Lower Saxony, which in turn will also have to involve the federal government, to draw up a package of financial guarantees for the construction site.
Meyer Werft underlines that the current challenges do not concern the order book, but are due to the increase in costs.
In fact, the group recently delivered the new ship Silver Ray (54,700 gross tons) to the Royal Caribbean group and is working on the Disney Treasure (135,000 tons) whose delivery is expected by the end of 2024.
The work on the Asuka III (51,950 gross tons) and construction of the Disney Destiny, a sister ship for Disney Cruise Line, also recently began.
Earlier this year, the Papenburg, Germany shipyard signed orders for two 180,000 gross tonne cruise ships for Carnival Cruise Line and still has a research vessel and offshore wind platforms in its portfolio.
The Finnish Meyer Turku shipyard is building two more mega-cruise ships for Royal Caribbean, other shipyards in the group are building river units for Viking, while the company is also managing the fit-out of the acquired Disney Adventure (formerly Global Dream) from the bankrupt MV Werften.
The challenge for the shipyard is financing shipbuilding
Some government officials and union representatives told the media that the challenge for the shipyard is financing shipbuilding.
Traditionally the builder of a cruise ship receives 20% of the order value in advance and 80% upon completion (delivery), for which Meyer Werft (as well as its main competitors, namely the Italian Fincantieri and the French Chantiers de l’Atlantique) must find ways to finance the costs of materials and labor throughout the construction period.
An alternative currently being discussed is to increase the initial payment portion to 30 or 40% of the contract value but this would inevitably make the conditions offered to clients by the German group less attractive.
Also according to media reports, Meyer Werft is seeking to obtain 2.3 billion euros in loans and another 400 million euros in capital.
The government of Lower Saxony has expressed its support, but the amounts involved are too high for the region to provide alone.
The state and federal governments should therefore collaborate on loan guarantees. One suggestion is that Lower Saxony could become an investor in the company as has already happened with Volkswagen and the Salzgitter steelworks.
Meyer Werft employs 3,300 people
One of the local government’s biggest concerns is employment because Meyer Werft employs 3,300 people and the same number are employed through contractors and suppliers in related industries. The shipyard supports an extensive network of vendors and suppliers in the region who contribute to construction projects. There would be 400 people at risk of dismissal.
Meyer Werft has brought in corporate reorganization expert Ralf Schmitz, who is working with the company’s recently appointed new CEO Bernd Eikens.
Patriarch Bernard Meyer has already taken a step back and, as part of a management reorganization, his son Jan Meyer has focused on the development of new businesses while Tim Meyer is the CEO. by Meyer Turku in Finland.
The company has had independent experts prepare a business analysis which is expected to be delivered to the government in mid-July.
That document will be the basis for discussions on the rescue package. In 2015 the Meyer group moved its headquarters to Luxembourg but to get help it will probably have to bring the head of the group back to Germany and set up a supervisory board.
Again according to German media reports, the situation is currently “extremely tense”, with employees awaiting news on their future.
The company is considered “too big to fail” but in the coming months there will inevitably be tough discussions to redefine the future of the German naval engineering group.
MEYER WERFT
MEYER WERFT is one of the largest and most modern shipyards in the world. The company’s roots can be traced back to the year 1795, when Willm Rolf Meyer founded the shipyard in Papenburg. Our family business is now in its seventh generation
Sources : Shipping Italy
