- A Deutsche Bank trader is expected to earn $ 1 billion for the bank from a single transaction on an Israeli shipping company.
- From 2016, the bank took over the debt and equity of Zim Integrated Shipping Services.
- When shipping costs increased in 2020 as the pandemic dwindled, the value of posts exploded.
- See more stories on the Insider business page.
Deutsche Bank’s investment in ailing Israeli shipping company is expected to bring in up to $ 1 billion, says report from Bloomberg.
Starting in 2016, the bank bought tens of millions of debt and equity from Haifa-based Zim Integrated Shipping Services, one of the world’s largest freight carriers. The trade came at a time when freight rates were close low record, and the shipping company was trading at a steep discount.
The bank’s bet on Zim, which debuted on the New York Stock Exchange in January, was devised by Deutsche trader Mark Spehn. According to Bloomberg, Zim quickly became Spehn’s closest conviction business, even as he faced skepticism about buying into the declining freighter.
Now, with Zim’s share price up 290% from its January IPO, Deutsche looks poised to make up to $ 1 billion on Spehn’s bet. The bank has already made gains on Zim’s debt as well as $ 90 million in cash received. Its remaining stake stands at some $ 645 million, potentially up to $ 1 billion if it is liquidated at current valuations, according to Bloomberg.
Spehn’s initial speech focused on steps the carrier is taking to digitize shipping records and build partnerships with industry, according to the Bloomberg report. He believed that consolidation in a capital-intensive industry would give Zim a boost.
Ultimately, however, the broader market dynamics provided the real boost. As shipping costs skyrocketed at the end of 2020, Zim saw its business take off. With the decline of the pandemic, increased consumer demand has combined with unused shipping capacity to create widespread bottlenecks. Freight rate indices, such as the Shanghai Containerized Freight Index, have soared.
The billion dollar gain for Deutsche is good news for the bank, which just announced its highest quarterly profit since 2014.
Other players who have made bets on Zim will also reap a significant windfall, including Goldman Sachs and Danaos Corp., according to Bloomberg.