A new source of ship financing called Blue Ocean Maritime Income (BMAR) is targeting a $250m IPO in London.
JP Morgan Cazenove will handle the transaction, which should see the shares listed on 23 October after the offer closes on 18 October.
The company is owned by US asset manager Legg Mason’s hedge fund subsidiary EnTrustPermal.
It will use the cash to set up a direct lending investment trust to target maritime financing.
A total of 250m shares will be sold at $1 each.
BMAR wants to be an alternative source of funds for shipowners as European banks pull out or become more wary of lending.
It said it has already deployed over $300m since September 2016, financing 55 vessels, including a Dublin-based asset management vehicle two years ago.
The portfolio manager at BMAR is Svein Engh, the former CIT shipping boss and the current managing director of EnTrustPermal.
He said: “While we continue to see capital inflow to direct lending vehicles and investment funds in sectors such as real estate or infrastructure, the maritime financing sector is in a different position; values are low, and the competition is limited, resulting in attractive risk-adjusted yield opportunities.
"Dislocation" is an opportunity
“The banking dislocation is driving our opportunity and we are stepping into the area where banks used to be very active but are now restricted due to Basel regulations and other factors. As a non-bank lender, we can construct our portfolio in a counter-cyclical manner in the privately-owned segment of the shipping market.”
Roger Harle, a senior vice president at EnTrustPermal, said: “We are delighted to announce the proposed IPO of Blue Ocean Maritime Income.
"With Svein’s experience in this sector, along with the support from the investment team, we have the opportunity to target high-quality maritime assets in the private market.
“We believe this is a unique and compelling investment opportunity, providing investors the chance to access an often-overlooked market, through a highly experienced investment team.”
EnTrustPermal will serve as the investment manager.
The company believes it can generate annual returns of between 8% and 10%.
Most of this will come in the form of dividends, with the company looking to generate a 7% yield two years after launch. It will pay 3% in year one.
It will operate a diversified portfolio, mainly consisting of senior secured debt spread across all shipping sectors.
Engh said shipping loans were attractive alternative investments, generating steady and predictable cash flows with returns that were not linked to either stock equity markets or the economy.
Steady returns promised
"With shipping rates for vessels driven by the supply and demand for each vessel type, the rate environment across different sectors tends to be generally uncorrelated to global GDP," he said.
"The company will aim to offer investors steady, predictable cash flows, the inflation protection typically associated with real assets and a low correlation to equity and bond markets."
According to the prospectus, EnTrustPermal will charge 1% of the company’s net assets up to $500m, falling to 0.8% at a later date.
The listing comes at a time when London Stock exchange is teaming up with the Shanghai Exchange to allow major LSE stocks to trade in China and Chinese stocks to be traded here.
There were 108 IPOs in London last year and 40 in the first half of this year. Shipping has raised $7.8bn in the London capital market since 2009.
