Private investors have committed to investing up to €30m ($36m) in a new shipping venture being set up by veteran Italian ship financier Fabrizio Vettosi.
The scheme, called VSL Club, is deemed an alternative to prevailing financial models being used to prop up struggling Italian shipping companies.
In Vettosi's view, many Italian shipping companies have bowed to restructuring solutions that are unlikely to provide much hope for the future.
He fears the approach is flawed because the companies involved do not stump up much in the way of fresh equity.
Instead, they merely manage the credit on behalf of the bank in the hope of partially repaying it when the assets are sold, Vettosi said.
He believes that approach will only lead to the shipping assets being liquidated and the residual value distributed to the banks.
Fresh approach
Vettosi is promising to take a fresh approach he believes will help secure the future of a handful of Italian companies.
He will pool equity from several sources in an attempt to bring equity "closer" to the shipping market.
"In Italy, we have some good companies, we want to help them rebuild a future," Vettosi said.
It would be "easy" to take the credit from the bank with the promise of future repayment.
"But it's not our approach," he said.
"We want to secure an alternative instrument to rescue companies coming out of the process of restructuring and prepare them for the future. We want to be remembered for our work."
Join our club
Vettosi’s new investment vehicle, which is sponsored by his Milan-based financial advisory Venice Shipping & Logistics, has been launched with long-term business partner Ciro Russo.
It has equity backing from a handful of shipping names, including Vittorio Bogazzi & Figli, which is controlled by Italian shipping entrepreneur Enrico Bogazzi. Other tranches come from high net-worth individuals and Italian family offices.
Investors in VSL Club will be divided into two categories.
One group, called "gold" members, are committed to taking equity stakes in the venture.
A second group of "silver" members will be able to pick and choose their investments.
Dividing investors in this fashion is designed to attract more investment by removing the rigidity of a traditional fund.
"It’s a flexible way to attract capital by private investors and finance individuals by family offices," Vettosi said.
VSL Club has made a modest start by raising €6m to date, but the tally rises to €30m when including what has been pledged.
The scheme will invest in equity and debt instruments.
Work with traditional lenders
The initiative does not seek to compete with traditional ship finance banks.
Instead, the aspiration is to work with traditional lenders on portfolios they may deem too risky.
"We are not the enemy to the banks," Vettosi said.
"But we want to take the more risky portion of the funding and leave to the bank the traditional role of security lender," he said.
He argues that the problem facing traditional lenders is not their outlook of the shipping sector. It is that banks face tighter constraints on lending to shipping as a result of tougher lending requirements, he added.
"Shipping is not more risky than other sectors. The problem is the treatment under capital requirement rules."
"Banks are leaving this sector for other sectors with fewer capital requirements," Vettosi said.
Close the gap
If it is successful, VSL Club could help close the gap between shipping and equity providers.
"We have to help private capital to stay close to the industry," Vettosi said.
"This is the future since there is appetite for private investors to invest money."
Returns to investors are likely to be more modest than promised in the past.
This will avoid the mistake of the large private equity funds that have in recent years promised too much to investors.
"They were greedy — expecting double-digit returns of 25% to 30%," Vettosi said. "I warned this was the wrong approach."
In contrast, the investments managed by his Venice Shipping & Logistics did not lose money.
"We were very conservative, very prudent. We never promised double-digit returns," he said.
Vettosi remains "agnostic" with regard to potential investments in maritime and logistics.
But he is casting an eye to prospective investments in port infrastructure and terminals.
