Consolidation has entered the world of ship finance. Hudson Structured Capital Management (HSCM) has acquired the key business assets of Northern Shipping Funds, a leading provider of alternative capital to shipping.
The companies did not disclose the terms of the transaction but said the combined platform will manage shipping and transport investments across the capital structure. Both firms are based in Stamford, Connecticut.
Northern, led by Sean Durkin and Sybren Hoekstra, has been providing alternative capital to the industry since 2008 and is pursuing opportunities under its $636m Northern Shipping Fund IV, which was closed in February 2021.
HSCM came on the scene more recently, launched in 2016 as an asset manager focused on investments in the reinsurance and transportation sectors.
How to think about the deal? Sources familiar with the companies said it is an easy coming together of two sets of staff already familiar with each other from past shipping deals.
Northern has dealt almost entirely in senior debt, while HSCM has been more geared towards mezzanine financing and sale and leasebacks, making their approaches complementary.
And HSCM’s size means it can offer a back-office infrastructure that Northern either lacks or has farmed out.
Almost all of Northern’s staff are expected to make the move to HSCM.
HSCM said it has more than $4bn in capital commitments and assets under management, including the combined transport platform with Northern that will manage assets and commitments exceeding $1bn.
“We are thrilled to be combining with the HSCM team,” said Durkin. “We view this as the next evolution of our business: one that expands our capabilities, better positions our existing team and will help us deliver for our collective investors.”
David Andrews, HSCM co-founder and managing partner for transport, welcomed the 17 Northern staff.
“They have spent nearly three decades building a premiere maritime franchise with an industry-leading track record,” he said.
“Maintaining that focus is our highest priority going forward. Combined, our platform has expanded investment capabilities across capital structures and unmatched technical expertise providing enhanced market positioning within maritime and potentially across broader transportation markets for years to come.”
The combined HSCM transport team will collaborate on market opportunities for Northern and HSCM funds.
By leveraging the expertise of both teams, the expanded platform will offer greater asset scale, investor reach, operational efficiencies and product offerings, HSCM said.
Northern was launched in 2008 as an offshoot of Oivind Lorentzen III-led Northern Navigation, the Oslo and Stamford-based shipowner with an initial pool of $110m at a time of poor bank liquidity.
“We have a proven track record and long-standing support from leading US-based institutional investors and notable shipping families,” the company says on its website.
“Typical investment sizes range from $5m to $60m with the ability to invest up to $200m through co-investment from its limited partners and third-party capital.”
HSCM was founded by Andrews and Michael Millette, who came from investment firms Pimco and Goldman Sachs, respectively.
It has pursued mezzanine financing opportunities in transportation.
In one known deal, it formed a joint venture with New York-listed bulker owner Pangaea Logistics Solutions on four 95,000-dwt post-panamax newbuildings at China’s Guangzhou Shipyard International financed through a $129.2m bareboat charter structure with subsidiaries of CSSC Shipping Co Ltd, a leasing company listed in Hong Kong.