When a US-based private equity start-up needed financing to help acquire two chemical carriers in September, the opportunity created a milestone for Australian lender Macquarie.
Maritime Logistics Equity Partners (MLEP)'s buy of two chemical carriers from South Korea's Cido Shipping was not the biggest of deals, but it pushed Macquarie's ship lending portfolio past the $1bn mark.
Although not a huge sum compared with some of the traditional ship-finance goliaths, it was a significant step for a newcomer that spied a business opportunity in 2017.
"We saw some of the large traditional banks sort of shrinking — pulling back or even exiting the market," Macquarie head of ship finance Marc Hari told TradeWinds.
"We thought this could be a good time to become a reliable lender to shipowners, particularly small and medium shipowners who were starved for capital. In hindsight, I'd say the timing was brilliant."
With no legacy exposure to bad shipping loans, Macquarie has been able to build a fresh book, financing more than 190 vessels with a market value of $3bn to date. Its current portfolio features 45 loans financing more than 140 ships.
"In the shipping industry, it's probably a drop in the ocean, but it's a milestone that we've always aspired to," Hari said of the $1bn figure. "Over the last four years, we've deployed probably $2bn, but of course you enjoy getting some of that paid back.
"The good thing is that from day one, we've been profitable. We don't have a single problem loan on our books. Personally, I hope we can grow the book to $2bn over the next few years."
Macquarie has built its presence through a ship finance team of 15, working from offices in London, New York and Zurich, where Hari is based. "We've had zero turnover on the team — they're all really invested in the business," he said.
The team includes senior advisor Morten Arntzen, the 30-year ship finance veteran and former chief executive of Overseas Shipholding Group.
The good thing is that from day one, we’ve been profitable. We don’t have a single problem loan on our books
Hari is a 22-year Macquarie veteran who conceded he is "not a shipping man by origin", but said he has gained a solid grasp on the sector.
One of Macquarie's hallmarks has been flexibility. While the bank predominantly serves small to medium-size owners, it also has done deals with larger public companies such as International Seaways and Danaos.
It is willing to lend to traditional shipowners but also to private equity or "project" vehicles such as MLEP.
While Macquarie will provide traditional bilateral loans close to $100m at the high end and $10m to $15m at the low end, it also works with mezzanine capital providers such as Oaktree Capital Management vehicle Fleetscape Capital in cases where a borrower needs a higher leverage ratio.
Pricing is "comfortably below the mid-single digits", Hari said. "Yes, it's more expensive than what, for example, a Citi might extend to a Maersk, but it's also comfortably below the proper alternative lenders."
With two of the three classic shipping markets — containerships and bulkers — now booming, one might wonder whether Macquarie's niche could be threatened by traditional lenders creeping back into the space, but Hari said he has not seen it.
"And we're happy to lend when markets are rough," he said. "We did our first bulk carrier financing in 2017 when the market was still on its knees, and financed containerships before the boom.
"I find it easier transacting in tanker markets today than in containerships, where you really need term employment for it to make sense. We're transacted a lot recently in tankers. You just need to see a decent cash runway if they're in the spot market."
One of the tanker companies Macquarie has served is Ridgebury Tankers, the private Connecticut-based owner.
"We recently completed our third successful transaction with Macquarie," Ridgebury chief financial officer Hew Crooks said.
"The team is creative and constructive; they understand our strategy and tailor solutions that support our business.
"We look forward to growing our relationship meaningfully in the years to come."