Owners currently have the upper hand in the ship financing market, but things may soon change, according to Oceanis.
There are a wide array of competitive options for shipowners to choose from at the moment and with the strong markets, the owners have generally prepaid debt or at least not refinanced it.
“As bank financing costs have increased and investment opportunities are limited, cash has been used to repay debt,” Hamburg-based Oceanis said in its first-quarter ship finance report.
“As a result, not all banks have kept shipping portfolios at the same level. Many, needing to stop outflows, have been forced into lowering their pricing and offering new products.”
Historically low margins remain available for shipowners taking on debt but going forward it may not be the case, according to Oceanis.
“Overall, we see downside risk to the shipping loan margins going forward. The environment of rapidly increasing base rates, which has been very beneficial for selected banks, is coming off,” Oceanis co-founder and managing director Erlend Sommerfelt Hauge said.
“Also, there are some other clouds on the horizon for banks, in the US, the liquidity support — Bank Term Funding Program — has just ended and there is the implementation of Basel IV,” he added.
With several sources available, Oceanis advises shipowners to maintain connections with a wide range of banks. Funds, lessors and private lending are other options.
The lenders are also willing to tailor solutions to the borrower and offer new products.
The revolving credit facilities may be suitable for some owners.
“The non-recourse revolvers are very helpful for owners that want to be ready once the opportunities arise. You avoid paying the full interest rate on funds you have easily available, saving the time of getting approval once the investment opportunity is presented,” Sommerfelt Hauge said.
In the dry bulk segment, Chinese lessors are continuing to improve their offering.
“Not only are the commercial terms offered generally superior in margins, loan-to-value and other commercial items but their response times and willingness to do business make them a pleasant counterparty to deal with,” the firm said.
In the tanker segment, “some lenders, which invest both equity and debt in the sector, are becoming very confident in future asset values and can offer high leverage at competitive pricing”.
“Others, whose backers see the tanker market as being at a peak and potentially declining from here, are finding it more difficult to lend at these levels,” Oceanis said.
“These more cautious lenders are maintaining pricing levels while slowly reducing the leverage available and requiring multiple vessels per facility to diversify earnings sources.
“In summary, the money is out there — no matter the niche it needs to fill. The shipowner’s main task is to find out who will provide it,” the firm concluded.
