The world’s largest shipping bank BNP Paribas has formed a comprehensive new alliance with Japan’s SBI Leasing Services to market leasing deals.
The partnership will be focussed on the growing market for Japanese Operating Lease with Call Option financing structures, known as JOLCO.
The marine JOLCO market is expected to grow to ¥593.5bn ($4.2bn) this year, according to local Japanese reports.
Tokyo-based SBI Leasing specialises in JOLCO deals in both the aircraft and the marine sectors.
SBI Leasing said BNP Paribas is the leading shipping lender with a $20bn portfolio of business in 2021.
It has already been working with the French bank for some time on numerous projects in which BNP Paribas has acted as the arranger.
The partnership will involve BNP Paribas offering JOLCO finance services its extensive book of shipping clients and from its 65 offices around the world.
SBI Leasing said: “We have agreed to further focus on acquiring new projects by expanding the JOLCO finance method to the global shipping industry.”
In the latest financial year SBI Leasing provided ¥273bn in JOLCO shipping deals, although around 70% of its business is targeted at the aircraft industry.
The JOLCO scheme began in Japan as a way of attracting private investors to aircraft finance through tax breaks.
It has grown in popularity in the marine sector as a versatile method of ship finance.
Through the scheme, a ship — secondhand or newbuilding — is acquired by a special purpose company which arranges bank finance and charters the vessel out to an operator under a lease finance scheme.
At the end of the charter period, the operator holds the option to buy the asset, extend the charter, or return the ship to the owner.
The scheme has been most widely used by Japanese owners ordering ships at local shipyards to be chartered by domestic and non-Japanese owners.
But, it has been increasingly used in financing high-value container ship deals.
The scheme was recently used by Seaspan Corp when it has fixed $1.17bn of new financing for 15 dual-fuel container vessels on order in China. The financing deal involved BNP Paribas, HSBC and others with Societe Generale acting as the lead arranger.
Japan’s Financial Products Group (FPG) has recently announced it had sealed ¥205bn ($1.4bn) of lease finance deals for 15 container ship newbuildings.