China's leasing houses can still have a successful year in shipping despite the effects of the coronavirus, according to top executives.
The two biggest ship-leasing operations have already booked impressive drawdowns in the first quarter of 2020.
But observers said a high volume of financing largely represents deals held over from the previous budget year, and that a good full-year figure will depend on a speedy recovery from the outbreak — preferably followed by a stimulus package from Beijing in the style of 2008.
Fang Xiuzhi, head of shipping at Bank of Communications Financial Leasing (Bocomm), said his company is on track to reach a $1bn drawdown during the first quarter — a strong number amid the ongoing epidemic.
Bill Guo Fangmeng, executive director of shipping at ICBC Financial Leasing, told TradeWinds that his team expects to reach a similar figure.
The billion-dollar drawdown mark is an impressive single-quarter figure.
In the whole of last year, only six Chinese leasing houses did that much business, with Bocomm and ICBC achieving drawdowns of $3.2bn and $2.8bn, respectively, for 2019, according to an annual survey conducted by James Chen Cheng of financial arranger Smarine Advisors.
Pioneering structure
Even some second-tier lessors, such as CCB Financial Leasing, are understood to have come near the billion-dollar mark for the quarter, in part because of a pioneering cruiseship deal, in which four leasing houses led by Bocomm teamed up to finance the 150,700-gt cruiseship Genting Dream (built 2016).
The $900m deal, concluded in September but formally closed in January, bolstered first-quarter figures for its participants.
But, as in the case of many Chinese leasing house transactions concluded between the solar and the lunar new years, the deal may have been held over because lessors had already achieved their targeted spend for 2019, and wanted to front-load the next year's budget.
CCB Financial Leasing teamed up with the larger ship-leasing operations ofCMB Financial Leasing, China Development Bank Leasing and Bocomm to do the deal through an unusual structure, in which each financed its share through a separate special-purpose vehicle.
As leasing's answer to syndication of traditional bank loans, the multi-lender deal may serve as a pattern for future financings of large single-asset projects.
Travelling freely
All the ship-leasing companies contacted by TradeWinds are at work amid the coronavirus crisis, but many employees continue to work from home.
Sources said the Chinese lessors remain eager to do business but are hampered in their marketing efforts by their inability to travel and meet potential customers.
That gives one leasing house a clear advantage now. Bocomm, with a four-person European marketing team based in Hamburg, is the only Chinese leasing house to have established a separate office overseas.
Bocomm's Hamburg team can travel freely to meet shipowner clients on behalf of their home-bound headquarters team.
"Other leasing houses are looking at them and wishing we could do the same," an official of CMB Leasing said.
