DNB expects the merger and acquisition business to continue following a busy year of deal-making involving particularly stock-listed shipowners.
DNB Markets advised BW LPG to acquire the $1bn Avance Gas VLGC fleet in August and has arranged several shipping bond issues, including for Navigator Holdings and SFL Corp.
Anders Grevstad, chief executive of DNB UK, said the cash-rich shipowners can do more M&A transactions.
“Sometimes they struggle to find good assets or business proposals to expand besides building what they were doing before,” he said.
The Avance Gas transaction is one of several high-profile swoops this year as shipping defined its traditional perception as a place where it is seen as difficult to get M&A transactions over the line.
Christo Nikolov, senior vice president for ocean industries in London, said: “We have been very active on the M&A and advisory side in the past year and this, in addition to our strong presence in the bond and equity markets, has kept us busy and very relevant to our clients.”
The executives spoke to TradeWinds in a joint interview at DNB’s London office, which has played a central role in the bank’s shipping business for over 50 years.
Grevstad said: “We are in London because the industries we want to be leading in are also very visible in London.
“Shipping and the whole ocean space are a part of that.”
Opened in 1971, the office has been headed by Grevstad since August last year.
DNB offers a full product portfolio from its London HQ, including corporate and investment banking services.
About 160 people work at the office in the Walbrook Building in the Square Mile, the city's financial district.
“A number of our shipping clients are in London,” Grevstad said.
“For us, it is important to be close to the decision-makers.”
From London, Grevstad also manages DNB’s office in Athens.
The bank has a strong position in the Greek market and other European regions, such as the Benelux.
Nikolov explained: “In shipping, we are well diversified across the different sectors and this is also reflected in our London book. We have a balanced exposure to dry bulk, tankers and gas.”
DNB has experienced prepayments of loans as the shipowners have made large profits.
“While new debt deal activity has been very high in the past year, we currently experience a large amount of prepayments in our portfolio.
“Most shipping markets have been exceptionally strong and owners have been rightly using their excess liquidity to pay down their loan facilities faster.
“This accelerated rate of repayments is increasing competition among banks and driving margins lower,” he said.
The Greek market is more competitive than the rest of the European market, according to Nikolov.
He said: “For every single transaction, there is more competition, especially in the Greek market.
“In addition to international banks, the local Greek banks have been more aggressive lately.
“Their credit rating has improved with Greece’s. Their funding costs have improved so they are more competitive.”
After several years into a shipping upcycle, DNB is keen to continue supporting its customers and grow its lending book.
“Shipping is still a cyclical business. It is important that we are not overextending ourselves at the wrong time in the cycle.
“Having said that we are here to support our clients in size for the right transactions using our balance sheet but also tapping other sources of capital where it makes sense,” said Nikolov, who joined the bank in 2008.
DNB is committed long term to the shipping industry.
“We have been through the cycles. Shipowners tend to like long-term partners,” Grevstad said.
