It’s probably a safe bet that Texas-based Beal Bank will not be a signatory to the Poseidon Principles any time soon.
Rather, the Dallas lender seems to be the antithesis of those banks aligning to promote green-shipping protocols. Beal’s shipping director, Andy Longhurst, was not shy about saying so in remarks to Marine Money’s annual New Orleans finance forum last week.
“We focus on the areas that are out of favour with everyone else, like the antique oil brigade. We provide capital when others are unwilling to do it,” he said during a panel appearance.
“We’re contrarian more than any others in the space.
“Ideally all my customers would be multibillion-dollar public companies, but that’s not the world I live in.
“If you can pass [‘know your customer’ protocols and the US Treasury’s sanctions-enforcing Office of Foreign Assets Control] we’re happy to deal with you.”
Streetwise took notice of Longhurst’s participation as a panellist at the New Orleans conference, which focuses heavily on the US flag/Jones Act trade and offshore services to the oil sector and wind energy.
His remarks came two weeks after the US presidential election, in which “drill, baby, drill” candidate Donald Trump decisively defeated the more green energy-friendly option, vice president Kamala Harris.
The “antique oil brigade” Longhurst spoke of may be set for a quick resurgence over the next four years.
But as to Longhurst, there is also an interesting back story of how a 16-year-old who entered banking in his native London in the early 1990s became an oil-patch-loving lender deep in the heart of Texas.
From his start in the back office at Lloyds Banking Group, Longhurst became director of ship finance from 1996 to 2008.
He departed before Lloyds began dismantling its shipping operations, following the 2008 world financial crisis, but not before building a $20bn portfolio and a team of 10.
Lane change
A merger that year with HBOS foreclosed the possibility of new business development, so he made a dramatic lane change, leaving banking to work for a former client: Venezuelan shipping legend Wilmer Ruperti and his Maroil Trading.
Longhurst relocated to Houston and married a Houston woman.
The idea was to work with joint ventures running tankers out of Venezuela. That worked for a few years but had run its course by 2013.
Longhurst spent some time that year working for old Lloyds customers when he learned that Beal Bank was looking for an entrance to shipping. He signed on.
The bank was led by Texas billionaire Andrew Beal — known for his brilliant countercyclical investments and being a “whale” in high-stakes poker games.
The lender took a while to learn shipping as it ramped up investments in the oil sector.
The first move came in 2018 with a $61m loan to MPC Container Ships.
But the first big fish landed in February 2019, when Beal announced a $306m financing to Herbjorn Hansson’s Nordic American Tankers.
Longhurst had covered the Norwegian market at Lloyds, and contacts in that market paid off.
Hansson, meanwhile, had in effect been made to walk the plank by long-time relationship bank DNB amid NAT’s struggles in the tanker sector and he was looking for a lifeline, even exploring opportunities in the Norwegian bond market.
Equity analysts said at the time that the loan was covenant-light and provided substantial flexibility, especially for NAT to pay its trademark shareholder dividend.
However, the money did not come cheap, with an interest rate estimated at 8.5%.
This was still below the 10% that NAT was believed to be paying under its revolving loan at the time, and the maximum 10.5% it could have paid under a “backstop” facility offered by DNB.
Liquid assets
“We like assets that are pretty liquid, and a fleet of suezmax tankers is something we can quite easily attach value to,” Longhurst told TradeWinds in a 2019 interview.
The loan matures in February, and NAT has said publicly that it is weighing refinancing options.
Beal’s other high-profile deals have come in the oil services sector, including financing for Oslo-based El Dorado Holdings, which in July was upsized to $550m to cover three drillships, and a total of $637.5m in lending to Texas oilfield services provider ProFrac Holdings.
It also led a $425m financing for US-based Centerline Logistics, which provides transport and storage of petroleum and alternative fuels.
The lender works closely with investment adviser and affiliate CSG Investments on these deals.
The Beal Bank family of companies has combined Tier 1 capital of more than $4.5bn and combined assets exceeding $20bn as of June, according to its website.
Its main competition on oil patch deals has come from the Norwegian bond market, reflecting that its margins have averaged between 500 and 600 basis points in the past decade.
What deals might Beal pursue from here? Longhurst said nothing about shipping sectors during his panel appearance, but he did make it clear that the lender is not quite ready for wind market opportunities.
“I don’t understand the wind sector, the vessels … I don’t even know the acronyms yet. None of it is underwritable for us,” he said.
More ship finance news
Ocean Yield reported a larger third-quarter profit and disclosed the sale of six ships through purchase options. Click here to read.
Norwegian bank DNB aims to increase revenue from commissions and fees in the coming years, it said at its capital markets day in London. Most of the fees will come from its investment banking division, DNB Markets. Click here to read.
European regulators have cleared the planned purchase of a majority stake in small Greek shipping lender Aegean Baltic Bank by UK-based billionaire investor Aristotelis (Telis) Mistakidis. Click here to read.
