Ship finance sources have diversified away from traditional lending over the past decade with less liquidity from European banks, giving rise to a more sophisticated financing model for shipowners, the TradeWinds Shipowners' Forum was told.
According to Astrup Fearnley group chief executive Even Matre Ellingsen, 55% of the ships were financed by banks in value terms in 2009. “Today, it is 34% and decreasing.”
While 30-35 European banks were active in shipping before the financial crisis in 2008, the number has dwindled to 10-12 currently, SEB’s global head of shipping and offshore finance Hans Christian Kjelsrud said.
Ellingsen said: “As a whole, banks are leaving the sector…that gives us opportunities [elsewhere].”
In one example, DNB—once the largest lender in shipping—saw its traditional shipping loan portfolio shrink by about half since 2015 to NOK 71bn ($10.6bn) at the end of 2018.
However, the Norwegian bank has been expanding its capacity in arranging bonds, equity and leasing deals.
Kristin Holth, DNB’s global head of ocean industries, said the reduction in traditional lending is “good for the industry”.
“It becomes more sophisticated when it comes to the financial sources,” Holth said.
“We did as much on bonds as we did in banking [last year]…It’s really just showing the importance of [diversified] capital sources.”
“Which would be a strength to the industry, because they (shipowners) have more to tap to. We find that’s very acceptable.”
However, it might not always be easy to secure financing outside of banks.
With listed shipping companies often mired in losses in recent years, public markets are not keen on shipping stocks, Ellingsen said.
However, bond investors apparently are more willing to bet on the improving fundamentals in some sectors.
“It’s kind of a mix picture,” Ellingsen said.
Chinese leasing houses—which have expanded rapidly this decade—are now less willing to loosen their purse strings due to their currency positions and losses in earlier deals, according to Flex LNG chief executive Oystein Kalleklev.
“They used to be very long on [US] dollars…These days, they have more liabilities than assets in dollars,” said Kalleklev, who has years of experiences in dealing with Chinese lessors. “They are less aggressive in lending.”
“I don’t think you can just go into Chinese financing these days…We need to use the bond markets.”
As for private equity, many are seeking to exit shipping because they have suffered losses since their entry in the earlier part of this decade, according to Kjelsrud.
“Right now, private equity probably has more to do with getting out of their positions,” Kjelsrud said.
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