Cypriot shipowner and fund manager Pelagic Partners is setting up shop in London with a new company to help bridge the financing gap in shipping.
Pelagic Capital will be launched in Mayfair under the leadership of executive director Tobias Backer, who founded Oaktree Capital Management-sponsored alternative finance provider Fleetscape Capital in 2017.
The new venture is designed to help Pelagic Partners build a dedicated credit fund and expand into future projects, the company said.
Backer told TradeWinds he started the new operation on 1 September. The London office opens on 1 October.
The director has been spending time with the Pelagic Partners team in Limassol and is now travelling to meet major clients.
There will be another associate employed in London, and another staffer in Cyprus eventually, Backer explains.
“And then of course it’s the broader team. Pelagic has the full set-up in Cyprus,” he said.
Pelagic Partners was established by Atef Abou Merhi, of the family-owned shipowner Abou Merhi Group, and Hartmann Group chief executive Niels Hartmann.
“It’s a natural build-up of what Niels and Atef have built up,” Backer told TradeWinds.
“Our goal is to establish Pelagic Partners as the premier source of capital for the maritime industry across the capital stack. Despite the growing capital needs of the industry, it has not garnered sufficient attention from broader credit markets.”
Seed capital is coming from Pelagic Partners, explained Backer, a dual US and Norwegian citizen.
“There’ll also be friends and family to build it further. And then eventually we will do a proper fundraising process,” he said.
Backer has also worked extensively in business development roles at Oaktree’s European Principal Group, ICON Capital (now CION Investments), DNB Bank and Fortis Bank (now BNP Paribas).
His focus on sale and leaseback transactions, mezzanine loans, preference share transactions and joint venture investments within shipping has made him a respected figure in the sector, Pelagic said.
“It’s quite clear to me — this is my third go-around between ICON and Fleetscape — that to do this successfully, you need to do it at scale,” Backer said.
“And I think we have big ambitions to build this to quite a large scale,” he added.
Pelagic Capital will be buying into ships, just as Pelagic Partners does.
“There are many ways of structuring it, right? You can do it as a lease, you can do it as a loan, you can do it as a preference share. At the end of the day, we are a capital provider for shipping,” Backer explained.
He said the company wants to be a partner with its clients rather than a competitor.
“When you sit in Mayfair, you shouldn’t be too much of a technical expert or believe you are too much of a technical expert. What we’re good at is identifying the clients we want to work with, and believe in their story and their ability to operate their ships,” the director added.
Don’t dictate
“If you, as a financial investor, dictate what kind of tech you have on a ship, you will fail,” he said.
Clarksons calculates there will be a 50% increase in the capital needed for shipping in the next 10 years, compared to the past 10 years.
“The banks are not there like they used to be. I believe the banks will continue to reduce. There’s a tremendous funding gap that needs to be filled by somebody,” Backer explained.
“And we believe that somebody should be us. There aren’t that many companies, frankly, doing what we do.”
The new recruit said he believes the company can become a leader in a fairly short time frame.
But banks are still needed.
“I think the banks will be there to some degree. We rely on the banks. The banks will fund us to some degree,” Backer told TradeWinds. “But we need to help fill that gap from funds such as ourselves. But obviously, if you ask me right now, there simply is not enough capital to meet the funding needs for shipping.”
The executive director said institutional investors, insurance companies and pension funds will have to “step up” and invest.
Building the fleet
Last month, Pelagic Partners unveiled another acquisition that brought its maritime investments to 26 vessels across six different ship types.
It bought a stake in the 10,400-bhp platform supply vessels Cooper Viking and Coey Viking (both built 2021).
These were the last two PSVs in the managed fleet of Christen Sveaas-backed Viking Supply Ships, which sold its 30% participation in them in January, for a net gain of $17m in cash.
The remainder was owned by UK-based Borealis Maritime, which has picked Pelagic Partners as a co-investor in the ships.
Pelagic Partners also owns MR and LR tankers, as well as LPG carriers and bulkers.
In addition, the company has stakes in Norwegian PSV owner Golden Energy Offshore Services and Oslo-listed Hunter Group, which charters VLCCs and is plotting liquid CO2 carrier newbuildings.
