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Taking a new look at shipping financeby Jim Lawrence, president, International Marketing Strategies, publisher of Marine Money | |
At the same time there are fundamental changes taking place within the maritime finance community. Banks face a difficult commercial choice brought on by growing competition. They are in the unenviable position: they can lend for next to no return to substantial credits or they may opt to lend at better margins but to lesser credits. If only because so many alternatives are developing, the days of simple mortgage financing are past, even as bank debt still accounts for 65% of all vessel financing.
Banks hope, as they always have, that even a low margin loan will lead to client requests for additional, and hopefully more profitable financial services, perhaps even a shot at hitting a homerun by providing capital markets advice.
In Piraeus, London, Hong Kong, Oslo and South America, a conversation on ship finance quickly turns the topic of the seemingly endless supply of high yield funds available to shipping. This debt-oriented late nineties reversal of shipping's late eighties equity first IPO craze has kept investment bankers on the road, accountants burning the midnight oil and a handful of attorneys extremely busy. The temptation: ten year non-amortizing debt with few if any collateral maintenance requirements. Just what shipowners have been asking their bankers for years!
Among the largest traditional shipping banks, Citibank, Chase and DnB, have each carved out new niches as investment bankers. Other banks have gone out and acquired investment banking skills. Witness ING Banks' acquisition first of the infamous Barings firm and more recently the New York investment bank Furman Selz, whose shipping reputation is strong, based on the long term industry coverage provided by senior analyst Jim Dowling. Nedship Bank, one of the premier worldwide ship mortgage banks, has recently turned to its parent Rabo Bank, one of only a handful of triple A rated banks in the world, to increase the level of investment banking services it can provide its clients. Add in the Wall Street firms and it is easy to see how competition has become intense. ML
| Issuer | B+H Equimar | Global Ocean | Golden Ocean 3 | Pegasus | PanOceanic | Alpha |
| Issue Date | 6/25/97 | 7/18/97 | 8/25/97 | 11/19/97 | 12/97 | 2/11/98 |
| Maturity | 2007 | 2007 | 2001 | 2004 | 2007 | 2008 |
| Issue size ($ mill) | 125 | 126 | 200 | 150 | 100 | 175 |
| Expenses 1 | $5 m (4%) | $6 m (5% ) | $61 m (30%) | $11 m (30%) | $4 m (4%) | $6 m (4%) |
| Pre-existing debt | $32 m (26%) | $62 m (49%) | $50 m (33%) | $28 m (28%) | $79 m (45%) | |
| Identified acquisitions | -- | $58 m 2 (46%) | $ 30 m (15%) | $84 m 5 (57%) | $56 m (56%) | $46 m (26%) |
| Future acquisitions/ Gen-eral corporate purposes | $88 m (70%) | -- | $29 m (15%) | -- | $12 m (12%) | $44 m (25%) |
| Minority interests | -- | - -- | $43 m (22%) | $5 m (3%) | -- | -- |
| Interest escrow | -- | -- | $37 m (18% | -- | -- | -- |
| Projected post- offering fleet value | $144 m | $136 m | $1,674 m 4 | $160 m | $119 m | $264 m 6 |
| Post-offering gearing | 87% | 93% | 95% | 94% | 85% | 75% |
| Notes 1 Includes original offer discount, if any 2 includes $3 million for working capital 3 does not reflect issuance of note warrants or stock warrants 4 fleet value reflects appraised value of operating vessels and vessels under construction as well, totaling $1,646 m as $28 m held for general purposes. Gearing includes existing and projected secured debt as well as minority interests totaling $1,392 plus $200 million of Senior Notes. 5 Includes $1 million for working capital 6) reflects drawdown of secured revolving credit facility Source:Marine Money, March 1998 | ||||||