The shipping industry has faced its worst crisis during the last 25 years. The limited liquidity of the shipping market and the trend of banks to limit their exposure have made shipowners to find new methods of financing their investment projects. Traditional lenders such as Germany’s Commerzbank and HSH Nordbank and the UK’s Lloyds and RBS are either exiting the market or trying to reduce exposure.
It is worth noting that during 2013 shipping companies have raised more than $8bn from stock exchanges of Oslo and New York. The truth is that equity funds remain a small player because traditional debt financing offers $250bn annually while during 2008 this figure was close to $500bn!
In addition, institutional investors such as private equity and hedge funds have emerged and play a key role in the shipping industry. From 2010 to 2013 nearly $15,6bn private equity funds have been invested, while $5bn of shipping loans have changed hands during the latest year.
Michael Dell, founder of Dell, has invested $33M in acquiring 9,8% share of Stealthgas capital as LPG shipping sector highlights strong demand and small orderbook. “We are extremely excited and proud that one of the United States’ major billionaires is investing with us” said Harry Vafias, founder of Stealthgas. Other examples are Oaktree Capital Management which took a large stake in Floatel Maritime and York Capital Management which formed a joint venture with Greek Costamare Inc. to buy five containerships for more than $190M.
Most analysts express their opinion that investors have targeted attractive sectors of the market, especially product tankers, LPG and LNG. They also mention that the main difference between traditional shipowners and private equity funds is that while the first tend to hold their vessels for 25 years, the second aim to quick profit by listing companies or selling their vessels when ship valuations and charter rates recover.
Finally, one major concern is that the problem of oversupply may be augmented because fleet growth for 2016 accelerates as the prices for newbuildings are low and the rates appear to have positive prospects.
John Nikolaou is based in Athens. He is a Financial Analyst with Coca Cola HBC and has passion about the maritime industry.
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The article is written by John Nikolaou, Financial Analyst at Coca Cola HBC and has passion about the maritme industry. |
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