Who will acquire Greece’s distressed shipping debt?

The UK state-owned bank’s provisions totaled GBP341m ($567.28m) in 2013, four times the GBP82m of 2012. This means 5.2% of its shipping loans are now impaired, compared to 1.1% in 2012, while the shipping book has shrunk to GBP6.5bn ($10.8bn) from GBP7bn as it sold off debt in Sophocles Zoullas-controlled Nasdaq-listed Eagle Bulk.

As RBS is by someway the largest traditional lender to Greek shipping, the comment: “Credit conditions remained difficult,” was cold comfort to many on the Piraeus waterfront.

Unveiling a pre-tax loss of GBP8.2bn, its worst performance since the financial crisis and up on 2012’s GBP5.71bn loss, RBS indicated an intention to deleverage from shipping and downsize its Greek exposure.

Head of global shipping Lambros Varnavides has insisted RBS will remain in ship finance and “a leading provider of ship finance in the Greek market”, but still speculation remains in Greece about its shipping future. Twelve months ago, according to Petrofin Bank Research, of the 51 banks engaged in financing the Greek fleet to the tune of $65.78bn, RBS had a book of $10.55bn, double the second biggest lender, Credit Suisse’s $5.21bn.

Indeed, RBS was among the banks that delegates were discussing a few days prior to the announcement, when chatting over coffee and lunch at the 5th annual Capital Link Greek Shipping Forum in Athens. Of course RBS is not alone in discussions, with Germany’s Commerzbank, not so long ago Greek shipping second largest backer, another cutting its Greek portfolio.

The forum devoted a session to non-performing shipping loans and it became evident during presentations there is competition among private equity (PE) firms to acquire distressed debt, but it is far from safe.

In fact, ex shipping banker Robin Das told the forum the increased trading in shipping loans is being fuelled by fatigue with the industry’s recovery story on the part of banks and oversight bodies. Founder and director of niche shipping and finance advisory, Auld Partners, Das noted that until recently interest in acquiring non-performing shipping loans was limited to picking up loans at below the underlying asset value. “Now people are willing to buy at a premium above the underlying asset value,” said Das.

Alexander Tracy, managing director of investment banking firm Miller Buckfire said the pricing of debt has increased as more debt has traded. “There’s generally a lack of distress going on in other segments, which is what has raised the opportunities [for shipping],” he said.

Interest in shipping debt depends on “relative value” as well, said Bank of America Merrill Lynch managing global credit and special situations group, Michail Zekyrgias. Zekyrgias said “no one formula” governs the market for acquiring shipping loans, which depends on factors such as whether the loans are performing or distressed, and the identity of borrowers.

John Howells, managing partner at Capstan Capital Partners, contends funds acquiring debt could prove supportive of owners, given the right relationship. “If the owner is doing the best job possible, and is transparent and reliable, it’s likely the lender will want to support that borrower,” said Howells.

Das believes there would be more deals as banks would exit more loans if they had the staff and resources to undertake the necessary preparation and marketing. “A lot of the lenders that are sitting on non-performing loans spend all their man hours and woman hours dealing with the problems.” He then advised PE people among delegates: “If you want to get your hands on [shipping debt] you need to do more work on cultivating those sellers.”

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