Andreas Ostern, senior vice president, offshore and logistics, DNB Asia, noted that there has been a lot of capital flowing into the shipping market over the last few years as asset values have gone down, attracting new and more investors.
“The access to funding will not be an impediment to shipbuilding as capital is not scarce as it can take new shapes and forms,” Ostern told delegates at the Sea Asia 2015 conference held in Singapore on Thursday.
“We urge owners not to order too many ships even if capital is freely available,” he said, in view of the supply overhang.
Over the last couple of years, a relatively new group of investors in the form of private equity and distressed funds has emerged to account for approximately 20% of the purchases of shipping and offshore assets of listed maritime companies, Ostern observed.
“Their common denominator is that they are active, they seek new structural solutions and they are a little bit impatient,” he said, adding that they could trigger a consolidation in the market on the equity side.
Before the global financial crisis of 2008, ship financing had been dominated by German and European banks, accounting for more than 80% of the world’s total ship financing portfolio, according to figures cited by Mark Long, head of corporate sector group, Asia Pacific, HSBC.
In the wake of the financial crisis, banks pulled back and companies started to look to diversify their borrowings away from the banks. In 2013 to 2014, ship financing from banks went down to 72% while owners increased their borrowings from the equity capital market and debt capital market.
“As the German banks became less active and slowed down, other mid-tier, Asian banks have significantly increase their share of ship financing such as Chinese banks, Standard Chartered Bank and Australian banks,” Long said.
Yang Chang Kun, managing director, shipping, ICBC Leasing, said ship financing is a good way for Chinese banks to engage in foreign businesses, and not because the banks find ship financing as profitable or interesting.
“I believe more Chinese banks will jump into ship financing and increase their portfolio in this area over the next few years,” Yang said. Some of the notable Chinese banks into ship financing include The Export-Import Bank of China (China Exim Bank), Sinosure, China Development Bank, and Bank of China.
DNB Asia’s Ostern pointed out that while it is good for shipping companies to become bolder in using more capital structures to develop their businesses, bringing in private equity as a corner investor could impede the growth of the company.
He explained that the private investors could be speculative and interested only in short term gains and pure play business, but shipping companies looking to survive long term need to diversify to take on the cyclical nature of the market.
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