Singapore: The economic slowdown has brought the availability of finance to the maritime industry into the spotlight. Speaking at the inaugural DnB NOR Asian Investor Conference Lim Hwee Hua, Minister in Prime Minister's Office, Second Minister for Finance and Transport, said " funding is the very lifeblood that keeps activity flowing. Unfortunately, I am told that about half of Asia's shipping banks, which had previously provided shipping finance have now closed. Banks that remain open are, in turn, taking a more conservative posture on shipping loans - made worse by a supply overhang and falling valuations."
The conference which focused on the offshore and maritime industries, brought together more than 200 corporates, institutional investors, hedge funds, sovereign wealth funds and private equity investors.
Lim said the industry now finds itself in a vicious cycle where the liquidity crunch triggers a slowdown in real economic activity, which in turn causes banks to tighten credit even further. She gave industry estimates that some US$350 billion worth of orders require financing as of 200. " Even though we can expect some delays or cancellations, the demand for capital remains. Not surprisingly, shipowners are increasingly looking beyond banks to alternative sources of finance."
There was general consensus, though, that the economic downturn is probably bottoming out and not in for a double dip. Some obesrved that banks were beginning to lend again. However, Erik Borgen (pictured), Regional Director, Head of Asia & General Manager, DnB NOR, cautioned that while for the banks themselves "the financing situation has stabilized", its another question if they would be willing to lend. Speaking for DnB NOR with its large portfolio, he said their priority was to look after the needs of existing clients. "New projects will [still] have more difficulty in getting funding".
The conference also saw the launch of DnB NOR Markets new Equity Research and Securities Sales team in Singapore, which is specialized in the Energy, Offshore and Maritime Sectors. According to Lim DnB NOR has played a significant role in the development of Singapore's maritime sector since the setting up of its office here in 1970. She said the Singapore government will continue to work with industry players and remains "committed to creating a vibrant financial sector capable of supporting the diverse financing needs of our expanding maritime cluster".
She pointed to a recent initiative in the signing of the Memorandum of Understanding between the Singapore Exchange and the Oslo Bourse in July 2009. This partnership is to help streamline the dual listing of shipping and offshore energy companies." With a combined market capitalisation of S$185 billion from 136 shipping, offshore and energy counters on both Exchanges, we hope that the MOU will facilitate investors' access to markets and offer more options for portfolio diversification."
Given Singapore's pro-business environment, Lim expressed hope that more service providers will use it as a growth platform to strengthen their Asian presence. To date, more than 20 local and foreign banks with shipping finance portfolios, complemented by a pool of boutique shipping investment banks, private equity arrangers and research houses, have done just that. "There is always room for more." [04/11/09]
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