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Profitable shipping seeing ‘exciting period’ for finance

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With shipping profitable and faring better than many other industries there is money available to shipowners across a range of bank finance, Chinese leasing and other forms of alternative financing.

A panel of finance experts speaking on the Sea Asia Virtual Preview webinar ‘Asia Ship Financing Scenarios’ painted a positive picture of the availability of funds to shipping.

Moderating the session Lee Keng Mun, Director of MPartners said, “Shipping is profitable, and some people say sexy again.”

While Covid has hit industries such as aviation, travel and hospitality extremely hard, shipping has proved to be relatively resilient and indeed container shipping is booming, dry bulk is performing well, and tankers had major spike at the end of last year, if currently performing poorly.

Dimitris Belbas, Managing Director and Head Ship Finance for Seafin said, “Because of Covid a lot of sectors became quite challenging for banks in the domestic, regional and global markets. So, shipping actually outperformed and it was about time.”

Belbas painted a positive picture of the market with money available including from traditional shipping banks who have been seen pulling back from the market in recent years.

“Across the shipping desks of banks people are smiling, companies are performing. There’s been issues where companies have to file for protection or defaulted, but that was more internal issues, over exposure or fraud,” he said.

“Shipping right now is a sector where banks feel comfortable as long as they have still decided to stay in shipping. There is money and most of this money will go to top tier names who have outperformed, and names that are very strong,” Belbas explained.

“Having said that due to the ample liquidity you see a lot of smaller banks, domestic banks reaching out to their respective markets and providing companies with the funds they require to renew and update their fleet.”

Listen to a recent espisode of the Maritime Podcast with Michael Parker, Chairman, Global Shipping, Logistics and Offshore - Citigroup

One of the biggest shifts in the ship finance market in recent years has been the emergence of Chinese leasing as a major force.

Christoforos Bisbikos, partner with WFW Global, commented: “We’ve seen huge changes in ship finance world, the Chinese leasing miracle is very important for the industry as it somehow bridged the gap departing banks left.”

The Chinese leasing market portfolio increased 10% in value last year to $67.7bn. However, James Chen, Director of SMarine Advisor noted, “Drawdown reduced by about 7% to $14.7bn, it is undoubtably impacted by the pandemic.”

Chen expects lower growth from Chinese leasing this year. “We see Chinese leasing houses active from this year but we expect their growth will slow down.”

However, there is plenty of growth elsewhere in the world of ship finance.

Bisbikos said: “In terms of volume this year the beginning has been very exciting, certainly better than last year. Another factor aviation is not doing very well at the moment, so you see players who have traditional invested in the aviation industry turning their focus to the shipping industry.”

There is a growth the in availability of alternative finance, and banking finance remains available to high quality corporates in shipping.

“We’ve seen other players coming in, we’ve seen funds converting themselves into debt providers instead of entering JVs with shipowners, we’ve seen them do sale and leasebacks, we’ve seen them do debt financings,” he said.

“Even seen shipowners creating their own leasing companies… in Europe you see examples of shipowners becoming a financier. I think we are in a very exciting period.”

Looking to bank finance Bisbikos commented: “Banks we still them being active with the top tier clients, they’re not out of the industry yet. Their focus more on the corporate side, providing shipowners follow the corporate model rather than the old model of traditional family shipowner I think the banks will still be involved.”

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