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Executives outline sources of finance for depressed OSV market

Despite the poor state of the offshore industry and limited access to credit, there are still financing options available for Middle Eastern OSV operators, speakers at the Seatrade Offshore Marine & Workboats Middle East finance session revealed. 

Session moderator Marcus Machin, ceo of Tufton Oceanic Finance , cited recent clients for Islamic finance and the issuance of sukuk bonds, including an AED1.2bn facility for Stanford Marine in June this year, a $350m term loan for Topaz Marine in April, and $430m for Abu Dhabi-based Zakher Marine in November 2014.

Besides Islamic Finance, Nijo Joseph, finance partner of Stephenson Harwood Middle East, said that companies seeking finance had various options, most of which have pros and cons. However, before agreeing any deal, the re-jigging of existing finance arrangements might be necessary. In the current climate, the availability of senior debt was limited. Banks had limited capacity and limited interest. Low loan-to-value ratios could result in funding gaps. 

Chinese banks have “enormous capacity” but this could be expensive and usually required a Chinese element. Export credit agencies were another option but also required a national element usually the building of vessels in that country. High-yield bonds offer a fast-track possibility, are often unsecured but could be pricy. Public equity in the form of an IPO was a possible option but had “grim prospects” in the current climate.

Meanwhile, private equity investors had ready money but often a limited time horizon and a requirement to have a say in the managing the business.

Joseph warned that “opaque” corporate structures with lots of one-ship entities were not appealing from a funding point of view. Financiers and investors needed “to understand what they were getting into” and sprawling companies needed to be put in good order before seeking new funds, he said.

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