The New Normal in Shipping Finance - Capital...

The New Normal in Shipping FinanceHarris Antoniou

Capital Link Greek Shipping Forum 201023 February 201023 February 2010

Merchant Banking | Energy, Commodities & Transportation | 2

Table of Contents

1. Ship finance today

2. How to deal with it - alternatives

3 F ti B k N d l d itt d t hi i3. Fortis Bank Nederland - committed to shipping


The Ship Finance Cycle

High returns in shipping

Higher margins for Non-shipping Current position in the

Ship

counter cyclical lending

banks enter the market

IncreasedNon-shipping

cycle but with the unique difference that the financial crisis has limited the lending Ship

Lending Cycle

M k t Reduced

Increasedcompetitionbanks leave

the industrycapacity of traditional shipping banks.

E l f Cheap debt leads to

Market Collapses

Reduced margins

Excess supply of tonnage

C eap deb eads oaccelerated borrowing


Traditional Sources of Capital for Shipping

Bilateral Lending Internal equity finance

Bank Loans have traditionally satisfied approx. 75% of capital requirements

A severe shortage of bank debt is currently constraining the shipping industry an Internal equity finance

Shipyard finance Government Other Syndicated Loans

constraining the shipping industry, an industry that is heavily dependent on the banking market

Markets currently closed or extremely

40.2%36.2%limited activity.

Limited activity

Closed

2 5% 2% 6 0% 5 0% 8 0%

Closed

2.5% 2% 6.0% 5.0% 8.0%

Non shipmortgage loans

KG / KS markets

Bond &Public Equity

Tax Lease investors

Equity funds


Funding demand remains high…

Expected need for ship financing May ’09 (60% leverage)

250

155

125150

200

bln

103 83 37

97

125

50

100USD

64 832537

02009 2010 2011 2012

Source: Clarksons

Equity Debt


Credit tightness since mid 2008…..

Global shipping loans by volume in USD bln In 2007 approximately USD 100 bln was lent to the shipping industry in the syndicated and

100

non syndicated loan market

2008 showed a decline 50

75

with a further sharp decrease in 2009

25

50

02001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Dealogic, syndicated and significant bilateral transactions

Q1 Q2 Q3 Q4


….and shipping finance continued to decrease

Global shipping loans: quarterly volume/number of deals

35 120

The high volume in 1Q09 was mainly driven by AP Moller Maersk’s USD 6.5 bln USD bln

77

96

74

9196

20

25

30

80

100debt restructuring

34 3424

33 3010

15

20

40

60

24

0

5

10

0

20

3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

Source: Dealogic, syndicated and significant bilateral transactions


Basically coming to a standstill in 2009

Global syndicated shipping volume

refinancings / restructerings new money

25.000

30.000USD mln

15.000

20.000

726

311

351

901

443

257

521

486

113

778

181

079

351

848

08 39 73 10

5.000

10.000

360

889

1.01

8

3.03

6

2.20

1

635

2.50

3

2.96

3

1.43

6

2.00

5

1.06

8

1.58

4

3.61

0

680

7.64

1

1.31

5

2.38

2

2.73

0

17.7

16.3

10.3

11.9

20.4

24.2

17.5

21.4

21.1

22.7

14.1

26.0

25.3

10.8

4.40

4.73

5.47

3.61

Source: Dealogic

03Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

3 8 1 3 2 6 2 2 1 2 1 1 3 6 7 1 2 2


Trends in bank debt

Strict conditions Refocus on core clients & quality

names

Less Liquidity Many big players in ship finance have

significantly reduced activity due to:

Smaller facilities

Little syndicated loan activity, bi-lateral and club deals

Pricing increase

• pressure from governments to act more domestically,

• credit related problems due to aggressive lending during shipping

Pricing increase

Tighter covenants

Declined appetite for LT debt; increased premium for LT funding

boom ,• concentration risk resulting from

recent mergers• reduction of bank’s balance sheetsincreased premium for LT funding reduction of bank s balance sheets

So today it’s all about:

Core regions Core clients Core sectors – is this still shipping?


Trends in Ship FinanceFinancing shortfall is significant

Conclusion: Major Shift in Ship finance has occurred

p Many big players in ship finance

have significantly reduced activity

Thi t k t l t 50% f th

g g

70

80

68.0Annual Shortfall

c. $13-30Bn

US$ Bn

This takes at least 50% of the lending capacity out of the market.

Demand for capital is very high 40

50

60

50.7

38.0

due to high new building order book. There is a big gap with the expected capacity in the banking market10

20

30Assuming

70% Order book

Deliverymarket.

0

Source: Marine Money, May 2009

Est. Annual New Building Financing Need ‘09 – ‘11

Est. Annual Lending Availability

How to deal with this ?y y


Table of Contents



3 F ti B k N d l d itt d t hi i3. Fortis Bank Nederland - committed to shipping


Imbalance in capital supply and demand

Europe:

ClientsNorthAsia:

Funding

Clients

North

America:

Funding

Middle East:

Funding

Demand for and availabilityyof capital are not necessarily at the same part of the hemisphere


Alternative sources of debt increase in relevance

New funds need to be sourced – from pension & insurance funds, sovereign wealth funds, Islamic funds, bond and equity market, commodity producers and traders, etc.

Part of the gap will be filled by DCM/ECM and private deals with institutional investors.

Public equity & high yield bond markets open up again, also for Shipping


Investors looking for alternatives

…investors are looking for Long-term assets with a preference

for higher yielding

Instead of traditional investments… Institutional investors are reducing

exposure to traditional asset classes in particular equity Inflation protected

Low correlated risk

• Corporate bonds

particular equity

Very low yields on government bonds and recent sovereign concerns reduce their attractiveness

• Infrastructure investments

• Other long-term and low-correlated investments


High yield bonds attractive substitute for loan debt

Structural benefits: More recession-resistant capital structure

Longest-tenor debt in capital structure

Interest rates is the next ‘Big Worry’ after this recession Borrowers looking to lock-in low fixed-

rate coupons via bond transactionsand ‘junior’ layer of debt

Diversify investor base and create trading liquidity for benchmarking and repeat issuance

rate coupons via bond transactions

Allows larger / more conservative borrowers to raise acquisition currency

minimize or avoid expensive equity issuance and dilution

borrowers to raise acquisition currency Bond market is increasingly re-opening

for acquisition related financings


Fortis’ role in the new market (1/2)

Establishing (Shipping) Funds Investors will benefit from:

• carefully selected and diversified portfolio of new shipping loans

• attractive risk - return profile.• Limited risk exposure; financing of assets < 10 year historic average

values; conservative leverage position of 0 – 45% of current market valuesvalues.

• FBN’s expertise in the global ship finance, its existing client base and its 200+ years of history in this sector.

Direct participation in Fortis deals is also a possibility.

FBN and Qatari Investment bank QInvest created a mezzanine fund aiming to fill the gap between what is available in the banking market and equity portion.


Fortis’ role in the new market (2/2)

Regional imbalance Asian surplus in liquidity and looking for

investment opportunities.

Capital Markets & Traditional banking FBN has access to the Debt and Equity

Capital Markets through a co-operation with Sunrise Securities Corp in New 95% of all vessel ship yards are in Asia,

looking for:

investment vehicles,

co sponsors

with Sunrise Securities Corp. in New York.

FBN will continue to find innovative solutions for Shipping Sector co-sponsors

experienced ship finance structuring parties

Asian investors start entering alternative

solutions for Shipping Sector

Asian investors start entering alternative investments

Asian yield requirements < US/EU yield requirements


Table of Contents



3 F ti B k N d l d3. Fortis Bank Nederland


Fortis has a long track record the ECT Industries

Energy Commodities Transportation Principal Finance Clients active from upstream to distribution: Offshore Oil (field)

Clients active in: Agri Metals

Energy

Clients active in: Deep sea shipping

industry Intermodal

Direct investments activities in ECT industries

Portfolio of assets( )and Gas services

Power & Utilities Carbon Banking Renewables

Energy Aviation

Portfolio of assets in projects related to and companies active in these assetsTop 5 Top 3 Top 5

Shipping syndicated

loan markets

Oil field services industry

Commodity bank

worldwide


We have come a long way since last year…

Some of our Transportation Group Milestones 2009 25 deals over US$ 800 mln Announcement of new strategy (May) T joins up with Forum of the Future (July) T together with Capital Link organises first ever Shipping Webinar

(23 september)( p ) Opening Singapore office + booked our first deals (16 October) Q-Invest – 12 November


…and we are moving forward fast

One bank with Market leader in the Netherlands in wholesale banking

AMBITIONS without

PRETENTIONS

in wholesale banking

International network with PRETENTIONS

In the year ahead we will

activities in 25 countries

A leading position in specificwork together to create a new, strong Dutch bank

under the brand name ABN AMRO

A leading position in specific sectors/services, such as Energy, Commodities & Transportation and Brokerage, Clearing &

ABN AMRO Custody


Strategic fit of Fortis Bank Nederland & ABN AMRO

Conventional Bank(like ABN AMRO in NL) Fortis Bank Nederland

Merchant Banking Sold to RBS

Commercial Banking

Private BankingPrivate Banking

Retail Banking


ECT and the new organisation

How will this affect you ? Business as usual is top priority

Client remains central Client remains central

ECT minimal affected by integration plan

ECT is acknowledged as one of the growth pillars g g pwithin the new bank

New combination allows us to:

Off ffi i t d t biliti t t f• Offer sufficient product capabilities to cater for our clients

• Leverage on the combined International N t kNetwork


ECT presence - Where our clients lead us

Amsterdam Oslo

RotterdamLondon

Dubai

New York

Rotterdam

Athens

Hong Kong

*Dubai

Singapore

Hong Kong

Sao Paolo

Representative office scheduled to open soon*


Conclusion - What ECT can offer you

Our capabilities: Strong Origination network

Strong Structuring and execution capabilities Strong Structuring and execution capabilities

Operational excellence in our Commodities and Shipping mid and back office

Adequate capital resources to meet (some of ) your funding requirements

Innovative approach to breach the funding gap (if any)pp g g p ( y)

Thank You

Date post:	07-Mar-2021
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

The New Normal in Shipping Finance - Capital...

Documents