Transcript
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Shipping Finance in a Swiftly Changing MarketRodricks Wong, Marine Money Asia
4th Annual Hong Kong Ship Finance Forum 18 March 2011
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Global Ship Finance in Transition A Mixed Bag of Signals
A few Green Shoots of Recovery in the Industry
- The worlds largest ship financer, HSH Nordbank, remains fully committed to shipping
and returned to profit territory in 2010. The bank generated earnings before
restructuring of EUR 545 million (USD 722 million)
- The bank is now ready for new shipping loans with new or existing clients of up to
EUR 1.5 billion (USD 2 billion)
- Transport finance specialist bank DVB reported the best year of its history in 2010,
having posted consolidated net income before taxes of EUR 131.1 million, a 51.4%
increase over the previous year's figure of EUR 86.6 million
- The bank repaired 88 loan facilities of USD 2.4 billion with over USD 300 million over
the past two years and grew its ship lending book 4.6% to USD 13.7 billion in 2010 from
USD 13.1 billion
- Deutsche Banks ship-financing business generated income before income taxes of
EUR 76.5 million, 30.1% higher than in 2009
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Global Ship Finance in Transition A Mixed Bag of Signals
A few Green Shoots of Recovery in the Industry
- Standard Chartered Bank may have only re-entered the shipping finance market in
recent years, it has been actively growing its shipping book estimated to be around
USD 1.5 billion
- At the end of last year, the bank established its ship leasing division, which has inked
up to four deals around USD 400 million in less than six months
- In June 2010 Standard Chartered Bank also closed a RMB 150 million (USD 22 million)
facility for Shanghai Greenland Energy (Group) Co Ltd to provide it with post delivery
financing for the acquisition of two handysize newbuildings as part ofthe companys
overall expansion into the energy sector
- This was the first RMB denominated, Chinese flagged, Chinese-documented shipping
finance transaction undertaken by a foreign bank in the Peoples Republic ofChina
since the global financial crisis
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Global Ship Finance in Transition A Mixed Bag of Signals
Negative News from the European Lenders:
- Many banks had stopped doing ship financing business and have not returned yet
- In Britain, Lloyds Banking Group and Bank of Ireland have reportedly put their shippingportfolios up for sale. The two banks have a combined shipping loan book of over USD
17 billion at the end of 2010
- WestLB, once the Germanys third-largest lender, is currently going through major
restructuring. Reported market rumours suggest that its shipping book could be up for
sale
- According to Lloyds List, Spanish bank Santander has moved the old Alliance &
Leicester (estimated to be between USD 2 3 billion) shipping loan book into the non-
core part of the bank, a move that could lead to the portfolio being sold
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Global Ship Finance in Transition A Mixed Bag of Signals
Some Observations
- Prevailing uncertainty of bank debt financing supply will continue. Charter rates will remain affected by the rising
supply of new ships, against the backdrop of excessive orderbooks across all major shipping segments
- Even though lending activities of some banks may have declined, but that does not necessarily mean they have
financed fewer ships. Ships cost lesser than what they used to be
- Harsh reality for ship owners. Gone are the days when owners could get loans for 7-8 years or even longer, and
loan spreads were less than 100 basis points
- Typical Loan Structure Today
- Lower Advance Ratios: Typically around 60%, but that can vary between 50 70%.
- Shorter Terms: 5 - 6 year Tenor with 10 - 12 year Loan Profile
- Higher Pricings: 200 400 bps, but can even go as low as 80 bps for sought-after clients
- US and UK banks dominated the global ship finance industry in the 70s and 80s. European banks subsequently
dominated in the 90s and 00s. And now there have been a lot of chatters on the rise of Asian banks and their
rising prominence in global ship finance. But are the Asian banks ready?
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New Sources of CapitalAsian Banks???
http://oceanbank.vn/trangchu/index.html7/30/2019 Finance Shipping
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http://www.busanbank.co.kr/english/index_english.aspxhttp://www.solomonbank.com/eng/index.htmhttp://www.cimb.com/index.php?tpt=cimb_grouphttp://www.rhb.com.my/index.htmlhttp://www.affinbank.com.my/home.htmhttp://www.axisbank.com/personal/index.asp7/30/2019 Finance Shipping
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Global Ship Finance in Transition Asian Banks
Asian Banks are still not Major Ship Financiers (Yet)
- Asian banks tend to have a domestic or regional focus
with a relatively limited role in global ship finance
- Unless there is an intrinsic need to support the
domestic shipbuilding sector, Asian banks generally do
not perceive shipping as a key growth area
- They prefer to work with existing clients and finance
deals with Asian content. Not many Asian banks have
been actively seeking new clients
- The flight to safety continues. Banks appear to be
competing aggressively one another for the same high
quality, cash rich owners in Asia. There is a willingness
to accept lower returns on loans for better credits
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Global Ship Finance in Transition Asian Banks
Chinese Commercial Banks
- Chinese commercial lenders are still very focused on financing Chinese
projects, although we note that some are more willing to take part in
international deals. For example, ICBC was a participant in United ArabShipping Companys recent USD 302 million term loan facility
- Chinese lenders adopt a Duality Approach when it comes to shipping
loans. For foreign names, they look at both the asset and corporate
strength of the borrower. But within China, it is still largely about
corporate lending (name lending)
- Chinese banks want to encourage foreign shipowners to borrow inRMB, as part of the countrys effort in internationalising its currency.
But will the foreign shipowners bite? Shipbuilding contracts in RMB??
Hyundai Heavy Industries is said to have started paying its Chinese
suppliers RMB. Samsung Heavy Industries is set to follow suit
- Policy risks, the shortage and reluctance to lend in USD will continue to
pose challenges for Chinese commercial lenders. Monetary policy in
China is finally normalising, after two years of very loose monetarypolicy
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Global Ship Finance in Transition Asian Banks
Chinese ECAs and Government Supported Shipping Funds to Provide
Massive Liquidity
- China Exim, Sinosure and China Development Bank will continue to
support the domestic shipbuilding industry
- Sinosure for example closed its first ever European ship export
transaction with mandated lead arrangers BNP Paribas, Societe Generale
and Bank of China in November 2010. J. Lauritzen secured a USD 267
million ten year facility to refinance five MR tankers and two LNG tankers
- Chinese banks are also planning to provide Greek ship owners with as
much as USD 10 billion in financing to purchase Chinese built vessels
- But at the same time, there will be more focus on domestic ship owners.
China Exim plans to increase the proportion of its lending portfolio to
Chinese owners from 10% to 33% over the next two years.
- Chinese shipowners account for at least 40% of new orders placed at
Chinese shipyards today
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Global Ship Finance in Transition Asian Banks
Chinese ECAs and Government Supported Shipping Funds to Provide Massive Liquidity
China Exim Transactions in 2010
Shipping Company Amount
(USD M)
Comments
Europe
Danaos 203 Greek owner secured approval for a USD 203.4 million Sinosure backed credit facility from Citi andChina Exim Bank. The funds will be ultilised for the financing of three 8,530 teu boxships, currently
under construction at Shanghai Jiangnan Changxing Heavy Industry
Diana Shipping 83 70% financing for the acquisition of two 206,000 dwt dry bulk carriers, to be built at China
Shipbuilding Trading Company and Shanghai Jiangnan-Changxing
Angelicoussis Group 111 Financing of Chinese built dry bulk carriers
InterOrient
Navigation
65 USD 64.7 million buyer's credit for the construction of two 115,000 dwt bulk carriers at Jiangsu
New Century Shipbuilding. Sinosure provided the export credit
Bourbon 400 12 year credit facility for the construction of vessels ordered at Sino-Pacific Shipbuilding
Africa and Middle East
Ethiopian Shipping
Lines
235 80% financing for 7x multipurpose vessels and 2x product tankers at China's Taizhou Kouan
Shipbuilding with Sinosure
Oman Shipping Undisclos
ed
Financing of 4x 400,000 dwt VLOCs to be built at Jiangsu Rongsheng Heavy Industries. The ships
reported cost USD 483 million
National Iranian
Tanker Company
1,112 90% financing with other Chinese banks for the financing of 12 Chinese built VLCCs
South America
Vale 1,230 13 year term loan together with Bank of China to provide 80% financing of the construction oftwelve VLOCs ordered at Jiangsu Rongsheng Heavy Industries
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Global Ship Finance in Transition Asian Banks
Chinese ECAs and Government Supported Shipping Funds to Provide
Massive Liquidity
- Within one year, Chinas first shipping fund - China Ship Fund signed
shipbuilding contracts for 45 vessels with total investment amounting toover RMB 15 billion (USD 2.3 billion)
- The fund seeks to a) fulfill the countrys pressing need for self-sufficiency in
maritime transportation and b) assist domestic shipping companies to go
global and become international players
- Shanghai is also planning to launch its own shipping fund with Guotai
Junan Securities, China Shipping Group, Shanghai State-Owned AssetsOperation Co and Hongkou District State-owned Assets Operation Co
- The shipping fund hopes to raise as much as RMB 5 billion (USD 760
million) in the first round of fundraising with an eventual target of RMB 50
billion (USD 7.6 billion)
- China is among the few countries in the world with the potential to build,
finance her own vessels and have her own cargoes to carry
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Global Ship Finance in Transition Asian Banks
Japanese Regional Banks Are Stepping Up Ship Financing Activities
- Japanese mega banks have limited room for fresh shipping loans, having aggressively financed Japanese
owners during the boom
- Traditional lenders have become more cautious as a result of the sharp appreciation of Yen against USD,rising operating costs incurred by ship-owners and foreign charterer defaults
- These experienced lenders are now exploring the possibility of working together with other regional
banks that are unfamiliar to the industry on syndicated transactions
- BTMU, together with regional banks Chukyo Bank and Musashino Bank, recently extended a JPY 2.9
billion (USD 35.6 million) loan to finance the construction of a 58,000-dwt Handymax bulker
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Global Ship Finance in Transition Asian Banks
Japanese Regional Banks Are Stepping Up to the Plate
- Five regional banks - Iyo Bank, Ehime Bank, Hiroshima Bank, Fukuoka Bank and Chugoku Bank have a
combined JPY 1.1 trillion (USD 13.5 billion)
- But again, liquidity is very much reserved for the domestic shipowners
Regional Japanese Banks Active in Ship Financing
Regional Bank Outstanding Shipping Loans Lending Preferences Remarks
Iyo Bank JPY 424.1 billion (USD 5.16
billion) as at 31 March 2010
Mainly regional established
shipowners in Japan
Largest regional ship financier that
focuses more on corporate finance
Ehime Bank JPY 255 billion (USD 3.11
billion)
Domestic Owners on
corporate finance basis
First regional bank to complete a
syndicated shipping transaction
HiroshimaBank
JPY 229.5 billion (USD 2.79billion) as at 31 March 2010
Domestic Owners will begiven priority
First regional bank to established aspecialized shipping division
Chugoku Bank Currently around JPY 100
billion (USD 1.22 billion)
Domestic Operators and
shipowners who have fleet
replacement needs
Completed its first syndicated
shipping loan in 2006 for Tanba Kisen
Fukuoka Bank Currently around JPY 100
billion (USD 1.22 billion)
Domestic Owners Building up its shipping loan portfolio
by reaching out to domestic owners in
Oita and Ehime Prefectures
Source: Marine Net, Marine Money
http://www.hirogin.co.jp/index.htmlhttp://www.himegin.co.jp/index.html7/30/2019 Finance Shipping
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Global Ship Finance in Transition Asian Banks
Likewise, Korean Banks are Domestically Focused
- Shipping finance exposure of Korean Financial Institutions stood at USD 12 billion as at May 2009
- With the exception of Korea Development Bank. Korean banks are not major ship finance providers
2008 Shipping Portfolio League Table (Korea)
Source: KDB Survey Data
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New Sources of CapitalCapital Markets?
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Asian Shipping Bond Volume Falls 46% in 2010
- Total shipping bond volume in Asia has surprisingly
declined at a larger pace than expected, down by
close to 46% to USD 4.1 billion last year from
USD 7.6 billionthe year before
- The sharp decline can be attributed to the following
reasons:
1. 2009 was an exceptional year
2. The bond market can only be accessed by a limited
number of shipping companies in Asia. Many of them
replenished their balance sheets in 2009, and hence
there was less need for more bond issues
China
Japan
Korea
Hong Kong
Taiwan
Singapore/Malaysia
Thailand
Indonesia
Vietnam
Source: Marine Money
Asian Shipping Bond Issues by Country
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2,401
1,780
2,908
350
75 53
1,188
1,838
230 170386
123 125 52
2009 2010
Asian Shipping Bond Volume Falls 46% in 2010 from USD 7.6 billion to USD 4.1 billion
Source: Marine Money
Figures in USD millions
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Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Hanjin Shipping 24/05/2010 KRW 250 billion 5.6% 3 24/05/2013
Hanjin Shipping 24/05/2010 KRW 100 billion 6.6% 5 24/05/2015
Hanjin Shipping 17/02/2010 KRW 220 billion 6.95% 3 17/02/2013
Hyundai Merchant Marine 22/10/2010 KRW 280 billion 5.2% 3 22/10/2013
Hyundai Merchant Marine 22/10/2010 KRW 170 billion 6.2% 5 22/10/2015Hyundai Merchant Marine 14/05/2010 KRW 200 billion 6.71% 3 14/05/2013
Hyundai Merchant Marine 14/05/2010 KRW 200 billion 7.3% 4 14/05/2014
Hyundai Merchant Marine 08/02/2010 KRW 260 billion 7.0% 3 08/02/2013
Korea Line 30/11/2010 KRW 40 billion 6.8% 1 30/11/2011
Korea Line 08/06/2010 KRW 50 billion 7.45% 2 08/06/2012
SK Shipping 06/07/2010 KRW 70 billion 5.7% 3 06/07/2013
SK Shipping 19/03/2010 USD 100 million Floating 3 09/03/2013
STX Pan Ocean 27/10/2010 KRW 200 billion 4.9% 3 27/10/2013
STX Pan Ocean 12/03/2010 KRW 200 billion 6.8% 3 12/03/2013
2010 Shipping Bond Issue
Korea
Source: Marine Money, DnB NOR Markets, Bloomberg
Total Shipping Bond Volume in 2010: USD 1.8 billion
Total Shipping Bond Volume in 2009: USD 2.9 billion
Top Issuer in 2010: Hyundai Merchant Marine
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Company Date of Issuance Amount Interest rates Tenor (years) MaturityChina COSCO Holdings 06/09/2010 RMB 5 billion 4.35% 10 06/09/2020
China Shipping Group 21/04/2010 RMB 2.5 billion 3.87% 3 21/04/2013
COSCO Shipping 28/04/2010 RMB 600 million 4.48% 5 30/04/2015
2010 Shipping Bond Issue
China
2010 Shipping Bond Issue
Japan
Total Shipping Bond Volume in 2010: USD 1.2 billion
Total Shipping Bond Volume in 2009: USD 2.4 billion
Top Issuer in 2010: China COSCO Holdings
Total Shipping Bond Volume in 2010: -
Total Shipping Bond Volume in 2009: USD 1.8 billion
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Ezra Holdings 21/5/2010 SGD 50 million 4.78% 3 21/5/2013
Neptune Orient Lines 9/9/2010 SGD 280 million 4.65% 10 9/9/2020
Swiber Holdings 31/8/2010 SGD 110 million 5.75% 2 31/8/2012
Swiber Holdings 11/10/2010 SGD 80 million 5.80% 3 11/10/2013
2010 Shipping Bond Issue
Singapore/Malaysia
Total Shipping Bond Volume in 2010: USD 386 million
Total Shipping Bond Volume in 2009: USD 350 million
Top Issuer in 2010: Neptune Orient Lines
Source: Marine Money, DnB NOR Markets, Bloomberg
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Source: Marine Money, DnB NOR Markets, Bloomberg
2010 Shipping Bond Issue
Hong Kong
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Pacific Basin Shipping 12/4/2010 USD 230 million 1.75% 6 12/4/2016
Total Shipping Bond Volume in 2010: USD 230 million
Total Shipping Bond Volume in 2009: -
Top Issuer in 2010: Pacific Basin Shipping
2010 Shipping Bond Issue
Taiwan
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Shih Wei Navigation 14/1/2010 TWD 450 million Zero 5 14/1/2015
Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 1 billion 1.42% 5 20/5/2015Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 500 million 1.42% 5 20/5/2015
Yang Ming Marine Transport 20/5/2010 TWD 1 billion 1.42% 5 20/5/2015
Total Shipping Bond Volume in 2010: USD 170 million
Total Shipping Bond Volume in 2009: -Top Issuer in 2010: Yang Ming Marine
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2010 Shipping Bond Issue
Thailand
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Thoresen Thai Agencies 9/7/2010 THB 2 billion 3.60% 5 9/7/2015
Thoresen Thai Agencies 9/7/2010 THB 2 billion 3.82% 7 29/6/2017
Source: Marine Money, DnB NOR Markets, Bloomberg
Total Shipping Bond Volume in 2010: USD 123 million
Total Shipping Bond Volume in 2009: USD 75 million
Top Issuer in 2010: Thoresen Thai Agencies
2010 Shipping Bond Issue
Indonesia
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Berlian Laju Tanker 10/02/2010 USD 125 million 12% 5 10/02/2015
Total Shipping Bond Volume in 2010: USD 125 million
Total Shipping Bond Volume in 2009: USD 53 million
Top Issuer in 2010: Berlian Laju Tanker
2010 Shipping Bond Issue
Vietnam
Company Date of Issuance Amount Interest rates Tenor (years) Maturity
Vietnam National Shipping
LinesAug-10 VND 1 trillion
14.5% for the first year
and floating rates then
after
3 Aug-13
Total Shipping Bond Volume in 2010: USD 52 million
Total Shipping Bond Volume in 2009: -
Top Issuer in 2010: Vietnam National Shipping Lines
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Shipping Equity Raised in Asia rose 36.8% in 2010
- Total shipping equity raised in Asia has rose by close to 36.8% to USD 3.9 billion last year from USD 2.8
billion the year before
- MISC concluded 2010s largest equity offering by concluding its mega RM 5.2 billion (USD 1.5 billion) rightsissue
- Moving forward, market sentiments are likely to remain fragile. From high oil prices and turmoil in the Middle
East to the euro zone crisis, a slowing Chinese economy and the disaster in Japan, shipping companies should
expect a bumpy ride in their quest for capital
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In conclusion
- There are signs of improvement in the banking market, but capital remains short in supply worldwide
- Asian bank are gradually playing a greater role in ship finance, but it will take some time before they become
significant capital providers for the shipping sector. Capital is largely reserved for their domestic clients
- Capital markets offer fund raising opportunities, but the outlook remains cautious
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Thank You!
The information and data in this presentation relating to the international ship finance industry are taken from Marine Money Internationals databases and other sources
available in the public domain. Marine Money Internationals methodologies for collecting information and data, and therefore the information discussed in this section, may
differ from those of other sources, and does not reflect all or even necessarily a comprehensive set of the actual transactions occurring in the ship finance and maritime
industry.
Rodricks Wong, Financial Analyst
Marine Money Asia
rwong@marinemoney.com
+65 6222 9456
mailto:rwong@marinemoney.commailto:rwong@marinemoney.com
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