Traditional and New forms Ted Petropoulos HEAD PETROFIN RESEARCH P - PowerPoint PPT Presentation

11 th Maritime Congress 10 January 2019 A brief review of current trends in ship finance Traditional and New forms Ted Petropoulos HEAD PETROFIN RESEARCH

P ETROFIN R ESEARCH Pre-Final Bank Shipping Portfolio – Top 40 Banks www.petrofin.gr as of end 2018 January 2019 $18 China Exim* $17 DnB* $17 BNP Paribas* $17 Bank of China* $17 KfW* $15 Korea Exim* $14 SUMI TRUST* $14 Credit Agricole CIB* $14 DVB* $13 ABN Amro* $13 Nord LB/Bremer* $12 Citi* $11 Credit Suisse* $10 Nordea* $10 SMBC* $10 China Development Bank* $9 SEB* $9 ING* $7 HSBC* $6 Danske Bank/Fokus Bank* $6 Standard and Chartererd* $6 Iyo Bank* $6 Bank of America Merril Lynch* $5 Danish Ship Finance* $5 Korea Development Bank* $5 HSH Nordbank * End 2018 pre-final total: $329.08bn $5 Societe General* $4 Hiroshima Bank* End 2017 total: $345bn $4 Japan Bank for International Cooperation* $4 Swedbank* $4 ICBC (excluding Leasing)* $4 Unicredit* $4 DBS* $3 Deutsche Bank* $3 Piraeus Bank* $3 National Bank of Greece $3 Commonwealth Bank of Australia* $2 Alpha Bank* $2 CIC* $2 Helaba* $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 Top 40 Banks - Global Shipping Portfolios

P ETROFIN R ESEARCH www.petrofin.gr Global Bank ship finance January 2019 pre-final results • Top 40 banks’ share of global ship finance is reducing • Clear shift from Western banks to Far Eastern banks • Large exodus of major banks in ship lending • Higher loan yields and fees

P ETROFIN R ESEARCH www.petrofin.gr Global Bank ship finance January 2019 pre-final results • Selective/targeted lending • Increasingly stringent terms/conditions • Outlook for 2019 calls for further consolidation by Western banks and a rise in Far Eastern finance

P ETROFIN R ESEARCH www.petrofin.gr Alternative forms of finance January 2019 • Alternatives to Bank finance: – Lower cost funds (cost up to 10% p.a. for very secure transactions structured as loans. – Lower cost funds (approx 15%p.a.) for higher leveraged transactions but flexible and accommodative, structured as loans/equity/profit sharing

P ETROFIN R ESEARCH www.petrofin.gr Alternative forms of finance January 2019 • Equity • Mezzanine • Secured Finance The above 3 can also be combined together in any form • Export Credit Finance

P ETROFIN R ESEARCH www.petrofin.gr Alternative forms of finance January 2019 • Novel alternatives: - Online finance : like ebanking, cuts down red tape, proposed as alternative to financing gap, investor oriented – e.g. eShipfinance.com (Lunde/Tzoutzouraki) - Crowdsourced : Yieldsweep: venture-capital backed, asset-based lender. Vessel on bareboat charter to shipmanagement company which has option to buy, residual value insurance in case of value decline (Cambanis, Fragos) Erst Trust Group: tapping the retail market There are more alternative ship financing schemes in the pipeline

P ETROFIN R ESEARCH www.petrofin.gr Alternative forms of finance January 2019 • Chinese and Japanese Leasing (as well as other, e.g. Korean)

P ETROFIN R ESEARCH www.petrofin.gr Chinese Leasing January 2019 Source: Marine Money

P ETROFIN R ESEARCH www.petrofin.gr Chinese Leasing January 2019 Chinese Leasing Houses backed by Major Banks Shipyards Investment Companies Industry Leaders ICBC CSIC Leasing CHINA HUARONG AVIC INTERNATIONAL Leasing TAIPING & SINOPEC Financial CCB CIMC Finance China Minsheng Investment Leasing Bank of Communication COSCO SHIPPING Leasing FAR EAST HORIZON Finance Leasing China State Building ABC Financial Leasing Corporation Leasing China Development Bank Leasing Minsheng Financial Leasing (currently seeking to sell more than $1.1bn-worth of its ship finance portfolio) Source: Marine Money

P ETROFIN R ESEARCH www.petrofin.gr Japanese Operating Lease with Call Option (JOLCO) The JOLCO is a tax-driven leasing structure funded by equity investment from a Japanese entity with non-recourse senior debt provided by an on-shore bank. The structure provides 100% financing at relatively attractive rates over a relatively long term. The 100% funding feature makes this a favourable product despite the lessee having to bear any change of law that may put the structure and its benefits at risk. Source: Marine Money

P ETROFIN R ESEARCH www.petrofin.gr Debt and Equity Markets January 2019 • It has been estimated by Fearnley’s that $7.9bn has been raised in 2018 of which bonds are approx. 60% and equity approx. 40% • The value of the global fleet is estimated at about $790bn (graph below) • The Debt and Equity markets, therefore, for 2018, have contributed 1% of the global fleet value, a rather small contribution • Reasons for relatively small contribution

P ETROFIN R ESEARCH www.petrofin.gr Value of World Fleet January 2019 $2,833,000,000 $696,000,000 $17,751,000,000 $11,000,000 $160,000,000 $29,635,000,000 $30,310,000,000 $30,628,000,000 Bulkers $207,409,000,000 Tankers Containers $75,535,000,000 MODU LNG $75,819,000,000 Small Dry LPG OSV $194,585,000,000 OCV $122,877,000,000 Reefers Multigas Combo OCV other Total World Fleet Value according to Lloyds’ List Outlook 2019: $788.25bn