Ship Financing Under Posidonia Spotlight

Press Release
Thursday, June 07, 2012

Defaults on shipowner/lender financing agreements may threaten fiuure funding for the shipping industry

A few days after Aggelikousis Group’s US$1.25 billion credit facility with six banks for the financing of nine LNG carriers was made public, delegates of a shipbuilding conference held during the fourth day of this year’s Posidonia Exhibition heard that increasing defaults on existing financing agreements between shipowners and lenders will ultimately lead to an era of no new lending.

Speaking at the ‘Building for the Future 2012’ shipbuilding conference, on the penultimate day of Posidonia 2012, Jean Richards, CEO of Second Wind Shipping Limited, said that while finance is still available through traditional banks, Chinese banks, bond and equity markets, financiers tend to specialize in specific asset types while setting demanding preconditions.

“Traditional banks lend only to their major clients in return for help with other assets, Chinese banks on newbuilding projects and local yards but with fairly high margins, the bond market focuses on large and known players with a high coupon cost while the equity market demand shares in new equity to protect an exposed position,” said Richards.

According to Richards, this year a number of restructurings which were agreed during the last three years will expire or fail.
“Currently there is a lot of debt restructuring which is about to expire or fail,” said Richards. “Principal outstanding is higher than vessel values, freight revenues are not sufficient to cover debt service and owners’ cash reserves are low or rapidly disappearing. So, with increasing numbers of defaults there won’t be any lending,” said Richards.

The situation is confounded due to reduced foreign lending as governments bail out banks which in turn reduce balance sheets. Yet, while ship financing is gradually rendered unfashionable, the list of shipping banks is not yet reduced, with even some apparent increases and the inclusion of new Chinese banks.

However, Richards said that the list of lenders will shrink over the next five years.This will come naturally as existing market conditions continue to see sluggish growth in GDP and trade, low freight rates and asset prices while ship yard capacity is not reduced.

Richards explained: “Container operators think that big is better and keep building while the introduction of eco designs keep yards busy and overbuilds fleets. So, the biggest danger is excess yard capacity that creates fleet oversupply and not the fact that shipping banks aren’t lending.”


Maritime Today

The Maritime Industry's original and most viewed E-News Service

Maritime Reporter November 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


Damen Crane Barge and Anti-Pollution Barge Delivered

Damen Shipyards Sharjah has delivered two barges, a Crane Barge 4920 and an Anti-Pollution Barge 2405, to BINCO, a contractor in the Middle East with over 30 years

DNV GL Approval for DSIC's LNG-fuelled VLCC Design

DNV GL has presented Dalian Shipbuilding Industry Company Limited (DSIC) with an Approval in Principle (AiP) certificate for a new LNG-fuelled very large crude

USN Issues Full Funding for LCS "Cooperstown"

As part of the Littoral Combat Ship (LCS), the US Navy has awarded to the consortium which includes Fincantieri, through its subsidiary Fincantieri Marinette Marine (FMM),


France-Corsica Ferry Operator SNCM's Takeover Gets EU Clearance

The European Commission has approved the takeover of troubled France-Corsica ferry operator SNCM by Corsican entrepreneur Patrick Rocca, according to a letter seen by Reuters on Tuesday.

Norway's Offshore Shipping Sector Faces Bleak Year

Norwegian companies that provide supply ships and drilling rigs to the global oil industry face a bleak year ahead as contracts disappear and financing options

MacArtney, Moog Focal in Expansion Mode

Moog Focal Technologies Corporation and the MacArtney Group have agreed to intensify their multi-service partnership aiming at expanding their long-term business

Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Offshore Oil Pod Propulsion Port Authority Salvage Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1505 sec (7 req/sec)