Global private equity firm KKR has bought $150 million worth of shipping loans from two European banks amid a surge of interest in the industry as world trade in goods picks up along with the global economy.
There have been a flurry of deals in recent months for ship finance loans, many of which are being put up for sale by banks under pressure to boost their capital in order to adhere to new, stricter industry legislation born of the financial crisis.
The banks have suffered alongside the shipping firms they lent to, as the latter endured one of their worst downturns in decades. Many firms defaulted on loans and several collapsed. As a result, the banks are offloading what they see as risky assets at cheap prices, even as trading conditions improve.
KKR picked up loans taken out by Indonesian oil and gas shipping group PT Berlian Laju Tanker that were sold by Sweden's Nordea Bank and France's BNP Paribas, trade finance sources with knowledge of the matter said.
KKR, Nordea Bank and BNP Paribas all declined to comment, while Berlian Laju did not respond to requests for comment.
Pricing on the deal was in the region of 70 percent of the value of the loans, the sources said.
A survey by accountancy and advisory firm Moore Stephens last week showed shipping confidence in February reached its highest level since 2008, while respondents indicated growing interest from private equity investors.
"Through buying shipping loans at a discount, investors are entering at a lower threshold. The freight market right now is okay, so companies will likely be able to service loans, thus funds make their 5 percent, which is a nice carrying yield," one trade finance source said.
"If market goes up, their loans will appreciate, thus there will be additional benefit and return. If the market goes to hell or they think they can find a better management team, then they just take over the vessels and become shareholders and own the business."