LLOYD S SHIPPING ECONOMIST 6th Greek Ship Finance Conference ATHENS 19 th 20 th May 2008

Transcription

1 LLOYD S SHIPPING ECONOMIST 6th Greek Ship Finance Conference ATHENS 19 th 20 th May 2008 International and Greek ship finance: latest trends and future outlook presented by Ted Petropoulos MD

2 Presentation outline 1. Analysis of the Greek shipfinance market, as of 31/12/2008 by Petrofin Bank Research 2. Global issues and trends affecting the shipping industry 3. Current status and the outlook for the global ship finance market 4. Current status and the outlook for the Greek ship finance market 5. Finance related questions affecting banks and their Greek clients 6. Summary and conclusions

3 Section 1 Analysis of the Greek shipfinance market as of end 2008 Petrofin Bank Research

4 Analysis of the Greek shipfinance market as of end At the beginning of 2008, total Greek-related shipfinance debt, including commitments, amounted to $66.941bn. Total Greek shipfinance debt had grown by 44.3% compared to end 2007(Petrofin Bank Research ). Now it is a different story -At the end of 2008, Greek-related shipfinance debt is up by only 9.4% to $73.228bn. This growth rate is the lowest shown in the last 8 years. The end December 2008 data show that the ship finance picture was taken while in decline.

5 Analysis of the Greek shipfinance market as of end 2008 The nationality of banks that provide shipfinance in the Greek market is as follows: Nationality End 2003 End 2004 End 2005 End 2006 End 2007 End 2008 UK & Ireland France / Belgium Scandinavia Germany Holland Greece Other European European Total North America Far East and other countries World Total Petrofin Bank Research

6 Analysis of the Greek shipfinance market as of end 2008 Top 30 banks financing Greek shipping Rank Bank Total exposure in $m 1 Royal Bank of Scotland $13,980 2 HSH Nordbank $5,671 3 Deutsche Schiffsbank $5,650 4 Credit Suisse* $4,900 5 National Bank of Greece $3,545 6 DNB $3,042 7 Emporiki Bank of Greece $2,970 8 Calyon* $2,750 9 Alpha Bank $2, Marfin-Laiki $2, HVB $2, Piraeus $2, DVB $1, Fortis Bank Belgium $1,800 *based on market estimates

7 Analysis of the Greek shipfinance market as of end 2008 Top 30 banks financing Greek shipping 15 Commerzbank $1, DB/SHL Shipping $1, Bank of Scotland $1, HSBC $1, Eurobank $1, BNP PARIBAS $1, Citibank $1, Nordea $1, First Business Bank $ Bremer Landesbank $ ABN (subsidiary undertaking of Royal Bank of Scotland) $ Nord LB $ Natixis $ KFW $ Bank of Cyprus $ Dresdner Bank $354

8 Analysis of the Greek shipfinance market as of end 2008 Individual shiplending bank figures are as follows:

9 International Banks WITH a Greek presence Total portfolio as of 31/ : $38,984.4m In US$m Royal Bank of Scotland $10,730 $3,250 $13,980 HSH Nordbank Deutsche Schiffsbank** $4,402 $4,100 $1,268 $1,550 $5,670 $5,650 Calyon* $1,750 $1,000 $2,750 HVB $1,640 $536 $2,176 DVB $1,250 $600 $1,850 Fortis Bank Belgium HSBC $1,200 $1,233 $600 $110 Drawn Loans Undrawn Loans $1,800 $1,343 BNP PARIBAS $523 $716 $1,239 Citibank $1,100 $45 $1,145 ABN AMRO*** $625 $138 $763 Natixis $467 $151 $618 Petrofin Bank Research - April 2009 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 * Market estimate ** Merged with Dresdner and Commerzbank in 2009 *** Subsidiary undertaking of the Royal Bank of Scotland

10 Credit Suisse* International Banks WITHOUT a Greek presence Total portfolio as of 31/12/2008: $17,299.5m DNB Commerzbank DB/SHL Shipping Bank of Scotland Nordea Bremer Landesbank Nord LB KFW Dresdner Bank ING Fortis Bank NL Lloyds TSB Bank of Ireland Deka Alliance and Leicester** $325 $580 $370 $354 $127 $204 $160 $192 $100 $120 $1,140 $902 $834 $840 $520 $0 $134 $32 $73 $40 $120 $0 $94 $224 $520 $2,530 $692 $3,000 $460 $200 $512 Drawn Loans $1,900 Undrawn Loans In US$m $4,900 $3,042 $1,600 $1,594 $1,354 $1,040 $845 $674 $594 $354 $261 $236 $233 $232 $220 $120 Petrofin Bank Research April 2009 $0 $1,000 $2,000 $3,000 $4,000 $5,000 * Market estimate ** Taken over by Santander-Abbey in 2009

11 Greek Banks Total portfolio as of 31/12/2008: $16,944.23m In US$m National Bank of Greece $2,382 $1,164 $3,546 Emporiki Bank of Greece $1,650 $1,320 $2,970 Alpha Bank $2,100 $550 $2,650 Marfin-Laiki $2,035 $400 $2,435 Piraeus $1,960 $118 $2,078 EFG Eurobank $1,001 $298 $1,299 First Business Bank $768 $108 $876 Bank of Cyprus $302 $147 $449 Aegean Baltic $273 $51 Drawn Loans Undrawn Loans $324 Proton Bank $130 $12 $142 Agricultural Bank of Greece $88 $0 $88 Aspis Bank $88 $0 $88 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Petrofin Bank Research April 2009

12 Greek banks ranking comparison end 2008 end 2007 Rank Bank Drawn Undrawn Total Bank Drawn Undrawn Total Rank 1 National Bank of Greece $2,382 $1,164 $3,546 National Bank of Greece $1,555 $837 $2, Emporiki Bank $1,650 $1,320 $2,970 Emporiki Bank $950 $940 $1, Alpha Bank $2,100 $550 $2,650 Alpha Bank $2,067 $610 $2, Marfin-Laiki $2,035 $400 $2,435 Marfin-Laiki $1,200 $1,050 $2, Piraeus $1,960 $118 $2,078 Piraeus $2,085 $1,291 $3, Eurobank $1,001 $298 $1,299 Eurobank $970 $640 $1, First Business Bank $768 $108 $876 First Business Bank $627 $176 $ Bank of Cyprus $302 $147 $449 Bank of Cyprus $132 $138 $ Aegean Baltic $273 $51 $324 Aegean Baltic $160 $52 $ Proton Bank $130 $12 $142 Proton Bank $149 $41 $ Agricultural Bank of Greece $88 $0 $88 Agricultural Bank of Greece $48 $0 $ Aspis Bank $88 $0 $88 Aspis Bank $102 $20 $ Totals $12.77 $4.17 $16.9 Totals $ $5.795 $15,8 Petrofin Bank Research April 2009

13 Section 2 Global issues and trends affecting the shipping industry

14 Global issues and trends affecting the shipping industry 1. The 2008 / 2009 banking / liquidity crisis. Is a recovery in sight? Up to now, $4bn in bad loans already absorbed by banks. 2. Global economic recession early signs of a bottoming out? 3. The uncertain investment climate and the flight to safety: A gradual change in sentiment? 4. The effects and prospects for international trade.

15 Global issues and trends affecting the shipping industry Exports and imports are a multiple of the GDP. Real GDP and trade growth of OECD countries, % change on a year to year basis Source: OECD National Accounts from:

16 Martin Stopford Clarksons - 10 March 2009

17 Global issues and trends affecting the shipping industry 5. Considerable intervention / stimulus by central banks, states and international financial institutions. Is the prescription (and dosage) enough? 6. The prospects for a recovery in the global economy and international trade. Historically, a recovery within 1 year of the lows. 7. Cycle analysis and forecasts (IMF) 6 to 7-year cycle since Evidence of a 30-year supercycle.

18 Global issues and trends affecting the shipping industry The cycles of recession and recovery depending on the crisis Research produced by the IMF, based on the analysis of the last 122 recessions of the last 5 years in 21 developed countries (April 2009) In yearly quarters Change in the GDP For all crises % 4.05% Growth: quarters For financial crises Growth: 26.4 quarters -3.39% 2.21% Combination of financial crisis and slowdown in many countries % 3.66% Growth: quarters Recession Recovery

19 Global issues and trends affecting the shipping industry 8. Shipping cycles, the prospects of a shipping recovery, the road towards market equilibrium. 9. Restoring international, bank and consumer confidence a slow process. 10. What is evolving demand for shipping. 11. What are the estimates of current supply of ships, the huge order book and the effects of non-delivery of ships, scrapping, delays and congestion. Is the fog clearing out? st quarter 2009, new orders only 3% of y.o.y $1.1bn orders order book at end of 1 st quarter 2009 down by 5% to 9535 ships of 564.2m DWT (Clarksons), which may well underestimate the extent of the fall

20 Data from SSY market report March 2009 Deliveries vs Scrapping 2009 TANKER FLEET SUMMARY (excl. Chemical tankers) Small Handysize 10-26,999 Handysize 27-41,999 MR 42-59,999 Panamax Aframax ,999 Suezmax ,999 VLCC 200,000 + Total No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT End March 2009 ADDIT DELET Net change BULK CARRIER FLEET SUMMARY Handysize 10-39,999 Handymax 40-59,999 Panamax 60-99,999 Capesize 100,000 + Total End March 2009 No. DWT No. DWT No. DWT No. DWT No. DWT ADDIT DELET Net change

21 2009 BULK CARRIER FLEET EXISTING FLEET AND ORDER BOOK Handysize 10-39,999 Handymax 40-59,999 Panamax 60-99,999 Capesize 100,000 + Total No. DWT No. DWT No. DWT No. DWT No. DWT Existing Bulk fleet (end Mar 09) Orderbook (schd. Delivery as at end Mar 09) Total on order Data from SSY market report March 2009

22 2009 TANKER FLEET EXISTING FLEET AND ORDER BOOK Small Handysize 10-26,999 Handysize 27-41,999 MR 42-59,999 Panamax Aframax ,999 Suezmax ,999 VLCC 200,000 + Total No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT No. DWT Existing Tank fleet (end Mar 09) Orderbook (schd. Delivery as at end Mar 09) Total on order Data from SSY market report March 2009

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24 Martin Stopford Clarksons - 10 March 2009

25 Martin Stopford Clarksons - 10 March 2009

26 Global issues and trends affecting the shipping industry 13. Is the shipping industry once again bound to live through a long and painful recession as a result of over-ordering exuberance? 14. The super cycle has been irredeemably smashed. There is a need for a fresh strategy by the shipping, shipbuilding and banking industries to meet the forthcoming market challenges.

27 Section 3 Status and outlook for the global ship finance market

28 Current status and outlook for the global ship finance market a) Total worldwide new shipping loans have been reduced to a trickle. b) Global syndicated shipping loans and US ship financing loans have also dried up. c) Sporadic bilateral and club deals only. d) IPO activity has also stopped. Some existing public company share issues though, e.g. Drys, Navios, Diana. e) Banks only focus to existing core clients. f) Overall bank attitude remains pessimistic. g) Banks highest priorities are to reduce shipping portfolios via repayments and reduction / cancellation of commitments (if possible)

29 Ship Financing Source: Reuters Loan Connector Syndicated loan market has considerably slowed down, Creating void in funding sources 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 x USD mln Q4 Q3 Q2 Q1

30 Source: Dealogic Ship Financing US US Syndicated Shipping Loans by Volume (x USD mln) 25,000 23,323 20,000 16,467 Q4 Q3 Q2 15,000 14,147 Q1 10,000 6,342 6,081 7,446 8,170 5, ,

31 Current status and outlook for the global ship finance market h) Banks busy reviewing the quality, robustness of their loan portfolios and applying stress tests and other risk criteria. i) Banks have / are in the process of identifying all sub-standard loans and taking provisions as well as pursuing loan recovery strategies. j) There is an active bank client process involving restructures, waivers and anticipatory covenant breaches coupled by pressures on clients to perform and / or provide additional support / guarantees. k) Banks are continually upgrading the quality of information on their client files, including financial projections, valuations etc, as well as closely monitoring vessels freights. l) Banks seeking opportunities to increase existing loan spreads and to charge fees for loan restructures and / or covenant waivers.

32 Current status and outlook for the global ship finance market m) Thus far, few redundancies among bank ship finance personnel. n) Increased bank reporting both internal and to regulatory authorities o) Numerous banks have withdrawn from ship lending altogether and commenced an orderly reduction of their loan portfolios. p) There have been persistent rumours of banks seeking to sell their shipping loan portfolios to other banks or unitise them. q) Numerous international ship financing banks have faced survival issues and / or have been involved in mergers and acquisitions. r) Any loans rate high margins of 300bps plus and upfront fees of 150bps plus, as well as a) low loan to value of approx 50%, b) reduced loan tenors and c) stringent covenants, guarantees and period charter conditions.

33 Current status and outlook for the global ship finance market s) All banks are seeking to increase their loan portfolio yields to partly offset their higher loan provisions. t) Influx of small Far East banks providing small loans to local shipping clients involving older vessels at high spreads / fees. u) Unavailability of bank finance has generated opportunities for alternative suppliers of debt and / or capital and the creation of specialist shipping distress investment funds, e.g. Tufton, DVB, Morgan Stanley, Merrill Lynch, SFS, MZM, etc. v) It is anticipated that ship finance activity shall slowly recover in the second half of 2009 and gather pace from 2010 onwards. This process is linked to the recovery progress of the global banking system.

34 Current status and outlook for the global ship finance market w) Increased ship lending requires: 1. The prior restoration of interbank confidence and liquidity 2. Sufficient capital adequacy by banks 3. Willingness by clients to meet the banks high loan pricing and stringent terms 4. A gradual restoration of investor confidence and enhanced prospects of an economic recovery. 5. An improvement in the quality of bank loan portfolios and 6. An improvement in the outlook and prospects of the shipping industry, as well as vessel values and earnings. x) Ship finance as always, will continue to compete with other forms of lending and capital allocation.

35 Section 4 Current status and the outlook for the Greek shipfinance market

36 Current status and the outlook for the Greek shipfinance market The Greek shipfinance market displays similar characteristics to those outlined for the international ship finance market.

37 Current status and the outlook for the Greek shipfinance market There are, however, some differences: a. Better inter-bank communications b. Bank-client relationships are generally closer, wider and more personal. c. There is still some highly selective fresh bank lending to selected core clients acquiring second-hand vessels at low prices, especially by Greek banks.

38 Current status and the outlook for the Greek shipfinance market d. The majority of Greek owners had obtained newbuilding ship finance prior to the crisis for 2009 and 2010 deliveries. There still remain about 10-15% of the Greek newbuilding fleet unfinanced, involving mostly deliveries 2011 and beyond, which are, however, in doubt. e. Finance for newbuildings still remains scarce. However, there is some limited finance available for newbuilding re-sales at lower prices.

39 Greek order book* using 1/5/2009 Clarkson Data Bulkers Tankers, Products, Chem&Oil Containers Other TOTAL Greek Listed Companies Greek private companies Total * subject to unrecorded cancellations

40 Current status and the outlook for the Greek shipfinance market f. The liquidity of Greek owners, despite the crisis and the poor shipping market, remains relatively high in comparison to other European nationalities. g. Greek owners enjoy a good reputation of surviving shipping cycles and remain committed to the industry. Banks draw comfort from past experience. h. Is this crisis, however, similar to previous ones? i. There have been no shipping failures in Greece, thus far, and relationships between banks and owners have remained co-operative and supportive. For how long?

41 Current status and the outlook for the Greek shipfinance market j. Successful public company restructures and waivers thus far, allowing time fro a recovery and the pursuit of alternative financial strategies. k. Secrecy prevails for private owner cancellations, delays and loan restructures. However, every order has been the subject of serious scrutiny. l. Considerable concern about the long-term commitment of some banks towards Greek shipping. Of the 40 banks involved, about ¼ have internal problems, which renders their continuous presence doubtful.

42 Current status and the outlook for the Greek shipfinance market m. The 2 top Greek ship lenders in particular, accounting for 26.84% of the total market are in particular difficulty. n. New entrants into Greek shipfinance appear unlikely at present. However, new attractive risk / rewards on loans will entice some in the future.

43 Current status and the outlook for the Greek shipfinance market o. IBRD (International Bank for Regional Development) reports that banks have reduced their overall lending by 14% in the last quarter of 2008 and the process has accelerated in p. There is increasing financial protectionism as banks favour domestic borrowers as opposed to foreign borrowers. Greek shipping is 75% financed by non- Greek lenders.

44 Section 5 Finance related questions affecting banks and their Greek clients

45 Finance related questions affecting banks and their Greek clients Are banks wise / justified in demanding higher loan spreads and fees for clients in difficulty? Should banks be supportive of fresh capital providers? Is there a further considerable downside to vessel values? In view of some notable charterer failures, should banks be more supportive of FFA hedging? Can ship finance still rely on period charterers?

46 Finance related questions affecting banks and their Greek clients Is name lending now a thing of the past? What constitutes safe lending today? Is the 70% finance model outdated? Are banks exploiting the market disruption clauses by charging more than LIBOR to clients? Is there a capacity problem for ship finance going forward? Are the changes in terms and margins a permanent or transient change in ship finance?

47 Finance related questions affecting banks and their Greek clients Asset finance lending versus cash flow lending? Should ship finance anticipate shipping slumps by more flexible agreements? How long can banks continue to support their clients by restructuring loan obligations?

48 Section 6 Summary and conclusions