KDB Shipping Fund and the Sophistication of the Korean Shipping Industry Marine Money Forum Nov. 1. 2017
What on earth is a Shipping Fund? 2
Salad, Veggie or Fruit? The Taxonomy 3
Taxonomy of Shipping Fund Sources of Ship Finance Finance Category Type of Finance Examples Mezzanine Finance Senior Debt Lease Owner Ship Fund / Private Placement Public Offering Hybrid of and Debt Bond Issue Commercial Bank Loan Shipyard Credit Finance Lease Operating Lease Retained Earnings of Shipping Company Limited Partnerships such as KG or KS Shipping Funds I.A.W. relevant laws Stock Issuance at Stock Exchange Uncovered Funding such as BW or CB Bond Issuance at Bond Market Syndicated Loans, Bilateral Loans, etc. ECA Ship Builder s Credit BBCHP BBC 4
Syndicated Loans in Good Old Days Ship Owner Dividend Loan Lenders SPC Builder / Seller BBCHP COA / TC Sub- 5
Bank Loan and its Pro-cyclicality Capital Gain Repayment Ship Value Loan Ship Value Loan 6
Pro-cyclical Banking Behavior stylized in the Market Boom Pro-cyclical Ship Finance Excessive Amplitude Recession 7
Things happening in the Rainy Downhill Years (1) Boom Recession 8
Things happening in the Rainy Downhill Years (2) Ship Owner2 or Tonnage Bank Ship Owner1 Dividend Dividend Lenders2 Sr. Tranche Jr. Tranche Loan SPC2 Ownership SPC1 Loan Lenders1 BBCHP BBC TC BBCHP Termination COA / TC Sub- 9
Things happening in the Rainy Downhill Years (3) Right to Use Retained + Loan1 Liquidity 1 Ship Value Loan2 2 Loan1 Repaid Loan2 10
Things happening in the Rainy Downhill Years (4) Right to Use Retained + 1 Net Liquidity Loan1 1 Ship Value New Owner s Liquidity Loan1 Repaid 11
Things happening in the Valley of Shadow (1) Boom Recession 12
Things happening in the Valley of Shadow (2) Loan Loan Ship Value Gap Ship Value Jr. Tranche Mezzanine 13
Shipping Fund in Legal Sense (1) FIs + SIs Dividend SIC Ship Management Co. Asset Holding Co. Mezzanine Dividend Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 14
Shipping Fund in Legal Sense (2) Limited Partners Dividend PEF Dividend General Partner Mezzanine Dividend Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 15
Shipping Fund in Legal Sense (3) FIs + SIs Investment Ben. Cert. Trust Asset Management Co. Trustee Co. Mezzanine Dividend Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 16
Economic Cycle and Types of Shipping Fund 17
Salad, Veggie or Fruit Revisited What Fund? KDB LTSF (one blind fund and its capital calls) KDB OVF, NBP Program, etc. (one set of project funds) 18
Tycoon versus Architect Big Player Deep Pocket Promotional Public Bank Magnetic North True North : Sophistication of the Korean Shipping Industry 19
The Korean Tonnage Bank (est. Jan 2017) KSmart Dividend SIC Ship Management Co. Dividend Sr. Lenders Sr. Loan SPC BBCHP BBC TC Sale & Leaseback COA / TC Sub- 20
New Building Promotion Program FIs (KDB, KEXIM) Maritime Finance Center Investment K-Sure Ben. Cert. Jr. Loan Trust Dividend Asset Management Co. Trustee Co. Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 21
Credit Enhancement for Jr. Tranche FIs + SIs Investment Ben. Cert. Trust Asset Management Co. Trustee Co. KMGI Jr. Loan Dividend Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 22
KDB Ocean Value-up Fund (KDB OVF) KDB (70%) + FIs (30%) Investment Ben. Cert. Trust Asset Management Co. Trustee Co. KMGI () Jr. Loan (Dividend) Sr. Loan Sr. Lenders SPC Builder / Seller BBCHP BBC TC COA / TC Sub- 23
Concert of Public Entities as Long-term Infrastructure Pump Priming / Sponsor Diversified/Combined Sources of Ship Finance Shipping Ship Mgmt Ship Finance Shipping Fund Asset Mgmt Ship Building Legal Services S&P Business Brokerage Market Intelligence Insurance Inter-industry Ramification Eco-systemic Development Education 24
Concert of Public Entities (Public Sector Initiative) Boom Counter-cyclical Ship Finance Recession Safety Valve 25
Forging Self-Sustainable Ecosystem(Private Sector Initiative) Boom Built-in Stabilizer Prudent Banking Sell High Specialized Forecast /Analysis Recession Built-in Stabilizer Buy Low Forward-looking Investment 26
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