Fearnley Securities 2018 an Inflection Point for Alternative Financing? Marine Money, Tokyo December,
Fearnley Securities Strong Presence Across Shipping Fearnley Securities has raised over USD 4 billion of capital across shipping and offshore sectors in the last 12 months Product offering Recent selected transactions USD 90m USD 40m Japanese lease financing 2 x MPP newbuildings USD 15m Japanese lease financing of dry bulk newbuildings USD 135m Japanese lease financing of crude /product tankers Strategic JV & Equity Investment Panamax VLGC fleet Co-Lead / Dry Bulk Selected Transactions USD 200m Secured Bond USD 100m USD 100m USD 125m USD 74m USD 88m Other Selected Transactions USD 100m Unsecured Bond Issue USD 125m USD 250m USD 650m Restructuring Secured bond USD 480m USD 800m 2
Banks and the Impact of Recent Shipping Crises Maritime sectors have been through a prolonged and severe downturn à significantly impacting bank lending policies Clarksea UDW 2.50 Shipping crisis hits Shipping crisis hits «Tandem low-cycle» 2.00 1.50 1.00 0.50 Offshore low-cycle - Shipping low-cycle 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 3
Increased Banking Regulations Basel II coincided with a «tandem low-cycle» Values & rates (indexed) Secondhand index ClarkSea index Basel II Announcement Basel II 2.50 2.00 1.50 1.00 0.82 0.78 0.50 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 4
Regional Shift Western banks have been trying to reduce exposure while Asian lenders have become more active USDbn Europe USA USDbn Asia / Australasia 400 120 350 100 300 250 80 200 60 150 40 100 50 20 0 2010 2011 2012 2013 2014 2015 0 2010 2011 2012 2013 2014 2015 Sources: Petrofin, Marine Money, Fearnley Securities 5
Opportune Time for Alternative Capital Minimal downside risk from historically low asset prices across most sectors Indexed historical asset prices 1.20 VLGC 2,800 TEU MR Panamax 1.00 0.80 0.60 25% - 80% down from peak 0.40 0.20 0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 6
Opportune Time for Alternative Capital concurrent with a clear recovery in rates for certain sectors Rates and values at cyclical low levels VLGC 2,800 TEU MR Panamax 1.20 1.00 0.80 Turning point for dry cargo and containers is behind us 0.60 0.40 0.20-2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Petrofin, Marine Money, Fearnley Securities 7
Demand for Capital Among Western Owners Western ship owners Type I New, quality player Type II Established, looking to refinance Financing alternatives Alternative capital Equity Bank Bond Source of capital Full cash release at bottom of the cycle Non-dilutive Retain control and upside Selective market Mostly available to listed companies, limited private equity Dilutive if price < NAV Restrictive cash release Limited availability Low leverage Selective market Relatively high pricing Low leverage Status 8
2018 the Opportune Time to Provide Finance? Recovery In Underlying Markets Traditional Western Lenders Scaling Down First in dry cargo and containers, where rates have seen a sustainable increase over the last 6-18 months Many are still busy with very challenging restructuring and work-out situations and; Next we believe will be tankers, LNG and LPG, where a wave of newbuilding deliveries will soon finally have been absorbed The ones open for business are almost exclusively targeting existing and prioritized clients Abundant Capacity in Japan Substantial Demand for Financing Attractive funding cost for Japanese local owners Limited domestic owner / operator business From novel entrants who have built their business at rock-bottom asset prices and with a very lowly levered capital structure Players seeking alternative finance: 1. Established players seeking re-finance 2. New, quality owners with growth ambitions Conclusion There is a historic opportunity for alternative capital to transact on very attractive risk / reward ratios 9
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