will the expansion continue? Henrik Haeder, Transport Capital, Head of Europe Marine Money Conference Hamburg 25 February 2016
Transport Capital Provides Four Key Services Founded in 2013 with offices in Singapore and Hamburg (18 employees in total); focus on shipping, offshore and aviation INVESTMENT MANAGEMENT FINANCIAL ADVISORY LENDING AGENT ASSET WAREHOUSING Institutional Fund Managers Financial Institutions and Transportation Companies German bank Shipbuilders, Lenders, etc. Working with institutional fund managers to originate, structure, implement, manage and dispose of investments in the transportation industries From commercial over technical to financial including treasury, accounting and reporting Our partners experience in leading publicly traded companies is of invaluable benefit Focus on distress / special situations, cyclical or yield Close relationship with several institutional investors From December 2013 to February 2016 around USD 800mn were invested on behalf of institutional investors We provide transportation advisory services to financial institutions, e.g., institutional fund managers and lessors. This activity covers due diligence related work, the development of commercial and/or technical plans or ongoing advisory / board mandates. We provide financial advisory services to transportation companies. This activity covers capital raising from the private debt and equity markets, IPO advice and M&A. Given our partners substantial experience in the capital markets we can offer a focused and efficient service. We are the exclusive Asia Pacific lending agent to a German bank for Shipping and Aviation sectors since January 2015. This German bank ranks among Germany s major securities service providers. Our mandate is to originate and structure both bilateral and club deal lending transactions. We are involved in the pre-screening of any lending opportunities, coordination and term sheet negotiations. We provide warehousing solutions to shipbuilders and lenders, etc. These services include commercial, corporate and operational management on behalf of the owner. Technical and crewing services are typically outsourced, we seek to manage the risk exposure of the owner usually through the use of tripartite BIMCO arrangements (in the case of shipping and offshore). Shore-based and in-country operational services are retained through and managed directly by affiliates of Transport Capital. We can put in place a corporate structure for the assets e.g. for financial institutions who cannot dedicate a management team to the assets. 2
Asian ship financing : current situation Asia is not only the center for shipbuilding, also its share in worldwide ship owning and chartering has grown continuously in the last few years. Asia (excl. Japan) remains to be the region with the by far biggest expected GDP growth, in 2016 with 5.4%. In contrast to Europe especially the Chinese Debt to GDP ratio has increased substantially since the financial crisis. The Chinese government announced to raise the share of cargoes imported being transported on domestically owned ships massively. There is lower regulatory pressure on Asian compared to their European competitors at the moment. Due to these supporting factors several Asian, particularly from China, have climbed up the ship finance league tables in the last few years. Several European ship owners have already started relationships with Asian. 3
Chinese : Lots of appetite for new business Bank affiliated leasing companies were very active in 2015: BP deal financed by ICBC Leasing (USD 869mn) Shandong Shipping (10 Kamsarmaxes) financed by CCB (USD 280mn) MSC deal financed by Bank of Communications Leasing Strong support for projects with Chinese component Bilateral deals with huge loan amounts possible Sinosure covered ECA deals still available, the ECA premium was slightly reduced recently Sinosure and commercial require strong balance sheet or strong long-term charter Max. LTV for Sinosure covered deals 80%, commercially 70% Bank of China ICBC China Exim CDB CCB 4
Japanese : Looking for new markets ly financing costs for Japanese ship owners are very competitive, both for JPY and USD But USD funding costs for Japanese have increased due to negative interest rates of BOJ First tier Japanese already have access to ship owners worldwide Some second tier Japanese are suffering from the bankruptcy of Daiichi Chuo Japanese trading houses are expected to be more active again from this year First tier Japanese are active in financing international deals with a Japanese or energyrelated component Currently JOL equity portions are harder to sell for shipping projects, investors prefer aviation deals JOL tax scheme might change after 2016 Japanese ECA s are less active than in China or Korea BTMU SMBC Mizuho 5
Korean : Waiting for the recovery Shipyard and local container liner crisis affecting the Korean severely Strong support from the Korean government for Korean ship owners and shipyards Several fleet renewals in the market KSURE and KEXIM contestants of commercial with billion USD budgets to spend each year Most competitive financing structures in the Asian market Korean fund houses still active, mostly for local projects (sometimes without senior debt) Up to 85% of LTV can be financed for Korean owners With state owned junior loan providers up to 100% LTV financing available KDB Woori ECA s KSURE and KEXIM 6
Taiwanese : Continuous support for local owners Recent election showed that Taiwan will continue their rather independent political way A lot of ordering activity by Taiwanese container liners Increased USD funding costs for Taiwanese Taiwanese start to diversify their client portfolio More conservative financing structures since collapse of TMT Corporate deals rather than asset deals Comparatively low pricing Cathay United Bank Several smaller lenders 7
Middle Eastern : Islamic finance still flavor of the day Market dominated by national oil companies Reduced revenues for GCC countries Funding gap for Middle East owners as local are slowing down because of distressed situations Active IF have started to expand to some Muslim dominated countries in Asia Large IF deals were closed recently: Stanford Marine (AED 1.2bn), Zakher Marine (USD 420mn), Bahri (USD 1.04bn), Topaz Marine (USD 550mn) Norwegian bonds and convertibles tested Trend towards higher equity contributions: max. LTV 60% Often robust charter contract coverage Abu Dhabi Islamic Bank Noor Bank Al Hilal Bank 8
Singaporean : Singaporeans first Big local are profitable and expanding in Asia quickly, but mostly in retail and private banking Lots of support for the better local companies, but not interested in much more shipping exposure Clifford Capital as virtual ECA getting more active Corporate deals rather than asset deals Singaporean component must have Strong balance sheet necessary DBS UOB OCBC 9
Indian : Focus on domestic projects India achieved GDP growth of more than 7% in 2015 Several Indian offshore projects have severe financing problems Few owners can access international Huge cabotage trade share, all financed by Indian Corporate deals rather than asset deals Most of the financing deals in INR, not in USD, with much higher interest margins Max. LTV 50-70% depending on collaterals ICICI State Bank of India 10
Asian ship financing : summary/outlook Asian will continue to support their respective domestic shipyards by financing the buyers. Export Credit Agencies from Asia remain to be active and sometimes even compete with commercial. The usual Asian approach is rather corporate than asset driven this is the case for both and ECA s. In some Asian countries local will have to increase their loan loss provisions in the coming years as current financing structures seem to be to aggressive. More Asian will open up branches/rep offices in other countries, but it will take time. Club deals involving experienced international players together with local Asian will be seen frequently. The expansion of Asian in the shipping industry will continue, but it will differ from country to country and the status of development of the respective market. 11
Thanks for your attention! Contact details Henrik Haeder Transport Capital Germany Kurze Mühren 1 20095 Hamburg Phone: +49 3290 1126 hh@transportcapital.com Transport Capital Singapore 1 Maritime Square #09-34 Singapore 099253 Phone: +65 6715 7190 enquiry@transportcapital.com 12
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