Money for the masses

Money for the masses

So here we are at Posidonia once again and my, oh my how the mood of owners descending on Athens has changed since the last edition two years ago.

I will be using the world’s most famous shipping show to launch my new project – eShipfinance.com – a platform designed to address the shortage in the availability of ship finance to the majority of shipowners around the world, not least in Greece.

To my mind, the market over the past year has become overblown by words like digital and blockchain. It is interesting to see how shipping on the cargo and brokering side has developed all manner of potentially useful online tools, but in ship finance there’s been just the release of shipowner.io and some fund-based leaseback vehicles.

If you look at other industries there are already an unbelievable number of financing platforms that have been created to cater for just about everything – the Zooplas of this world – but no one has cracked it in ship finance… yet!

It remains a fact that for the majority of shipowners there is limited access to banks. With eShipfinance.com we are trying to connect borrowers with investors. There is a lot of cheap money in the market that has never touched or thought about shipping, a sector that finally is set fair in recovery/growth mode. We will bring well-structured projects to investors. Owners will get a fixed interest rate at let us say 7%. Our 0.5% commission is next to nothing when you remember banks tend to come in for a 4% or 5% margin plus LIBOR. The investors will then get 6.5% fixed return, quarterly paid over three to five years in dollars. We will charge the owner the normal upfront fee of 1.5 to 2%.

Greece will be our main market thanks to the huge numbers of smaller owners across the Mediterranean nation. I am indebted to the folk at VesselsValue for providing me with the following key data (see chart below), which I find very interesting. As it stands today, there are 558 shipping companies in Greece, 354 of those have five or less vessels, 95 have six to 10 ships and 35 of them have 11 to 15 ships so 484 companies out of 558 (87%) are companies with less than 16 ships – that is our target market.

For a very long period owners in Greece have not had much access to ship finance. Greek banks are finally returning to the market, passing recent stress tests, but they will come back only in a small way. It is interesting to note the growth of Cypriot banks with an eye on the Greek ship finance sector, albeit from a small base. Meanwhile, the exposure of the big European banks is shrinking all the time. The Dutch are still stable but the Germans and the Brits have pulled out en masse.

Central bankers and regulatory authorities are panicking about ship finance because of the inherent volatility. The probability of default in shipping is enormous and has traditional bankers on edge. You can see it most vividly at the moment with suezmaxes, which have been trading at dire levels for a long time.

Still, I’d argue that the disconnect between banks and their shipping clients has never been wider in terms of understanding the business, its cycles and what owners need. I’ve now been in ship finance since 1976, back when there was no LIBOR and no paper markets. This business, I do firmly believe, is now at a crossroads and is set for new ways of doing things.

 

Dagfinn Lunde

Dagfinn Lunde, previously head of DnB New York (90-95), Head of INTERTANKO (95-00), and on the board of DVB responsible for the shipping and offshore division from 2000 until end of 2013. He is now a board member of Advantage Tankers, Dynamic Drilling and Maxi Shipping and co-founder of DagMar Navigation Ltd.

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