Bangkok: In its detailed and enlightening annual report Thailand’s Precious Shipping has warned that fund raising will continue to be the biggest challenge that shipowners will have to face during 2014.
Ship finance is not going to get any easier, Precious noted. “The lack of current/future bank finance and absence of new equity sources will help to stabilize the markets,” the dry bulk outfit noted, adding: “but the economic outlook for world trade suggests recovery will arrive sometime in 2014 and all these reluctant lenders will be back again, providing easy credit, and the cycle will start once again.”
Non-traditional lenders have, and will continue to come to the rescue of shipowners, Precious said, albeit at higher costs.
“Then there are the equity and debt capital markets where we have seen very large sums being raised, at times by people who have still to have a single ship in the water,” Precious wrote.
The problem with such sources is that they are always much more expensive than the traditional bank lending that comprises the majority of the funding requirements of shipowners, Precious suggested. Moreover, they can open or shut down very quickly depending on the experience that the current debt/equity issues have had in the market.
Concluding, Precious noted only the very strong, publicly listed, cash rich and non-speculative ship owners will attract any or all the funding that is available in the market.
“The smaller, non listed shipowners will be hung out to dry and will have to basically use much more of their own cash to get any business done,” Precious concluded. [11/02/14]