Shipping companies increasingly turn to alternative sources of financing

By G. Thomopoulos

A doubling of the BalticDryIndex (BDI) rate over the last two months has apparently not positively affected results of bulk carriers as yet, according to reports.

Prices for bulk carriers remain low, with several factors in play, the most significant of which is the lack of availability of capital financing.

Ιn part, this is due to the increasing flight of investment banks from the shipping finance sector, with several of the “top names” having sold off their portfolio over the recent period. The remaining lenders face increasingly strict guidelines by central banks and regulatory authorities in their respective countries before their can sign-off on loans to ocean-going shipping companies, with conditions often demanding high-value assets as guarantees.

With the “lion’s share” of financing in the sector now going only to a handful of major maritime companies, the remaining firms are now seeking alternative forms of financing.

Such alternative financiers, increasingly, are Asia-based export credit agencies, which have proven to be a stable source of financing for the shipping industry, especially for companies with orders in Asian shipyards. The biggest “player” in this field the Export Import Bank of China (CEXIM), which is controlled by the central government in Beijing.  

Other sources of financing are capital markets, which retain an advantage of being able to issue debt for a longer period of time at lower interest rates. Additionally, Initial Public Offers (IPOs) have also become popular with investors.

Finally, collaborative financing has emerged, with increasing cooperation of late between a majority of European banks and Asian lenders, with the former attempting to penetrate the Asian market. Such cooperation allows Asian credit institutions to finance the building of new vessels. One such example is a partnership between HSHNordbank with EximBank of Korea.