Shippers turn to capital markets to replace banks
Date of publication: 18.11.2010

Shipping companies are increasingly turning to the capital markets to plug the gap caused by banks reluctant to lend to the sector. "What I see is basically almost a total halt in the large syndication business," Harris Antoniou, managing director energy, commodities & transportation at ABN AMRO, told a shipping conference on Wednesday. Economic turmoil in 2008 hit lending in the shipping sector, as banks cut back on new financing.

Antoniou said the volume of syndicated transactions had dropped from almost $100 billion in 2007 to $30 billion in 2009. And just $10 billion of deals were done in the first half of this year.
"Some of it has been substituted by bilateral business and secondly we have seen the re-emergence of the capital markets --high yield and equities as substitution," Antoniou said. Earlier this year German landesbank NordLB [NDLG.UL] said it aimed to scale down its shipping exposure. 
Simon Booth, global co-head of Deutsche Shipping, Deutsche Bank\'s ship finance arm, said due to tighter lending conditions there had been "rationing of capital" to some extent in the shipping sector.

"We have seen a lot of bond issuance, equity follow ons ... as people try and find other sources to supplement what the banks have historically provided," he told the conference.
Frontline  , the world\'s largest independent oil tanker company, and Seadrill  , the world\'s number two deepwater rig group, have both used convertible bond issues to fill the gap.
Meanwhile, German container shipping company Hapag Lloyd   and Sweden\'s Stena tapped the high yield bond market.
Major lenders to the shipping sector include DnB NOR  , BNP Paribas  , Royal Bank of Scotland (RBS.L), Nordea  and HSBC.
RBS said in August that lending conditions in the shipping sector would remain "challenging for the foreseeable future". "The main arranger banks within shipping are still relatively nervous about underwriting large tickets," Deutsche\'s Booth said. "For the time being it will continue to be a book build process on a club basis."


Source: http://uk.reuters.com