In a new quarterly report, the Hamburg-based ship finance platform, Oceanis, predicts ship financing costs for 2023.
Executive summary:
- Bank financing for Container vessels has all but dried up, with only vessels employed by top-tier Charterers able to obtain financing terms on a non-recourse basis.
- Product Tankers are in vogue with Financiers; loans at over 100% of historic fair market value (FMV) are possible for pool-trading mature vessels.
- Poor earnings in Dry Bulk have caused a severe decline in the leverage available to shipowners, but finance remains available from various sources.
- Strength in the Offshore sector is bringing international banks back after a decade of write-downs and restructuring.
- Rising base rates make alternative debt providers more attractive, with margins dropping across sectors.
2023 looks set to be a positive year for shipowners seeking finance. Shipping finance markets remain open, and banks seek opportunities to grow their portfolios, resulting in a highly competitive market.
Strong earnings across sectors and a flood of cheap money from quantitative easing efforts pulled more banks and more investors into shipping after the pandemic.
The increased competition caused leverage to rising and margins to shrink across all vessel types. It is now most clearly seen in Dry and Tanker financings as banks attempt to rebalance their portfolios away from Container vessels.
The increase in base interest rates – 0.5% in January 2022 to 4.3% today – has, in some cases, tripled the total interest cost to shipowners and led to large changes in loan affordability for those seeking finance. These rising base rates have favored higher-cost alternative lenders, who are now much closer to banks regarding the total interest cost.
Erlend Sommerfelt Hauge, Co-Founder and Managing Director of Oceanis, said: “The improving credit of shipowners over the past three years, coupled with heavy repayments on Container financings, has generated immense competition between financiers. At the same time, rising base rates are making higher-leverage financings comparatively cheaper,
creating more competition for banks.
“Now is one of the best times in recent memory to finance your fleet.”
Oceanis’ new Q1 2023 Finance Report gives an overview of the main sectors – Containers, Tankers, Bulk Carriers, and Offshore – including the best terms available for vessels in the market today.
The first report of its kind contains high levels of detail on the margins available to shipowners seeking high and low-leverage financings for old and new vessels across the Dry, Wet, and Container segments. These margins are generated through a detailed analysis of the financing terms received by Oceanis in 2022, which totalled over $2bn across a broad
range of vessel types, loan amounts, and leverage requests. Importantly, the indications shared are based on pure asset financing with no corporate guarantees.
“Whether used by shipowners to benchmark their bank’s pricing, by investors to model expected returns, or by financial institutions to gauge their market competitiveness, we hope that this report will be of use to a wide range of industry participants,” said Sommerfelt Hauge.
“This is just one step on our path to provide the industry with a more transparent and efficient ship finance marketplace.”
Read ISG Cover Story February 2023: https://theshippinggazette.com/how-value-creations-efficiency-steps-encourage-ipc-tpk-to-exceed-target/
