Traditional ship finance for more than a century is based on financiers, the banks, taking a first priority mortgage on the ship. This proved a good way of lending to the sector, providing security in case the shipowner cannot pay back. The characteristics of the ship (valuation and ability to generate income) determine the amount of finance should be made available, how this is repaid and at what price (interest margin). International ship finance banks have mainly funded the global ocean going fleet. The Dutch banks are still amongst the leading players. Also regional shipowners involved in coastal and inland transportation have been solely depended on local bank funding in case of limiting own sources.
From the start of the financial crisis in 2008 and due to continuing overcapacity in many of the shipping markets the financing capacity from traditional banks in Europe and US have reduced. The private and smaller shipowners find it especially difficult to obtain bank financing. Marstrat has assisted owners in the financing, refinancing and restructuring of various vessels and have involved alternatives to bank funding to in order to survive or to ‘make the deal work’.
An example is funding from institutional investors such as pension funds or insurance companies, making capital available for the longer term (matching with the life of the ship). Regulatory requirements like Solvency II for insurance companies may work out more favorable than the shipping banks’ regulatory framework in the near future (Basel IV), therefore offering attractive cost of funding for the shipowner and attractive risk-return for the institutional investor.
Increasingly there are alternative fundings available from private high net-worth individuals as well as from direct lending platforms and Chinese funds, depending on the vessel and the sponsor’s business model. Financial institutions can act as intermediary or advisor in accessing new sources but are often available for the ‘big players’.
Marstrat acts fully independently with hands-on advice and strong network in the financial market. We have the complementary advantage of fully understanding you maritime business needs.