Greek Shipping Finance 2005 –Analysis and Trends, The Future of the Small Greek Owner And the Attitude of Banks

By Ted Petropoulos, MD, Petrofin S.A.

The Shipping Market and Banks

Both international and Greek shipping finance had over the 12 months from September 2004 to September 2005 to deal with an extremely turbulent shipping market. In the first six months up to April 2005, both newbuilding and secondhand vessel values as well as freight rates rose to unprecedented heights in shipping history across all sectors. Whereas banks welcomed the positive effects this boom brought to their customers and indirectly to their own shipping loan portfolios in terms of enhanced client liquidity, high asset values and cash flows, profitable vessel sales, and income security via period charters at high rates, they also became extremely wary of the market collapse that might follow.

As vessel values rose steeply, banks grew uncomfortable with lending a high percent age of finance that would result in historically very high loans per vessel. Where there were period charters with a high earnings stream, banks reduced the risk to a large extent by front-loading the loan repayment schedule so as to stay in reasonable touch with historical values and earnings at the end of such charters. Client pressure, and fierce competition between banks meant that high loan to asset financings had to be provided even in the absence of period charters. Banks in such cases tried to latch on to other client securities, but bank, however, competition also frustrated them from doing this in many cases.

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