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Editor’s Choice: Fortis and Standard Chartered for Brunei Gas Carriers
By Rodricks Wong
How quickly the tide has turned. Just a year ago, shipowners were still basking in cheap money with relatively little difficulty in securing funds for their fleet expansion plans. Today, times have certainly gotten tougher as the torrent of bad news from Wall Street continues to ignite fears that more financial institutions will fall victim to the subprime crisis. Bankers are now advising their clients to secure financing while they still can amid a general consensus that things are most probably going to get worse before they get better.
Liquidity is no doubt drying up but there are still pockets of alternative financing sources available to the shipowners and Islamic banking is one option. Although people tend to perceive Islamic financing as a complicated way of raising money, our Editor’s Choice Award winners demonstrated that with clever structuring, Islamic concepts can deliver flexible financing solutions across various vessel types effectively for the shipowners.
Opportunities in Crisis
By Rodricks Wong
As the credit crunch bites deeper and wider, the tightening of global money markets has pushed relative borrowing costs higher and the shipping sector in Asia has already started to feel the pinch. Many financiers have since scaled back their lending to shipping, a sector they perceive to be heading towards an imminent correction. But for others like Standard Chartered, the recent credit crisis presents significant opportunities to expand their shipping portfolio.
The Standard Chartered Group began life in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India, Australia and China, founded in 1853. With a rich history of over 150 years, the London-headquartered group has been extending its footprint in the world’s fastest growing markets and derives more than 90% of its operating income and profits from Asia, Africa and the Middle East. The bank recently announced in August that net profit attributed to shareholders grew 30% to USD 1.785 billion in the first half of 2008 from USD 1.443 billion in the second half of last year.
THE RISE OF ASIAN SHIPPING GIANTS
It was only a decade ago when an unexpected financial crisis gripped Asia and pushed the region into recession. Since then, the Asian economies have resumed strong economic growth with the renaissance of China and India. Companies are once again expanding, and stock markets in the region are skyrocketing driven by the influx of foreign capital and optimism over Asia’s future.
While the current sub-prime crisis does pose a downside risk to global economic growth, underlying fundamentals of the Asian economies remain robust and sound. In its latest Global Economic Prospects report, the World Bank estimates the Asia-Pacific region to have grown about 10 percent in 2007, the strongest performance since 1994. Continue Reading
SMBC - Like a Phoenix from the Ashes
By Rodricks Wong
Tough times remain for the shipping financiers in Asia. Although companies in Asia tend to reply on bank borrowings to raise capital, the global liquidity glut especially in this region has not only intensified competition among the usual players but has also attracted new entrants to the ship finance arena particularly in debt financing amid the current buoyant shipping market. Margins have been going down the slope and in order to stay on top of the game, banks are on their toes and rethinking their strategies.
To increase their profit margins, some banks choose to focus on the emerging markets and do businesses with lesser-known clients. Others set sights on top tier shipping companies, working hard to come up with products tailored to their needs while identifying cross selling opportunities. Some are all out to underbid their competitors to build brand awareness and increase market share. Others are simply out of the market, waiting for the conditions to improve. Continue Reading
The Lending Scene in Hong Kong
By Rodricks Wong
In the midst of all the excitement surrounding the global equity markets and assorted alternative financing instruments, it is easy for us to overlook the predominant role debt finance plays in the shipping industry, particularly in Asia. The shipping players in these highly fragmented markets are predominantly the small and medium size private owners who rely mostly on bilateral loans for their funding needs.
As the leading financial hub with close proximity to the major global shipping players China, Japan and Korea, Hong Kong is home to many financial institutions involved in shipping. It is hardly surprising that most syndicated and club deals in the Asia-Pacific region are executed out from Hong Kong. With this in mind, Marine Money Asia visits this vibrant city to take market temperature of the lending scene over there. Continue Reading
Changing Ship Finance Landscape in Japan
By Rodricks Wong
We estimate the funding requirements of these mega carriers to be about $16 billion, and half of this financing will be borne by the mega carriers themselves. This leaves other shipowners, foreign and local, a financing need of $8 billion. The large appetite for financing due to the mega carriers’ massive fleet expansion plans will have a significant impact on the Japanese ship financing landscape as we begin to question the ability of the Japanese banks to provide this huge amount of funds needed in the coming years. Already, MOL has highlighted their concerns regarding the sustainability of the Shikoku shipowners, many whom they charter in their vessels from, in securing cheap financing for their vessels from their banks after year 2010.And if we tally up our figures to include orders placed by other Japanese shipowners and operators at the Japanese yards, we see in Figure 2 an amazing cumulative orderbook of 495 vessels scheduled to be delivered from 2007 till 2010. The real size of the orderbook is expected to be even larger given that supply side statistics in shipbuilding are well known to be patchy. Continue Reading
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