Ship finance in Turkey – the Real Opportunities

By Ilhan Yirmibesoglu

FOR more than thirty years the Turkish ship- ping industry has primarily operated older vessels and small locally-constructed vessels financed mainly through a limited number of state-owned banks. Only one international bank, Hamburgische Landesbank (HLB), has been consistently active in Turkey over the last decade. Now HLB is reducing exposure and Turkish banks are no longer in the picture. Therefore further fleet expansion will depend mostly on the availability of funding from international financing institutions. There are both risks and opportunities for new players looking at the Turkish ship finance market.

The trend (at least for the major players) now is away from small, old vessels and local construction and towards a bigger, more modern fleet built internationally. For the first time in their history, in 1999, Turkish shipowners started placing orders at Japanese and Korean shipyards for suezmax, aframax and handysize tankers as well as super handymax bulkers. This can be attributed mostly to the fact that the newer generation of shipowners, which has now largely taken over their family-controlled business, has realised that the future lies with more modern vessels better suited to meet the requirements of modern international trade. The creation of the Turkish International Ship Registry (TIS) has also assisted the industry in attracting outsiders to invest in shipping. TIS has made shipping a unique sector within Turkey because it offers corporate and income tax exemptions both on profits from activities as well as capital gains.

Local investors have realised that despite their ability to be competitive by running vessels at low costs, their chances of expansion based on older or locally built small-size tonnage (the type they mostly control) would be limited. An additional complication is the fact that it would almost be impossible to raise financing for these types of vessels from international financiers and they cannot turn to Turkish banks, because they are no longer looking at shipping.

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