A question of money
“Tomorrow’s Champions” are the subject of the SMM Ship Finance Forum
Leading experts from all parts of the world discuss current challenges and perspectives in ship financing
Top event on 3 September – one day before the start of SMM 2012, the premier trade show for the maritime industry
Wanted: equity capital. The maritime industry is currently faced with massive financing problems. But, difficult though the situation is, there will also be winners. Logically enough, “Tomorrow’s Champions” is the theme of the SMM Ship Finance Forum to be held in Hamburg on 3 September – one day before the start of SMM 2012. The 25th SMM, shipbuilding, machinery & marine technology international trade fair hamburg, will take place at the Hamburg Fair site from 4 to 7 September, with expected attendance by more than 50,000 trade visitors from all parts of the world.
This is the fourth time that SMM organiser HMC (Hamburg Messe und Congress) is co-hosting this English-language conference together with Financial Times Deutschland; more than 200 participants and eminent speakers are expected from all parts of the world.
“Financing is one of the key subjects in the maritime industry”, says Peter Bergleiter, Business Unit Director at HMC. The importance of this specialist event is correspondingly great. Albrecht von Arnswaldt, Director of the business publishing house G+J Wirtschaftsmedien, to which FINANCIAL TIMES DEUTSCHLAND belongs, confirms this – “we are delighted to host this fourth Ship Finance Forum in cooperation with HMC. This event, as the ‘kick-off’ to the SMM trade fair, has enabled us year by year to get the leading finance experts of the maritime industry together in Hamburg. That is particularly important, because a solution to the credit crunch will be a make-or-break issue for the whole of the industry in the near future.”
Where is ship financing headed? The conference chaired by Herbert Fromme, Correspondent, Lloyd’s List and Financial Times Deutschland, features discussions with leading experts from the international shipbuilding, shipping and finance industry, including Ron Widdows, the new CEO of Rickmers Holding and for many years chief of Neptun Orient Lines (NOL) in Singapore.
New models in demand
According to analyses by Clarkson Research, some $90 billion were invested in new ships last year – that is a lot less than in record year 2007, but still an enormous amount, which the shipping lines cannot raise under their own steam. At present it is becoming increasingly difficult to obtain equity capital from investors, and loan capital from banks. Private investors are scared off further commitments in a context of numerous insolvencies of single-ship companies.
“The classic German KG model has become obsolete for the time being,” says Dr. Torsten Teichert, Chairman of the Management Board of Lloyd Fonds AG. He will present ideas on the future role of shipping funds at the SMM Ship Finance Forum. He expects that international investors will in future become more involved in the maritime sector.
“The entry of US Private Equity companies gives German shipowners a funding alternative to the previous models,” says Dr. Dirk Lammerskötter, Management Board of HSH Corporate Finance. But experience shows that their profit expectations are substantially higher.
Banks take wait-and-see attitude
While some of the traditional ship financiers such as HSH and Unicredit are successively reducing their commitment, the public-sector KfW IPEX-Bank is increasingly moving into project financing – for example with two modern RoFlex ferries for the Finnish shipping company Bore/Rettig, to be supplied by Flensburger Schiffbaugesellschaft. It is also involved in the new building of a crane lift ship for assembly of offshore wind turbines for HOCHTIEF Solutions, in construction at Crist shipyard in Poland. Dr. Carsten Wiebers, Head of the Shipping Department of KfW IPEX-Bank, says “As one of the world’s largest ship financiers, KfW IPEX-Bank is now making a contribution to the energy turnaround by financing the assembly vessel, and at the same time it is supporting the maritime industry.” KfW IPEX-Bank is also a playing an active part in the consortium for financing the two largest cruise vessels ever built in Germany. The ships will be delivered by Meyer Werft to Norwegian Cruise Lines in 2013 and 2014, with a total order volume of EUR 1.2 billion.
However, bank regulations are becoming more and more stringent (Basel II and III), which means that most of the banks find it hard to work with this volatile industry. So far the expectations that an Asian bank would fill the gap by moving into this sector in a big way have not been fulfilled – as a rule such arrangements operate with a linked package deal whereby a ship built by a South Korean or Chinese shipyard also gets a funding arrangement or credit guarantee from these countries.
So in Germany more attention is now directed towards alternative financing instruments such as borrower’s note loans, profit participation capital, and ship mortgages. Some of the major international shipping companies are already stock exchange listed, or can get access to the capital market by means of bond issues. That is the approach used by Hapag Lloyd, the fourth largest shipping line in the world. Finance Director Peter Ganz reports on the experience of the company at the SMM Ship Finance Forum.
A good time to enter the market
Investors currently benefit from an extremely favourable price level – “I think the risk-return ratio is at present the best it has been for many years,” says Dagfinn Lunde, Director of DVB Bank and a panel participant at the SMM Ship Finance Forum. That is also confirmed by the figures from Clarkson Research: “Compared with their peak in 2008, shipbuilding prices have dropped by 30 or 40%,” says Dr. Martin Stopford, Managing Director at Clarksons. There is no doubt about it – the crisis does give investors worthwhile openings. Newbuildings are mostly more energy-efficient than ships in the current fleet, so that is very useful in view of the dramatic rise in fuel costs. Individual shipping companies are already thinking of adding to their fleets – provided they find the right financing partners.
Background – SMM 2012
SMM, shipbuilding, machinery & marine technology international trade fair hamburg, has the patronage of Chancellor Dr. Angela Merkel. This top event in the international maritime industry calendar celebrates its 25th anniversary this year. It is the ideal forum to present products, see innovations, meet new customers, cultivate relationships and close deals – with 2,000+ exhibitors from more than 60 countries on over 90,000 sqm of exhibition space and more than 50,000 trade visitors expected.
Highlights alongside the SMM Ship Finance Forum include MS&D, international conference on maritime security and defence; and gmec, global maritime environmental congress – a premium event and an integrated component in the SMM supporting programme for the second time. Another regular feature is the SMM Offshore Dialogue, held for the second time this year, with industry experts discussing oil and gas production at sea and offshore wind energy. Trade visitors from all parts of the world can also look forward to an extensive supporting programme with more than 150 programme items.
For further information, please visit the website www.smm-hamburg.com