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MARINE & AVIATION FINANCE

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July 2019: Specialty Lenders Eye the Maritime Sector

While lower freight rates, the fallout from Basel III, and pockets of distress are limiting the funding appetite of traditional marine lenders, speciality lenders are stepping in to fill the gap.  In the first half of 2019, six major banks and equity research firms have terminated their shipping research - including stalwart Morgan Stanley. Taking advantage of the scarcity of capital and rising rates, are the alternative lenders including: specialty lenders, PE firms, opportunity funds, leasing companies, insurance companies, and family offices.

Positive Trends Buoying Specialty Lender Activity
After a decade, the sector is finally benefitting from the long term structural improvements that followed the financial crisis of 2007/2008.  These include: improvements in transparency, compliance, better corporate management, sustainability, sustainable/green investment projects and syndication structures with banks. 

 

Strong Macro Growth Boosting Container Trade

IMF projected global GDP growth of 3.3% in 2019 and 3.6% in 2020 should propel container trade as world economic growth continues. Increases in retail container miles are expected as advanced economies seek cheaper production centers around the world that are farther from existing consumers. Container trade grew by 4.2% in 2018 and is forecasted to rise by 3.8% in 2019 which is above than the 2.6% long term growth trend.

The Opportunity for Nimble Capital Providers

The industry now faces the halfway period were much of the oversupply of tonnage created around the time of the credit crisis is accelerating the scrapping of older vessels. This drives the need for ship owners to find new financing sources for vessel acquisitions and new buildings. As finance has always been a key driver in maritime, financial institutions who remain active and are positioned for the new cycle in the industry will have a unique opportunity to provide profitable loans on favorable terms that are well secured to select names in the industry.

Competitive Advantages of Specialty Finance
Specialty finance companies have a higher degree of tolerance and agility to navigate the lack of organizational structure and transparency of family-owned shipping businesses. In addition, they are more comfortable adjusting their financing structures and pricing to allow for the volatility associated with freight rates and assets prices

Emerging Specialty Finance Options

Private equity firms, hedge funds and venture capital are finding opportunistic investment options to provide capital, acquire shipping loans and manage non-core and distressed assets. We have seen several PE funds apply for banking licenses in order to compete head to head with conventional lenders.

Lender Terms:  Pricing & Tenor

Return expectations vary from low double digits for mezzanine and junior tranches to a high teen for true equity investments, and a holding period preference of 5 to 7 years

Seven Shipping Segments Expected to Benefit from Alternative Capital Inflows:

  • Dry Bulk

  • Tanker (Product, Chemical, Crude)

  • Container

  • Gas Carriers

  • Green Shipping Projects

  • Cruise (Passenger)

  • Offshore

Top Four Emerging Growth Regions

  • Europe (Greece, Norway, Germany)

  • US

  • Asia (China, Japan)

  • Middle East-Saudi Arabia (Qatar)

Characteristics of the Specialty Finance Players

  • Leasing Companies: Seek higher margins

  • Insurance companies: Prefer stable contracts, long term charters

  • Pension Funds: Prefer stable contracts, long term charters

  • ECA: Focus on profitability

  • HNI: Seek tax incentive and high margin

  • IPO & Stock market: Driven by growth projections and sentiment 

The Need for an Advisor: The Role of Kligier Capital

As transaction layers increase and new entities enter the market there is a need for experienced intermediaries to arrange the transactions, negotiate and advise borrowers and create cost efficient and workable capital structures.

Avi Zukerman| Principal & Founder

avi@kligiercapital.com | (646) 552-7701

Rick Cosse| Executive Managing Director

rick@kligiercapital.com | (917) 836-6280

 

MARITIME FINANCE
SECTOR UPDATE

 

$4,100,000 - Asia PE Fund
Secondary

Transactions

$8,600,000 Multifamily
Fairfax VA, Pref Equity 

moi00110_Moissy-DC8_7.jpg

$205,000,000 NY Office Tower
Acquired for Family Office

$32,500,000 Industrial
New Jersey, Refinance

$7,700,000 Retail
Stockton, JV Equity 

$8,800,000 Logistics
Boston, JV Equity 

$21,400,000 Bulk Condo
Miami, Acquisition

$12,700,000  - European

RE Fund - Secondary

$72,000,000  - Stalking Horse

Distressed Retail Portfolio

$5,100,000  - Asia  PE Fund

Secondary Advisory

Representative Transactions

Cond Inventory Lender
 Retail investment sales and surplus dispositions

Advisor on the sale of search & rescue fleet to Vietnam.

$205,000,000 NY Office Tower
Acquired for Family Office

Equity financing of

2 Supramax Bulk Carriers

$7,700,000 Retail
Stockton, JV Equity 

$8,800,000 Logistics
Boston, JV Equity 

$21,400,000 Bulk Condo
Miami, Acquisition

$200M Sale-Leaseback 
Boeing 747 - Singapore Air

Private Equity Secondaries Investor

$72,000,000  - Stalking Horse

Distressed Retail Portfolio

$5,100,000  - Asia  PE Fund

Secondary Advisory

Aviation Finance Lender
Marine and Cargo Finance Advisor and Banker
Maritime Finance Lender
1450 Broadway Investment Sale Advisor
Industrial Logistics Mortgage Finance Boston
Commercial mortgage finance

Our Story

After working in investment banking and on the buy-side for large institutional and family office firms, I formed Kligier Capital to create an advisory model where precision, ease of use, and respect for time and resources all come first. We provide advisory services to companies. We also originate interesting, high yield debt and equity opportunities suitable for direct investing in sectors under-served by traditional capital providers. We look forward to working with you in all your pursuits   -Avi