FINANCE
SHORE UP YOUR CAPITAL NOW to prepare for the growth ahead
By Sebastien Solar, Senior Vice President of Maritime Lending with Bank of Texas, a subsidiary of BOK Financial Corporation
T
he maritime industry is poised for dramatic growth in the coming years. Smart operators know that the time to get growth capital lined up is before it’s needed. Let’s face it, the maritime industry is extremely capital intensive. Access to capital for new f leet additions, existing f leet maintenance, and working capital is the lifeblood for any successful operator. Here are a few tips to ensure that you have everything shipshape from a banking standpoint, as the industry continues to grow.
LINE UP YOUR CAPITAL TODAY The risk profiles of many top operators have changed dramatically over the past 5 years. Companies have closed strategic acquisitions, grown their fleets in response to increased demand, and at the most basic level, addressed the need to replace aging fleet assets with new boats and barges. As a result, marine operators are now finding themselves better prepared to service their existing clients, but could potentially face increasing challenges to service new debt and/or access growth capital as lenders evaluate higher levered credit profiles. Although most marine credits continue to find willing lenders, it appears that many non-marine focused lenders are now beginning to show signs of resistance, largely due to the “high levered” nature
of many marine transactions. Several reasons why a banker might resist lending may include: New leverage exceeds the “traditional” 4x leverage “red line” of most commercial lenders. Every bank has its limit, and while an occasional case can be made for an exception to policy, the further a borrower gets above that limit, the more difficult it becomes to get an exception approved. Banks that have formal marine underwriting policies or in-depth knowledge of marine assets and industry trends are more likely to be better positioned to absorb the perceived risk associated with temporary spikes in leverage. Borrower exposure limits. Customer exposure limits are a reality of the banking world, and should not be perceived as a negative reflection on your company, but rather an opportunity to bring in an additional partner. Although multi-bank deals or syndications may not have been a reality for most operators, many companies are beginning to see their exposure limits tested and begin the process of evaluating new complimentary banking partners. Industry exposure limits. In many ways, the past three years have been the perfect environment for the U.S. marine industry. Day rates and utilization rates have been on the rise, interest rates have been at record lows providing inexpensive growth capital, and banks that are desperate for loans due to impish demand from June 2014 MARINE LOG 19