Finance ■ ■ ■
Red knight Expect Chinese ship finance deals to pick up speed this year, writes Sam Chambers, and not just for domestically built vessels
European outlets for ship finance continue to fall by the wayside. In the past few months many blue chip names have announced their intention to either pull out completely or significantly from the shipping scene. Names such as Lloyds in the UK, France’s Société General, and even Germany’s Deutsche Schiffsbank (a bank with shipping in its very name) have cut their commitment to the sector this year. According to Greece’s Petrofin Bank, approximately 90% of all western ship finance banks are currently reducing their ship finance exposure. “Consequently, the past three years have represented an enormous opportunity for Chinese banks in particular to build up their Greek ship finance presence, based on previous and new shipbuilding orders at Chinese shipyards,” Petrofin Reseach boss Ted Petropoulos noted in a report. The global newbuild orderbook which stretches through to 2014 is going to cost up to $500bn, with Greece, home of the world’s largest merchant
fleet, accounting for a fifth of this figure. Increasingly, shipping is looking east for finance salvation, but just how prepared and adept is China at providing capital to hard pressed, profligate owners? “To expect China to be the white knight for everything is unrealistic,” says Paul Chang, ICBC’s managing director and head of global shipping.
Greek owners businesses that many enquiries have ground to a halt. Chinese banks’ requirement of credit insurance (with Sinosure) in support of local finance has been deemed unduly expensive. This amounted to approximately 2% of the newbuilding price. Lately this requirement is increasingly being waived, SinoShip understands. Greek owners have been reluctant to accept loans
90% of western banks are reducing their ship finance exposure It is in Greece that Chinese financiers have spent most time. This was thanks to the October 2010 announcement by Chinese premier, Wen Jiabao, of a $5bn loan pledge to Greek shipping to finance Chinese shipbuildings, a figure which since then has reportedly been doubled. Up until February this year however results have been slow. Problems have been manifold. The Chinese banks’ due diligence has been so demanding and intrusive into
in RMB and not US dollars. As such, RMB financing requires PRC flags and PRC ship mortgages, exposing owners to greater delays, costs and risks. February 13 saw a landmark deal that shows signs of progress in Sino-Greek dealings. China Development Bank (CDB) signed an export buyer credit syndicated facility between the bank and Greece’s Dryships. The facility is part of the multi-billion dollar Sino-Greek Shipping
Finance Special Scheme that was announced by the Chinese prime minister 18 months ago. The $122.58m facility will help finance three 206,000 dwt bulkers currently under construction in Shanghai Jiangnan-Changxing. The lead arranger was CDB and the co-arranger was Bank of China, thus this deal became the first syndicated shipping transaction between two Chinese banks as part of the new Sino-Greek Shipping Finance Special Scheme without the involvement of any Western bank. George Xiradakis, founder and managing director of XRTC Business Consultants who acted as project advisor, comments, “Chinese banks offer competitive lending products both in loan structure as well as in financial cost. Of course the main problem that exists is the long time response in the new applications but I think that the Chinese banking sector and particularly CDB is taking the appropriate measures to overcome such draw backs.” “As know-how improves, it is anticipated that the heavy bureaucratic approval process often lasting for six months or more shall become more competitive,” Petrofin’s Petropoulos reported recently. As we went to press it became clear that buoyed by recent developments at home Chinese banks are now willing to finance ships not built in China, a potentially very big development. Bank of Communications, ICBC, Agricultural Bank of China and Bank of China have all prepared groundwork to start offering finance to owners building in South Korea. Sinoship SPRING 2012
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