Hamburg-based ship finance platform, Oceanis, predicts ship financing costs for 2023 in a new quarterly report. Highlights include:
• Bank financing for container vessels has all but dried up, with only vessels employed by top-tier charterers able to obtain financing terms on a non-recourse basis
• Product Tankers are in vogue with Financiers; loans at over 100% of historic fair market value (FMV) are possible for pool-trading mature vessels
• Poor earnings in Dry Bulk have caused a serious decline in the leverage available to shipowners, but finance remains available from a wide variety of sources
• Strength in the Offshore sector is bringing international banks back after a decade of write-downs and restructuring
• Rising base rates make alternative debt providers more attractive, with margins dropping across sectors
This year looks set to be a positive year for shipowners seeking finance according to the report. Shipping finance markets remain open and banks are seeking opportunities to grow their portfolios, resulting in a highly competitive market.
“Strong earnings across sectors, coupled with a flood of cheap money from quantitative easing efforts, pulled more banks and more investors into shipping after the pandemic. The increased competition that resulted, caused leverage to rise and margins to shrink across all vessel types, and is now most clearly seen in dry and tanker financings as banks attempt to rebalance their portfolios away from container vessels”.
The increase in base interest rates – 0.5% in January 2022 to 4.3% today – has in some cases tripled the total interest cost to shipowners and led to large changes in loan affordability for those seeking finance. These rising base rates have played to the favour of higher-cost alternative lenders who are now much closer to banks in terms of total interest cost.
Erlend Sommerfelt Hauge, co-founder and managing director of Oceanis said: “The improving credit of shipowners over the past three years, coupled with heavy repayments on container financings, have generated immense competition between financiers. At the same time, rising base rates are making higher-leverage financings comparatively cheaper, creating more competition for banks.”
Overall, shipping finance markets remain open across most sectors. Banks are looking to grow their portfolios and with increasing numbers of alternative funds, increased competition plays to the favour of the shipowner. And on the heightened base rates which have caused so much market turbulence over the past year, there is some hope for the future.
Click below to read the full report: