Stuart McAlpine Global Head of Marine Projects
Marine Money panellists see buoyant 2021 for ship finance
Stuart McAlpine, Global Head of Marine Projects at Ince, chaired an engaging discussion on trends, products and pricing in shipping finance at this year’s London Virtual Marine Money Forum. An esteemed panel of guests consisting of Torm’s Kim Balle, Gaurav Moolwaney of Standard Chartered Bank, Thor Erling Kylstad of Smarine Advisors, Citi’s Shreyas Chipalkatty and Ian Webber of Global Ship Lease contributed a broad range of perspectives and shared a sanguine outlook regarding the prospects for shipping finance in 2021.
The panellists first reflected on a 2020 of two halves. With the initial shock of the coronavirus pandemic, it initially took a while for the industry to take stock of the likely duration and effect of the pandemic on financing. Overall, however, Gaurav Moolwaney concluded that the year was not as bad as many had thought it would be in Q1 2020, noting in particular, that the tanker and container sectors had fared relatively well. Considering the list of challenges Kim Balle set out, including the introduction of IMO 2020, the fall in oil prices and volatility in freight rates and stock levels, it is clear that the shipping industry showed a lot of resilience. Indeed, Ian Webber commented on the ’significant recovery’ in the second half of 2020, which allowed a transition from severely limited sources of finance to a much friendlier financing environment. Besides the main headline of a sharp recovery, the panellists also noted some interesting subplots like the growth of hydrogen fuels and ESG-financing products, as well as the continued ascent of Chinese leasing.
The panellists also had positive expectations for 2021, with Shreyas Chipalkatty perhaps providing the main takeaway that ‘there is a lot of firepower in the banking community to fund the right deal’. Shreyas expected deals valued at around $150m-$200m to be of particular interest to banks. Gaurav Moolwaney echoed this, noting that bank lending remained the cheapest form of capital, but Kim Balle highlighted the importance of diversification of financing options.
Following the trend of recent years, Thor Erling Kylstad expected Chinese-leasing-house activity in the industry to continue to grow, notwithstanding that volumes might suffer potential blowback from 2020 that may take some time to filter through. Leasing houses are expected to remain an attractive option, but could become more selective in terms of the businesses they serve, with a preference expected for standard, modern vessels that provide more liquidity. Notwithstanding this, Thor Erling expected the larger leasing houses to have an appetite for deals running into several hundreds of millions of Dollars.
Debt and equity capital markets are also set to feature in the financing mix. Gaurav Moolwaney noted that there is an appetite among banks to grow their shipping portfolios, with new sectors, such as offshore wind farms, set to be of increasing interest.
Overall, the panellists’ comments suggested that financing will be available in 2021 from a variety of sources, both traditional and non-traditional, with the ESG lending landscape set to evolve particularly quickly. As the global Covid-19 vaccine rollout continues and market conditions for a strong rebound strengthen, it seems that now is a good time for owners to engage with financiers and to consider their strategy for the post-Covid-19 shipping landscape, ready for full steam ahead once markets rebound.
This article was co-authored by Trainee Solicitor at Ince, Lewis Habbershaw.