Credit squeeze threat to shipping industry-survey
Fri Feb 10, 2012 2:00am EST
Consolidation expected to gather pace
* Banks scaling back due to euro zone crisis
By Jonathan Saul
LONDON, Feb 10 (Reuters) - Tighter bank financing is the big threat to shipping companies, and many are looking at alternative sources of funding such as private equity to fill gaps amid a worsening credit squeeze, a transport survey showed on Friday.
In the survey by international law firm Norton Rose, 42 percent of respondents said a lack of finance was the greatest threat to their businesses.
Many banks are keen to shed dollar-denominated assets such as ship and trade finance loans to meet tougher capital rules imposed on euro zone lenders.
"The past three years has seen a notable decline in the availability of bank lending to the shipping sector, and this has had a considerable impact on many shipping businesses," Norton Rose global head of transport Harry Theochari said.
UniCredit, Italy's largest bank by assets, is scaling down its ship financing operations to boost its capital reserves. Industry sources told Reuters that Lloyds Banking Group aimed to sell its $10 billion portfolio of shipping loans.
Almost a third of respondents in the survey, 31 percent, expected their primary source of funding over the next two years to come from private equity, and 18 percent said it would come from export credit agencies. Neverthless, 43 percent still expected their primary source of funding to come from bank debt over the next two years.
"Shipping companies are now looking beyond traditional forms of finance and are readying their businesses to weather further economic uncertainty over the next 12 months," Theochari said.
Shipping companies, especially in the oil tanker and dry bulk sectors, have been hit by weak earnings and an oversupply of vessels ordered in the good times.
The survey found 55 percent believed their key priority was to maintain cash reserves and secure funding lines, with 56 percent planning joint ventures or mergers over the coming year.
"Shipping is facing challenges on a number of fronts, from a reduction in the amount of debt available to an oversupply of vessels within some areas of the market," Simon Hartley, Norton Rose head of shipping, said.
"Despite this, the sector is proactively putting plans in place to adapt to market conditions, and a significant number are seeking opportunities in new markets and planning joint ventures and mergers."
France's two biggest listed banks, Societe Generale and BNP Paribas, also plan to exit or shrink non-core businesses such as shipping, according to bank memos. |
