Nordic bonds, US high-yield and institutional loans will be the best markets for shipping capital
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| Pareto Securities managing director Christian Moxon. Photo: John Galayda |
Investment bankers see debt, rather than equity markets, being the
most important source of capital to the shipping industry in the coming
years.
But the cost of that debt capital will be higher than bank
financing, which continues to be a smaller part of shipping capital
markets.
The world’s commercial fleet will worth $920bn this year, Pareto Securities managing director Christian Moxon told attendees at the Marine Money Ship Finance Forum in New York, up from $700bn.
“This will probably be the last year the global fleet will be worth more than Apple, which is growing 20% annually,” he quipped.
But funding the growth is tough. Shipping equities raised $700m this year, down from $1bn last year, and well below the levels seen four years ago.
Moxon says initial public offerings will remain scarce as few investors want to fund new companies in the industry.
“There is very limited appetite for growth equity,” Moxon said. “Most equity issuance is for refinancing existing companies.”
Moxon says that banks, once the largest source of capital to the industry, will continue to reduce their exposure to the industry, forcing shipowners to “find alternative sources to bank funding.”
Nordic bond markets remain very active with 20 new issues floated this year, raising $2.2bn, Moxon says. He expects the Nordic bond market “to grow significantly over the next two years” as a source of capital for the industry.
Stifel managing director Chris Weyers says shipowners have been able to raise equity capital through at-the-market offerings and institution-led private placements because it “allows companies to raise without traditional discounts required by investment banks.”
But debt looks to be the main source of capital for the industry. Weyers says there has been growing interest among shipping companies to issue “baby bonds” for debt financing. Those bonds are issued in $25 increments and aimed at retail investors.
Shipowners could also tap high-yield, US bond markets, Weyers says. Institutional lenders are also taking over from banks through term loans. But those investors will require higher returns on the debt than did banks.
The world’s commercial fleet will worth $920bn this year, Pareto Securities managing director Christian Moxon told attendees at the Marine Money Ship Finance Forum in New York, up from $700bn.
“This will probably be the last year the global fleet will be worth more than Apple, which is growing 20% annually,” he quipped.
But funding the growth is tough. Shipping equities raised $700m this year, down from $1bn last year, and well below the levels seen four years ago.
Moxon says initial public offerings will remain scarce as few investors want to fund new companies in the industry.
“There is very limited appetite for growth equity,” Moxon said. “Most equity issuance is for refinancing existing companies.”
Moxon says that banks, once the largest source of capital to the industry, will continue to reduce their exposure to the industry, forcing shipowners to “find alternative sources to bank funding.”
Nordic bond markets remain very active with 20 new issues floated this year, raising $2.2bn, Moxon says. He expects the Nordic bond market “to grow significantly over the next two years” as a source of capital for the industry.
Stifel managing director Chris Weyers says shipowners have been able to raise equity capital through at-the-market offerings and institution-led private placements because it “allows companies to raise without traditional discounts required by investment banks.”
But debt looks to be the main source of capital for the industry. Weyers says there has been growing interest among shipping companies to issue “baby bonds” for debt financing. Those bonds are issued in $25 increments and aimed at retail investors.
Shipowners could also tap high-yield, US bond markets, Weyers says. Institutional lenders are also taking over from banks through term loans. But those investors will require higher returns on the debt than did banks.
“The investors in these products like big issuances and high liquidity,” Weyers said. “Instead of the Libor plus 2% to 3%, these investors will require Libor plus 5% to 7%.”
source: www.tradewinds.com