May 29 - Traditional sources of bank business finance and capital in Europe are drying up for shipping lines in the face of global credit and austerity programmes, leading many to new sources of investment such as private equity funds.
That was the message from 'The Funding Gap Myth or Reality?', a presentation by Andrew Hampson, managing director of investors Tufton Oceanic at the third annual London Ship Finance Forum, organised by Marine Money. Hampson told delegates at the one-day event: "We believe that the impact of the coincidence of the extreme adverse supply / demand fundamentals which we are now experiencing has been made considerably worse by the lack of traditional sources of debt and equity to the industry.
"We therefore need to study and evaluate not only the supply and demand for vessels but also the supply and demand of capital in order to more fully understand the current situation."
An example cited at the conference was how Hamburg-based HSH Nordbank is slashing its core shipping portfolio to EUR15 billion (USD18.8 billion) by 2014 from EUR19 billion (USD23.8 billion) at the end of 2011 under conditions set by the EU for state aid it received during the global financial crisis. Frankfurt-based Commerzbank also reduced the size of its shipping exposure by 6.6 percent to EUR21.2 billion last year.
The contraction of investment in newbuilds can have an advantage, says Hampson.
He says: "Lack of available debt capital should constrain new orders over the next few years - no bad thing."
Tufton Oceanic is a fund manager in the maritime, offshore oil service and energy industries and has equity funds under management of USD1.6 billion. Tufton and its managed funds own a total of 26 vessels with total value of about USD0.6 billion at the end of 2012.