For Julian Macqueen's (Lloyd's List) interview with Aslan Paksoy, click here...

Conservative family-owned shipping firms go in search of new finance

 

Lloyd’s List - Julian Macqueen - Thursday 1 July 2010

 

SHIPPING firms in Turkey tend to be family-owned, with the corollary of a conservative approach both to the industry and to financing. In the current market, one characterised by flat rates and tight credit terms, they are not under undue pressure. Certainly, the interest rates seen during the crisis, of between 8.5% and 12% a year, have come down to between 4.5% and 8.5%. And while this might apply to the larger firms, the smaller Turkish shipping firms are struggling.

 

Aslan Paksoy, who runs Finship Turkey, a ship finance boutique based in Istanbul, knows this only too well since a good proportion of his clients come from this industry segment. “Our job is to bring the banks, the funds and the shipowners together,” he says.

 

Mr Paksoy says that these companies are enthusiastic about presenting themselves to a wider investment community. It is also true that their choices are limited, since traditional sources of ship finance have diminished considerably.

 

International banks have closed the door on new deals, which has led to more dealings with domestic institutions, observes Mr Paksoy. In addition, other players have emerged. “These are independent funds, aiming at the mezzanine part of the loan,” he says.

 

Bare boat higher purchase is one structure to emerge in the current crisis. “The seller wants to get the money; the buyer wants to get the ship. But who’s giving the credit?” BBHP is a way of getting around this stumbling block.

 

Another idea is sale and leaseback, where the owner sells the asset to a nominal owner and then uses the money to pare down debt or purchase more assets.

 

But mezzanine debt is classed as a second mortgage. It carries greater risk and must be approved by the first mortgagee.

 

These are all ways of trying to secure funding in a hostile environment, explains Mr Paksoy. The drawback is that the “funds are expensive”, referring to international funds rather than specifically Turkish ones.

 

They want a 10%-15% per annum dollar terms return which means that Turkish companies must give deals careful consideration. The funds themselves are not without offers since credit is at a premium.

 

Some Turkish companies see this source of funding as a form of temporary relief, a stop gap. They might have to pay a high rate of interest on the deal but at least they have the funds. From the lenders’ point of view, transparency is a big issue which Mr Paksoy says can sometimes be difficult for firms unused to operating in an international context.

 

“We call ourselves the sandbags,” says Mr Paksoy.

 

Apart from the interest from international funding sources, Turkish shipping has also received the green light from the government, which has agreed in principle a package to help struggling shipyards and owners. In the shipyards’ case, the state guarantee is available to ease the process of securing credit, an essential step on the road to realising the investment.

 

Finship has been appointed consultants to Turkish Exim Bank.

“Exim is lending money to Turkish shipyards,” says Mr Paksoy. “Our job is to make these deals — many of which are problematic — work in real terms,” he says.

 

Meltem Suloglu, of Istanbul-based brokerage Pelikan Shipping & Trading, reports a lot of interest in shipping from Turkish investors.

 

There are a lot of cash buyers in the marketplace, she says. “Mainly holding groups which have investments in different industries and sense that now is a good time to get involved.”

 

The range of investors is wide — from gold dealers to textile companies — and the focus of their interest is primarily dry bulk ships. “As far as I’m aware, these Turkish investors are not using bank loans but their own cash,” she says.