Learning Lessons From Past Mistakes in Ship Finance

by Anne Oian

Oversupply is currently plaguing the banking industry the same way it has plagued tanker owners. The number of banks willing to lend to the shipping industry has increased as shipping markets improve. But demand for loans has decreased because many shipping companies don’t think the timing is right for new investments. The situation, which has resulted in dramatic changes for loan terms, has spurred reflection on previous shipping market downturns and the lessons that may or may not have been learned.

Refinancing Under-performing Loans

The downturn in shipping in the beginning of the 1990′s affected most banks involved with the industry. At the same time, the world fleet in most segments was still increasing as deliveries of newbuilding orders – placed when the outlook was more favorable – were completed.

Several problem situations were also created by old ships at the top of the market in 1989-90. Owners did not assure themselves of the quality and condition of the ships, and they did not have the necessary experience and know-how to manage them. For example, Norwegian players, unlike many Greek owners, acted more often like financial investors than dedicated and experienced shipping people. They made mistakes accordingly.

This is only an excerpt of Learning Lessons From Past Mistakes in Ship Finance

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