Riding the Waves

From the favorite getaway of the newly-wed and the nearly-dead to the average vacationer’s agenda, and on the priority list of most financiers, the cruise industry has been the pleasant surprise of the shipping industry for the past 15 years. To those who complain that capital markets are indiscriminately negatively positioned towards shipping companies, the cruise companies’ case should be a good answer and proof that the capital markets do not deny financing to anyone as long as their prerequisites are fulfilled.

Exhibiting a sustained growth for 15 consecutive years, the cruise sector has moved from being a side-player to becoming one of the most important parts of the shipping industry. Currently, the orderbook for cruiseships amounts to $8.5 billion, which is equal to the aggregate orderbook for VLCCs, Suezmax and Aframax tankers. This mammoth orderbook is mainly financed through commercial loans, some of them unsecured, and public offerings of bonds.

The capital markets provide the major operators such favorable terms that most of the operators even skip the OECD subsidies which became relatively expensive after the drop in interest rates. On top of this, equity investors are willing to invest in cruise companies or, at least, in the major ones.

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