Chinese Ship Finance – On Hold?

By Nigel Ward, Partner, Norton Rose LLP

In 2008/9 the Chinese banks were looked to as the only remaining hope for international ship finance – the last pool of bank debt that could be harnessed to replace the withdrawing European banks and to satisfy the capital requirements of owners with existing new building orders in the shipyards of the world. Just as many other countries, but on a larger scale, China responded to the global financial crisis by injecting significant liquidity into its domestic market.

A large part of that liquidity was funnelled through the public sector banks and much of it was deployed in support of infrastructure projects sponsored by regional and municipal authorities, to pump up domestic consumption and to fund state owned enterprises in support of export  manufacturing, business investments and the acquisition of strategic resources abroad. Continue Reading

A Growing Chinese Ship Financier

Asian banks tend to have a domestic or regional focus with a relatively limited role in global ship finance, but it is always our belief that the crises of global disequilibrium have provided them with the opportunity to gain prominence over the medium and long term. Last year, for the very first time, ICBC reported their shipping loan portfolio figures to Marine Money and we view this as the result of the increasing confidence the bank is eluding in its ship financing business.

This year, we are delighted that ICBC has once again provided us with their shipping loan portfolio figures at the end of 2009, and despite the challenging market conditions, ICBC managed to grow its book by 115% from USD 2.2 billion in 2008 to USD 4.74 billion last year. In terms of assets, bulk carriers form the majority 59.4% in the portfolio while container vessels and tankers took up 19.2% and 16.3% respectively. 2009 was a difficult year but ICBC remained supportive to both its foreign and domestic shipping clients with good track records and sustainable business models. Continue Reading

A Noble Breed

Last week, our sister publication Freshly Minted reported on Maersk’s successful EUR 750 million (USD 1.3 billion) five-year bond. This was the shipping conglomerate’s first bond issuance, following a recent equity offering of USD 1.7 billion. In Asia, commodity trading house Noble Group has likewise found tremendous success in raising funds, suggesting that investors and bankers are getting warmed up to investing cash again. Continue Reading

The China Story Continues

Trying to get a sense of how huge the ship finance market in China has always been a daunting challenge for us. The domestic banks are highly competitive and remain guarded when it comes to disclosing their ship finance transactions. In our quest to make the market more transparent, we are very pleased to make some progress. This year, for the very first time in history, Industrial and Commercial Bank of China (“ICBC”) shared with us the size of their shipping portfolio in our annual bank debt survey. And likewise, for the very first time in Singapore, we are very grateful to Ms Helen Zeng, Senior Relationship Manager from Bank of China (“BOC”) for taking time off her busy work schedule in Beijing to share with us her views on the Chinese market at our conference.  Continue Reading

Lease Your Ship in China?

Given the relative lack of funding support from the domestic banks, is leasing a viable option for the Chinese small and medium sized shipowners? There are over 1,400 leasing companies in China, according to an unofficial estimate, but very few actually have the capacity to deal with big ticket items like ships. However over the past two years, state-owned banks have established wholly-owned leasing divisions. Industrial and Commercial Bank of China (“ICBC”), China Construction Bank, China Development Bank, China Merchant Bank, Bank of Communications and Min Sheng Bank have all ventured into offering ship leasing services, and many of these specialised leasing units offer leasing services not only to ships but to other asset types such as industrial machinery and construction equipment as well. Bank of China Leasing for example is established in Singapore and offers aircraft leasing services.

There have been varying degrees of success. These state-owned leasing arms prefer to carry out leasing transactions with the first tier shipping companies in China to minimise counterparty risk, but interest has so far been limited, bearing in mind that these top clients have no lack of competitive funding support domestically. Some leasing companies have nonetheless found success with the state-owned power generation enterprises in China who have the need for coal transportation. Continue Reading