Ship finance "black hole" tops $140bn.
THE ship finance ?black hole? is about $140bn-$150bn, according to the latest estimate from Tufton Oceanic.
Andrew Hampson, managing director, Tufton Oceanic Asset Backed Investment Funds, told the Marine Money London Ship Finance Forum that he had seen recent estimates for the unfunded portion of the orderbook ranging between $100bn and $400bn. ?We came up with $140bn-150bn as the size of the ?black hole?.
He said that Tufton estimates the value of the global fleet at about $750bn and the current orderbook at about $350bn-$450bn, depending on the assumptions about cancellations.
In normal market conditions this gap would be covered by normal loan run-offs. ?I expect that most shipping banks will continue to do roughly the same volume of lending but some banks could have to make dramatic reductions, which could leave a gap.? He estimated that if $40bn run-off annually each year is available to lend over three years, this would leave a net ?black hole? of about $30bn.
He added that there is a danger that the gap could be filled in ways that are not good for the wider shipping industry, such as by increased export credits or funding from banks in shipbuilding countries, such as China. This would mean the ships would still be delivered and prolong overcapacity.
Other sources of finance can fill some of the gap, such as private equity, bond issues and other funds, but this is unlikely to be sufficient and are mainly aimed at good names in shipping. ?Private equity is not the solution,? Mr Hampson said.
Other speakers thought that it might not be necessary to plug the gap. ?I do not think the hole will be plugged, which would be a good thing,? commented Erik Hellberg, chief executive of RS Platou Markets.
Andreas Poulsen, managing director Global Shipping at BTMU Capital Markets went further, suggesting: ?The best option is to avoid the need to cover the shortfall by cancelling orders, especially those of weaker shipowners.? He added that it is some of the biggest shipping banks that are experiencing the biggest problems, making filling the gap uncertain.