Banks to force owners into ship sales.
BANKERS are getting ready to force troubled shipowners into ?voluntary? ship sales, as a precondition to renegotiated loan packages.
The tactic is gaining traction as banks assess and reassess their lending portfolios. It is a logical mid-point between foreclosures and extending covenant waivers.
Hans Kjelsrud, executive vice-president and general manager of Nordea, one of the world"s top shipping lenders, told Lloyd"s List that the wave of bankruptcies driven by foreclosures that was widely predicted at the end of 2009 is unlikely to materialise.
?I expect lenders this year would reach agreements that are conditional upon the borrower [owner] voluntarily selling, say, two out of its ten ships for the bank to agree a renegotiation,? Mr Kjelsrud said at an annual conference hosted by the Hellenic-American and Norwegian-American Chambers of Commerce.
Instead, bankers would rely on ?relationships? to stretch out loans over multiple years, or take other such halfway measures, rather than repossess ships, the Hellenic-Norwegian conference was told.
Colin Manchester, Americas head of shipping at Royal Bank of Scotland, said: ?Banks do not want to be owners.?
Giacomo Landi, senior vice-president at DnB Nor, another top maritime lender, said the issue of foreclosures has vexed bankers since the 2008 market crash. Now, as then, the question remains: ?Can banks handle foreclosing on all ships all at once??
The logical answer being ?No?, bankers would remain interested in working with committed owners and stretching the solution out over two or three years.
Still, Mr Landi told Lloyd"s List, the sheer severity of the latest recession is likely to mean that more loan failures would be seen in 2010 than last year. He said: ?We had a big adjustment last year, but surprisingly few blow-ups [foreclosures]. This year, that could be tested.?
Mr Kjelsrud and Mr Landi both insisted, however, that each borrower would be treated on its own merits, and ?good? owners would be rewarded with leniency. In this regard, a good-faith commitment, a management that is ready to compromise, the prospects of visible and predictable cash flows on the back of charters, or the clear proof of improved asset values over 2008 would be key factors that would influence lenders" flexibility and willingness to give more time.
Mr Kjelsrud said: ?Things are not as dark as they appear.? This muted confidence was based on his belief that, ?bankers would have no choice but to resume new lending? in 2010.
Some $33bn in new shipping lending business was written last year against $85bn in 2008, with the number of deals dropping to 100 from 300. Mr Kjelsrud said these shackles would start to come off in 2010. In special cases, bankers could happily write new loans to keep an older, good-quality loan in good standing.
Nordea lent $4bn in new capital in 2009 ?and we expect to surpass this figure this year?, Mr Kjelsrud said.
With floating rates expected to remain low for the near future, the overall interest charged on bank loans would also remain reasonable, the Hellenic-Norwegian audience was promised.