This article first appeared in Lloyd's List on Wednesday 14 October 2009.
Nigel Lowry - Wednesday 14 October 2009
Private equity funds have yet to make an impact on shipping, but their time could be quickly coming, a partner at prominent law firm Holman Fenwick Willan has said.
Commercial drivers prompting interest in private equity include insufficient bank financing, attractive investment opportunities and a hole that is likely to appear in financing of newbuildings, Jonathan Campbell said.
HFW has recently been involved in setting up several funds, but these were currently "in limbo" as backers waited to watch market developments.
"Although we have seen examples of one or two other funds being set up, it is still a little early yet," he said.
"We think we are a bit ahead of the game.
"There is definitely a lot of private money out there looking for a home and it is a question of marrying the equity with the shipping expertise."
Speaking on the sidelines of a fully subscribed HFW private equity seminar for shipowners in Greece, Mr Campbell said there was plenty of interest among the Greek shipping community.
"In Greece it is more likely that a shipowner or a shipbroker will put together a deal and join forces with people who want to invest," he said.
Private equity managers were looking at various businesses and generally needed "a beginner's guide to shipping".
HFW steers them to talking directly with shipowners, said Mr Campbell.
Meanwhile, the firm was telling owners there was a "dearth of funding and there will continue to be a dearth of debt funding", he said.
"You have to start thinking of alternative ways to finance your fleet. Our view is that the banks are not going to lend for another year at least."
In spite of the distress among containerships, Mr Campbell said that in HFW's experience investors were looking squarely at the dry bulk and tanker markets.
"I think people see the big potential is in the asset play, but at the same time they have watched the returns shipping has made over the past six to seven years."
According to Mr Campbell, private equity demanded high returns and was likely to be more expensive than bank loans, even with today's larger bank margins.
"But it may be that it is the only game in town," he said. "We believe that there will be new investors in shipping who have not been in the market before."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.