Financing of shipping and offshore in Pareto Bank
Av Petter Flo-Bakke, 11. februar 2021
Norway has a long and proud maritime history and has for more than 150 years been an important part of the international shipping industry. The shipping and offshore segments constitute a viable and growing maritime cluster contributing to industrial value creation both in Norway and abroad and the Norwegian maritime cluster is a significant player in a global perspective. Pareto Bank aims to contribute to the development of this Norwegian core competence by offering customized financing solutions for shipping and offshore investments to our clients.
We provide loans - it is that simple
Shipping is a highly capital-intensive industry, and the right financing structure is an important factor for maintaining competitiveness in a sector with few barriers of entry, cost consciousness and where earnings can be very volatile. Since the financial crisis, the capital landscape for the shipping industry has seen major changes.
Many traditional shipping banks have suffered big losses and exited the sector. There has also been an increasing trend amongst the large shipping banks to increase their focus on selling additional less capital-intensive services from the banks’ product range.
The trend has been growing on the back of increased capital requirements for traditional ship financing implemented by regulatory bodies over the last decade. This increased focus on “cross sell” have led the large shipping banks to prioritizing large cap clients who tend to make use of a bigger portion of the bank’s product portfolio within (i.e. ECM and DCM products).
This shift in focus from the banks have led to a large number of shipping companies and shipping investors facing challenges in obtaining financing. Lack of interest for the SMB market and project financing in shipping from the large financing providers have opened doors to smaller niche banks like Pareto Bank.
At Pareto Bank, we have extensive ship financing experience, and we provide both project financing of individual projects as well as financing directly to shipping companies. We thus have the necessary expertise to advise our customers and we are dedicated to finding solutions and opportunities together with our clients.
Flexibility and custom-made structures are often required to finance shipping projects and our specialized team, with unique shipping and financing experience, can offer tailor-made financing solutions as well as help new and existing customers realize new business opportunities within the shipping and offshore segments.
Strategy and focus when financing shipping and offshore
The type of structures we provide can usually be divided into two main areas:
- Shipowners: financing directly to shipping companies
- Project financing: financing of syndicated shipping or offshore projects, part financing the acquisition of one or several vessels
Pareto Bank might be best known as a project finance bank; however we also provide financing directly to fully integrated shipping companies.
Credit decisions are made based on in-depth analysis of segment, vessel type, market outlook and lender’s commercial and financial standing. Shipping is a global market, but Pareto Bank has its main focus on clients based in Scandinavia. Pareto Bank wishes to contribute to supporting the Scandinavian shipping cluster through innovative financing solutions and we aim to be an important advisor and partner for our clients.
Our focus is financing of modern and liquid assets with first priority mortgages in the vessels as our main tangible security. We aim to have a prudent loan to value ratio (LTV) with an LTV of between 50 and 60 %, however this is dependent on the asset type, contract coverage, additional security etc.
For recourse facilities where the facility amount is partly or fully guaranteed by a reputable counterparty, higher LTVs can be considered, however always dependent on the strength of the guarantee provided. Our target ticket size is between USD 10 million and USD 20 million per financing with a tenor of 3 – 5 years and we can offer both bilateral financings as well as club deals and syndicates in collaboration with other banks.
Together with the customer's competence and track-record within shipping, the vessel’s condition and the liquidity of the asset, entry point from a historical point of view, cash break/even levels compared to historical and expected future earnings as well as the market outlook for the relevant segment are all important elements that the bank will consider.
For each financing we make a separate in-depth credit analysis in order to present a complete risk assessment for the bank, but also provide you as client with a robust financing structure.
Quick and efficient processes provides opportunities when investing in shipping and offshore
We know that access to capital is a big competitive advantage in the shipping industry and when requesting financing of a vessel, you are often in an investment process where time is of the essence.
Pareto Bank has short decision lines and can offer predictability that gives you a competitive advantage. We can quickly provide you with an indication of the terms and conditions for the financing we can offer, both in terms of loan amount, LTV, pricing and repayment structure.
We are flexible, which gives us the opportunity to finance projects that require tailormade structures and we have extensive experience with both project financings and financings directly to shipowners.
As a provider of debt capital, we are a partner in the project. A financing partner who understands your needs with a desire to contribute in the best possible way for you to succeed with your investments. We strive continuously to be the preferred and trusted business partner offering the predictability and assistance you need to navigate through changing market conditions.
We look forward to hearing from you.
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Om Pareto Bank
Pareto Bank ble børsnotert i 2016, og Pareto AS er bankens største eier. Banken har en forvaltningskapital på rundt 20 milliarder. 2022 var bankens beste år noensinne med et resultat etter skatt på kr 555,5 mill. Pareto Bank har en god kapitalbase og solid plattform for videre lønnsom vekst.
Vi er spesialisert på eiendomsfinansiering, bedriftsfinansiering og skipsfinansiering. Banken har en særlig sterk posisjon innen finansiering av boligutviklingsprosjekter. I tillegg tilbyr vi en rekke forskjellige finansieringsløsninger til mellomstore bedrifter. Innen shipping retter vi oss mot norske rederier, eiere og det norske prosjektmarkedet. Vi bygger alltid vårt arbeid på faglig kompetanse og bruker vår kunnskap til å skreddersy løsninger. Vi er ubyråkratiske og får ting til å skje. Raskt, ryddig og tett på.