……Dagfinn Lunde, a high-profile industry figure after stints at DVB, Det Norske Bank and Intertanko, is now one of the principles at fintech company eShipfinance.com.
Founded in 2018, the platform seeks to match those needing to finance shipping deals with potential lenders, ranging from banks to private equity and family offices.
From the investor’s point of view, the attractions of fintech platforms include potential bespoke opportunities to invest in low risk, secured maritime loans with attractive yields, served up in an easy, fast and secure manner. On a risk/reward basis, lending to shipping can compare favourably to other debt products, such as mortgage-backed securities, investment grade corporate bonds, municipal bonds and direct investments.
Fintech platforms will suit some shipowners more than others. The household names are still fought over by the banks and larger tickets will usually find cheaper money through listing or the over-the-counter market. But smaller players are faced with the reality that bank exposure to shipping is now at just 63% of where it stood in 2008, even though the world fleet is some 40% larger. For these companies — and they make up most of the industry — fintechs can offer speed and cost efficiency, and the ability to reach a wider lender base than they otherwise might. Term sheets can sometimes be ready in as little as three days.
However, Lunde and his business and life partner Marina Tzoutzouraki, also a former ship finance professional with Credit Lyonnais and EFG Eurobank, is selective on which transactions it will take forward. During the past year, requests have come in at around the $1bn mark, but only around one in 10 were deemed of sufficient quality to take to investors.
The active pipeline was around $77m at the time of interview, and there were new discussions over a further $80m of lending. Deals in the $3m to $20m bracket are seen as the sweet spot. But Lunde has detected a change in demand over the last 12 months, both in terms of ambition and range of finance required.
“In the beginning we had one-ship deals and now we’re getting up to five ships in a deal,” he said. “The requests have changed a bit from the pure debt financing that we started with. We started purely with mortgages, but now we have had several discussions with people who want to buy other companies, and some people who need equity for their projects.”
But with central banks in many countries jacking up interest rates to combat inflation, borrowing is inevitably become more expensive. Rising interest rates have wrecked cashflow projections on many proposals.
“Many projects were rejected because we couldn’t see that the owners would make money on it. If the owners don’t make money, we don’t want to give them a loan. “If there’s a bank willing to take it and you can go down to under 3.0% or 2.5% over SOFR.”
SOFR — which has taken over many of the functions of the old London Interbank Offered Rate in the wake of a rate-rigging scandal — stood at the time of writing at 5.3%.
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