Trends in Shipping Finance

KEXIM

JINYOUNG LEE

2

Table of Contents

Ø 1. KEXIM at a Glance

Ø 2. Trends in Shipping Finance

- 4 Key words (China, LNG, M&A, Scrubber)

- New Ship Sector Understanding

- KEXIM’s approach

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The Export Import Bank of Korea(KEXIM)

1. KEXIM at a glance

• Established in 1976 under the special act

- Functions as a government vehicle to remedy

market failure

• 100% owned by the government

- The government fully owns KEXIM’s capital directly

and indirectly through other government arms

• Par with Sovereign Ratings

- Moody’s: Aa2(stable), S&P: AA(Stable)

Fitch : AA-(Stable)

• Financial Products provided by KEXIM

* According to OECD arrangement

- Direct Loan

- Loan Guarantee

- Bond Guarantee

- Scrubber Financing

Korean Ship-owners Foreign Ship-owners

• Exposures by Vessel Types

2012 vs 2018

2012 2018

53%

18%

13%

11%5%

30%

27%17%

14%

11%

21%

79%

Ship Offshore

48%52%

Ship Offshore

21%

79%

4

Trends

Financial Market- Expansion of

Chinese ECA &Leasing

New Regulation- Retrofittingscrubbers

Shipping Market- Increase in

M&A

New Building Market

- Increase in LNGcarrier orders

4 Key words : China, LNG, Scrubber, M&A

2. Trends in 2018

5

Issue : Aggressive Chinese ECA & Leasing terms

2. Trends : Financial Market

Source : Marine Money

• Chinese ECA and Leasing Institutions are

suggesting more aggressive Terms and Conditions

- Balloon, Higher LTV(90~95%), Longer tenor & profile

- Best Terms (Marine Money Aug/Sep)

1) 100% leverage

2) 12 years tenors + 20~25 years profile

(exposure)

• Exposure : CEXIM 7th(2016) -> 1th (2017)

• Chinese Institutions : 9 out of 40 companies

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Conventional Lenders - Weaker Borrowers - Stronger

Weaker Covenants

Longer profile (18~20years)

Decrease in

new building orders

Shorter T/C

Limitations by

OECD arrangement Over-Capacity

Market Volatility

Higher LTV(More than 90%)

2. Trends : Financial Market

Credit Risk

Lower Interest Rate

Issue : Impacts from aggressive Chinese ECA & Leasing terms

Aggressive Chinese Leasing Tool

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Angelicoussis(7), BW(4), Alpha Tankers(2) etc

Tanker

A.P. Moller Maersk(5), MSC(11), Zodiac(9) etc

Container

Angelicoussis(8), Teekay(6),Gaslog(5), Cardiff Marine(4) etc

LNG Carrier

77

8

167

52

85

46

70

130

168

290

65

250

181

599

83

422

195

318

24

151

93

326

200

236

433

111

62

80

305

142

158

464

155

152

56

109

53

107

68

48

8

36

48

28

18

14

12

- 200 400 600 800 1,000 1,200 1,400

2011

2012

2013

2014

2015

2016

2017

2018.7

Bulker Tanker Container LNG∙LPG Product Carrier Drillship Offshore

Issue: Increasing LNG carrier orders

2. Trends : Ship Building Market

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Expansion of LNG SPOT operations – Challenge for Lenders

• Increase in Global Trade is expected • Increase in SPOT operations

• Market Expectations (Freight Rate)

2. Trends : Ship Building Market

9

2. Trends : Shipping Market

Issue : Increase in M&A activities among diverse vessel types (2013-18)

• Fleet Deals by Purchase Price

• Fleet Deals by Vessel Capacity

[ Containers ]

(2017) Hamburg Sud to Masersk(U$4billion)

(2018) OOCL to COSCO (U$6.3billion)

[ Tankers ]

(2015) Principal Maritime to Teekay Tankers (U$0.7billion)

(2017) BW VLCC to DHT (U$0.6billion)

(2018) Gener8 to Euronav (U$2.0billion)

• Review of Shipping Cycle

• 42 M&A deals since 2013

Source: Clarksons

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Issue : Retrofitting Scrubbers

2. Trends : New Regulation

• Low sulfur regulation from 2020 • Key words for KEXIM’s support

• Owner VS Charterer

Who pays for the cost ?

When can we install this ?

Unsecured

u Difficulty obtaining senior lender’s consentsfor sharing 1st ship mortgage

Credit rating is a critical point

u Scrubber should be in bulk for financingIt is small for financing separately since

the value of each scrubber is around U$5M.

Packaged

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India, Brazil etc.

IWG(International

WorkingGroup)

Reflecting new trends

in shipping finance

Interest rate and Premium

Scope of Application

Tenor of Loan and Guarantee

2. Trends in Shipping Finance

OECD arrangement IWG arrangement

• 17 countries including China, EU etc.

• From 2012. 12 (Meeting : 3 times a year)

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OECD SSU vs. IWG SSU (Ship Sector Understanding)

18th IWG scheduled on Jan 2019.

OECD SSU

v Minimum Down Payment : 20%

v Tenor : Maximum 12 years

v Repayment Structure :

- No Balloon, No Bullet

- Only Amortization allowed

IWG SSU

v Minimum Down Payment : 15~20%

v Tenor : Maximum more than 12 years

v Repayment Structure :

- Balloon shall be allowed under certain

conditions.

2. Trends in Shipping Finance

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l Building Communication Channels

(Regular/Irregular)l Discussions about market trends, oil price,

shipping industry, etc

MoreContracts

l What can we achieve?

1) Understanding Market Needs - Develop creative and innovative solutions

2) Risk Management- Proactive actions

- Minimizing project risks

3) Effective Financial Structure- Maximizing Flexibility (ECAs + Commercial)

4) Common understanding about issues- Quick decision and process

Lawyers & Analysts

InternationalBanks

Ship Owners KoreanShipyards

MoreOpportunity

MoreOpportunity

MoreOpportunity

KEXIM’s approach : Collaboration with ship owners and commercial banks

2. Trends in Shipping Finance

Thank you