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Wednesday, April 22, 2009

KG houses will play decisive role for owners


Patrick Hagen, Frankfurt - Tuesday 21 April 2009

Torsten Teichert: Equity is more important than ever

THE German KG ship financing industry will play an important role in helping large shipowners to unburden their balance sheets, according a leading German financing executive.

“Equity is more important than ever and KG houses will play a decisive role as equity providers for shipowners,” said Lloyd Fonds chief executive Torsten Teichert.

“In the past, large liner shipping companies such as Maersk or Cosco were not interested in tapping the KG market to finance vessels,” Mr Teichert said.

This would change, he said. The KG system would allow them to sell and lease back vessels.

“They will be under immense pressure from their banks to sell ships to unburden their books,” Mr Teichert said.

“I believe that a huge market is emerging here for KG houses.”

In the past, large lines did not need the KG market as they could finance 95% of a newbuilding with bank loans.

“Next year we will see a high demand for equity.”

Mr Teichert stressed that shipping markets would have to improve and market prices for vessels will have to stabilise first.

He said the situation in container shipping would remain “disastrous” for the next 12 to 18 months.

However, Mr Teichert said that it would be necessary for KG houses to develop new types of KG funds to encourage investors to put money in shipping funds.

Investors are reluctant to buy shares in KG funds following losses.

New fund types could include ones with lower commissions or they could include a right to exit for investors, Mr Teichert said.

“The industry always lived by developing innovative financing schemes,” he said.

Lloyd Fonds made a loss of €4.6m ($6m) in 2007 after a profit of €20.2m in 2007.

For its closed-end shipping funds, the company collected only €117m, compared with €253m a year earlier.

The company has a pipeline of 26 vessels scheduled for delivery between 2010 and 2012.

“We are in negotiations with shipyards for all of these vessels and we made a certain amount of headway for every order,” said Mr Teichert.

One outcome of these efforts could be that yards would delay building vessels or reduce the purchase price.

However, Mr Teichert refused to give any details.

Lloyd Fonds is under pressure to find employment as 14 of the vessels that it has ordered have no charter contracts.

They include four 12,800 teu vessels that the company ordered with shipowner NSC Schifffahrtsgesellschaft from Hanjin’s Subic Bay facility.

Mr Teichert confirmed that South Korean shipyards were much more reluctant to change existing orders than Chinese yards.

“But the situation has improved somewhat.”

There had been several agreements to delay the construction of vessels in previous months, he added.

Mr Teichert forecast that about 10% of the containerships ordered by German owners or KG houses would not be delivered at all.