Alternative Ship Financing
As CEO of PBS SA Capital Group, Alexander’s Christodoulakis’ passion is to assist companies to grow, expand and reposition themselves in the market.
Using a vertically integrated management system for his global portfolio at PBS SA Capital Group, this has helped to provide companies under management with a degree of stability, sustainability, and growth in volatile global market times. Alexander’s management system enables asset and ship equity growth via alternative ship financing solutions. The ship financing solutions include fleet optimization and ship refinancing.
The global shipping industry is a capital-intensive business. The industry’s players need Capex financing, credit lines, and ship operational liquidity to handle the large scale opex of the intense daily cash flows. Over the past decades, international shipping enterprises relied on traditional ship finance, which was heavily dependent on bank financing, while alternative ship financing was limited or unattractive, up until the recent years.
However, the introduction of a number of alternative financing options in the wake of the global economic crisis created new means of alternative funding which in turn came in handy to those who needed it and had nowhere else to go. Significant changes to the market conditions in many parts of the shipping industry with newly created successful partnerships between financiers and experienced shipping groups. The shipping industry gained added advantages from capital markets in the recent years since they are able to issue debt easier as well as attract more equity participations. Initial public offers (IPOs) became popular among investors and shipping companies.
Today, there is a relevant disconnect between freight rates which remain low and are expected to increase and gain more traction during the winter months and the attractiveness of last year’s IPOs which were relatively low. But, this is expected to grow, starting from the winter season as well. While Private equity (PE) funds have been focusing on opportunistic investment options and have been doing well until presently, a number of capital management companies invested heavily with a specific focus on the shipping industry and real estate market. Private Equity funds provide flexibility in extending credit and also extend loans to riskier projects where banks would be more restricted from providing such funding.
The capital markets remain critical for the enhancement as well as the promotion of shipping business growth and the creation of corporate value since capital markets perform the following fundamental functions. The capital markets act as qualified intermediaries in providing funds required to finance new investments projects and sustain business growth.
This has created the important shift that has been seen in the recent years until today in the shipping industry. The international capital markets played a protagonist role of key importance, predominantly equity and bond markets, which provided a large share in fund-raising for shipping enterprises.
As shipping is a cyclical industry with idiosyncratic characteristics, strategic market timing remains of key importance to any shipping investment. The behavioral pattern of shipping business is related predominantly to the nature of shipping demand and supply, being sensitive to economic growth and trade, cyclicality in freight rates and vessel prices, demand and supply imbalances and fragmented business structures.
The issue of optimal capital structure blending with the appropriate funding method is critical for an industry that is capital intensive and its operation employs real assets (Ships) of high commercial value. Strategic decisions in shipping enterprises today, shift from simple profit maximization to corporate value enhancement. The capital intensity and magnitude of shipping investments always requires capital availability, but also careful vessel selection and reliable fleet diversification, based on solid capital frameworks is a must. In a highly dynamic and volatile business environment, modern shipping finance becomes highly sophisticated, innovative as well as complex in today’s market environment.