* European banks tighten credit lines to shipping firms
* Diversifying funding lines key to survival
* Private equity funding in US likely to be difficult
By Randy Fabi and Harry Suhartono
SINGAPORE, Sept 27 Global shipping firms must
look to private equity funds and corporate bond markets to
obtain capital to expand their operations as traditional bank
financing dries up in the West, industry executives said on
European banks, traditionally the top lenders to global
shipping companies, have tightened credit lines as the region's
sovereign debt crisis spills over to financial institutions.
The International Monetary Fund warned last week that the
crisis had increased the risk exposure of European banks by 300
billion euros ($404 billion), and they needed to recapitalize to
ensure they can weather potential losses.
"The capital market at this moment is shut," said Philip
Clausius, chief executive of Singapore-listed First Ship Lease
Trust Management , at an industry conference.
"The way forward is funding diversification as the old days
of going to your house bank and getting the funding that suits
you are over."
The economic gloom in Europe has amplified the pain for
shipping companies, already struggling with rock-bottom freight
rates and a glut of new vessels that were ordered when times
Banks are more closely scrutinizing the companies they lend
to and asking clients to provide higher downpayments in the
difficult economic environment.
"In London in 2007, there were probably 18 banks that you
could have visited. Today, it is probably nearer to 10 and when
you visit those banks now you need a good strategic story,"
Nigel Anton, head of ship finance for Standard Chartered Bank,
told Reuters on the sidelines of the conference.
Shipping firms hoping to protect market share from industry
leaders A.P. Moller-Maersk (MAERSKb.CO), Mediterranean Shipping
Company and others will need to find financing through
alternative sources such as the corporate bond market and hedge
"The weakening of valuations, cheap interest rates and the
unavailability of credit has made publicly traded (shipping)
companies prime candidates for private money," said the maritime
and commodity brokerage firm Poten & Partners.
"The ability of private money to weather the near-term storm
could bring salvation to those that are feeling the public
Ship owners warned, however, that private funding in the
United States could prove more difficult due to the region's
aversion to maritime investment.
"Most US money-market managers have no idea about shipping
and they generally distrust it," said Graham Porter, director
and co-founder of Seaspan , a leading containership
"It's going to take a long time and a lot of rating agencies
and everything else to build up that trust. This is not
($1 = 0.742 euros)
(Editing by Matt Driskill)