(Writes through with comment, detail, context)
By Jonathan Saul
LONDON, April 3 Global private equity firm KKR
has bought $150 million worth of shipping loans from two
European banks amid a surge of interest in the industry as world
trade in goods picks up along with the global economy.
There have been a flurry of deals in recent months for ship
finance loans, many of which are being put up for sale by banks
under pressure to boost their capital in order to adhere to new,
stricter industry legislation born of the financial crisis.
The banks have suffered alongside the shipping firms they
lent to, as the latter endured one of their worst downturns in
decades. Many firms defaulted on loans and several collapsed. As
a result, the banks are offloading what they see as risky assets
at cheap prices, even as trading conditions improve.
KKR picked up loans taken out by Indonesian oil and gas
shipping group PT Berlian Laju Tanker that were sold by Sweden's
Nordea Bank and France's BNP Paribas, trade
finance sources with knowledge of the matter said.
KKR, Nordea Bank and BNP Paribas all declined to comment,
while Berlian Laju did not respond to requests for comment.
Pricing on the deal was in the region of 70 percent of the
value of the loans, the sources said.
A survey by accountancy and advisory firm Moore Stephens
last week showed shipping confidence in February reached its
highest level since 2008, while respondents indicated growing
interest from private equity investors.
"Through buying shipping loans at a discount, investors are
entering at a lower threshold. The freight market right now is
okay, so companies will likely be able to service loans, thus
funds make their 5 percent, which is a nice carrying yield," one
trade finance source said.
"If market goes up, their loans will appreciate, thus there
will be additional benefit and return. If the market goes to
hell or they think they can find a better management team, then
they just take over the vessels and become shareholders and own
KKR said in August it had formed a speciality finance
company to lend to the maritime industry that would "originate,
structure, underwrite, invest in and distribute debt financings
secured by high-quality maritime assets". Maritime Finance would
be capitalised with $580 million of equity, KKR said then.
Berlian Laju, which narrowly escaped bankruptcy last year,
said in January it had cut its fleet size by 44 percent and
would transfer a stake in subsidiary PT Buana Listya Tama to one
of its creditors Deutsche Bank. The shipping firm, which had
struggled with weak freight rates and escalating fuel costs,
reached a deal with creditors in March last year to restructure
its $1.9 billion debt.
Thomson Reuters LPC data showed Berlian Laju unit Gold
Bridge Shipping Corp took out a $685 million syndicated loan in
2011 in which Berlian Laju was an additional borrower on the
facility. Lenders included Nordea Bank and BNP Paribas.
Trade finance and banking sources said separately that
Lloyds Banking Group had received multiple expressions
of interest for a $500 million tranche of shipping loans and was
reviewing the offers.
Lloyds declined to comment.
One trade source with knowledge of the matter said KKR was
among those interested in the sale. KKR declined to comment.
"Every man and his dog is looking at this portfolio, it's
very competitive," one banking source said.
Other contenders included Citigroup and Bank of
America as well as private equity group Apollo Global
Management and asset manager Oaktree Capital Management
, trade finance sources said.
Citi, Bank of America, Oaktree and Apollo all declined to
The sale is likely to be the final large divestment of loans
from Lloyds' ship finance portfolio which was worth around 7
billion pounds ($11.64 billion) at its peak.
Lloyds' British rival Royal Bank of Scotland and
Germany's Commerzbank CBKG.DE and HSH are also selling
shipping loans to investors including private equity funds in
order to strengthen their balance sheets and divest assets that
have hurt them during the market downturn.
RBS said in February impairments on its shipping loans
soared to 341 million pounds last year, of which 310 million
pounds was in the fourth quarter. Its shipping assets were worth
6.5 billion pounds at the end of 2013, down from 7.6 billion a
year earlier, RBS said.
(Additional reporting by Steve Slater, Freya Berry and Anjuli
Davies in London, Lionel Laurent in Paris, Mia Shanley in
Stockholm and Randy Fabi in Jakarta; Editing by Sophie Walker)