1/21/2014 ‘Maritime CEO’ interviews Basil Karatzas | Shipping Finance by Karatzas Marine

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‘Maritime CEO’ interviewsBasil KaratzasPosted on January 17, 2014

We have had the pleasure recently to have an exchange of ideas on marketdevelopments with the editors of Singapore-based ‘Maritime CEO’, an esteemedpublication on international maritime matters with strong focus on the marketdevelopments in Asia, and specifically in China. Here are excerpts of our interview:

Karatzas Marine Advisors: Owners must become more transparent and corporate

New York: In the new straitened times for shipping, shipowners will have to get moretransparent and corporate with their capital and organisation structures, argues a leading NewYork-based ship wheeler dealer. “Banks will be looking for corporate lending, and access toFollow

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alternate sources of capital will require more documentation but mainly setting up propermanagement structures,” says Basil Karatzas, who heads up his eponymous firm, KaratzasMarine Advisors.

Karatzas Marine Advisors is a shipbrokerage and shipping finance advisory firm, representingmostly financial shipowners, financial institutions and banks in shipping. It has sold vessels at theexclusive mandate of Bank of America Leasing, HSH, AIG, when the charter/lease ended, or thebank decided to have the vessels sold. It has been advising private equity and institutionalinvestors on shipping matters, as well as advising private, independent Greek owners inaccessing institutional investors.

On trends for ship finance this year, Karatzas reckons debt financing will not be easily availablewith most of the traditional shipping banks in Europe not having the capacity for new loans, on alarge, sustainable basis. “They are active on a limited and very selective capacity in terms ofclients, asset classes – type of vessels – and specification of vessels – age, spec, etc,” saysKaratzas. Most of the European banks are still pre-occupied with legacy issues, says Karatzas,implying old, bad loans. They do not have additional capacity to expand their portfolios at thisphase of the cycle, he reckons. Furthermore, banks are looking forward with Basel III in mind,when asset based lending, such as first preferred ship mortgages, will be very costly in terms ofreserves the banks will have to maintain, which implicitly will reflect the spread the banks that willhave to charge their clients in order for the banks to get their expected return on capital.

In further bad news for owners, the cost of capital will be getting higher, whether for bank lendingor accessing alternative sources of capital, Karatzas says. Moreover, with banks becomingextremely choosy on assets to finance, owners looking to acquire value priced vessels of 15years of age will have to depend on their own capital.

Still, with banks remaining wary of lending to owners at present, Karatzas is confident that thewave of private equity investments in shipping shows no sign of abating.

According to a recent article in the Financial Times, private equity funds have about $780bn drypowder to invest in projects in all industries.

“By the virtue of this number alone, they will have to look into every industry, including shipping,”says Karatzas.

“Shipping as an industry has been in a multi-year trough and now it’s in the early stages of acyclical recovery, thus it provides for good investment opportunities on its own right, for funds toenter the cycle now and ride the wave,” the finance advisor concludes.

Karatzas, originally from Greece, has been living in the US for more than 20 years. His advisorycompany was founded two and a half years ago. [13/01/14]

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The interview was published online originally on January 13th, 2014 and can be found byfollowing this link.

For more information on Maritime CEO, please take a minute to explore their site by clicking onthe logo herebelow!

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