Tradewinds – Vessel hungry Greeks mull high interest loans

(Written by Georgios Hatzimanolis)

26 June 2013 - Greek owners struggling to get financing from banks are being offered loans with interest rates in the high teens

Cash strapped Greek owners keen to acquire new tonnage while prices remain low are so desperate for financing that they are considering taking out loans with rates in the mid to high teens, say market sources in Athens.

One local finance broker tells TradeWinds that a London based fund, which sources suggest is backed by Kuwaiti money, is offering loans against the total scrap value of a company’s older ships.

“It’s definitely an option that is being shopped around at the moment and I have heard of deals being done but not which owners have done them,” said Gerasimos Zolotas of Eurofin Group.

“We have taken this to a few clients but after carefully assessing the numbers, they decided the costs were too high given the current freight market,” added Zolotas, who would not name the fund.

He says these kind of agreements are normally appropriate for deals on early 1990s built ships.

“The sort of transactions we’ve looked at for this kind of financing has been for vessels valued around $4m to $6m,” he said.

Zolotas insists financing can be up to the scrap value of the vessel, but “wouldn’t recommend going above 80% of the scrap value because that would make repayment very difficult”.

He believes a number of owners are not accurately assessing their cost of equity in comparison to the cost of funding.

<h4>Poor position</h4>

Zolotas notes that traditional shipping banks are no longer in a position to consider transactions for older vessels.

“Which leaves smaller shipowners with very few financing options,” he said.

Lack of financing options is also affecting small players that wish to enter the market.

A long serving Greek captain now hoping to become an owner but also facing difficulties acquiring a loan through conventional banks says he also considered the high interest loan.

He asked to remain anonymous, but said: “After failing for lending from the banks, we shopped around for alternative options and one finance broker told of us of high interest loans available from funds based in London.”

“Unfortunately, we don’t have any vessels to put up as collateral, and, in any case, the rates, which we were told could be up to 16%, are extraordinarily high and would not have made much sense.”