In International Shipping News 30/09/2016
With ship finance from the traditional lending base more difficult for many to access since the global financial crisis, Asian finance has increased in prominence globally. Within this wider trend, one recent development has been Chinese leasing companies providing finance under not only traditional financial leasing structures, but also under an ‘operating lease’ model.
An Emerging Source
In the main, activity by Chinese leasing companies in the shipping sector has been undertaken through ‘financial lease’ arrangements, under which the lessee typically manages the unit, takes ownership at the end of the lease, and generally is regarded as the primary ‘owner’ of the unit. However, there has also been a trend towards Chinese leasing company activity under an ‘operating lease’ model. Here, the leasing company retains ownership of the vessels at the end of the charter period, with the assets remaining on the lessor’s balance sheet. Since the start of 2013, Chinese financial leasing companies have accounted for orders of around 12.2m GT under operating lease models, about a quarter of tonnage ordered by Chinese owners.
New Starts
While this form of Chinese leasing company activity was responsible for some orders in 2012 and before, these companies started becoming a notable force in ship ‘ownership’ under the operating lease model in 2013, and in 2013-15 they accounted for an average of 3.4m GT per annum of orders in this way. Some of the early orders were by BOCOM and Minsheng for large boxships for CMA-CGM and MSC. Chinese leasing companies have since broadened their portfolio, with ICBC Financial Leasing placing orders this year for ten very large ore carriers (VLOCs) for Vale. These orders are characteristic of the preferences of China’s leasing companies, with long-term charters with reputable owners providing stable income. Subdued newbuilding interest has also motivated some Chinese builders including to establish their own leasing arms to help win orders, with further yard-affiliated companies understood to be in the pipeline.
And Old Ones
The Chinese leasing companies have also expanded their secondhand portfolios, acquiring under the operating lease model an estimated 3.3m GT since the start of 2013. Many of these vessels have been bulkers, after the original owners cancelled orders or encountered financial difficulties. They have also been active in buying tonnage from shipping companies and leasing units back to them, helping the sellers to free up funds. ‘Top tier’ clients have again been targeted, with recent deals including products tankers with BP and VLOCs with Vale.
A Greater Presence
So, China’s leasing companies have expanded their activities, and today account for the ‘ownership’, under the operating lease model, of a fleet of 8.2m GT (6% of the Chinese-owned fleet) and an orderbook of 6.7m GT (20% of the Chinese total). Against a backdrop of limited availability of finance from traditional sources, Chinese leasing companies are clearly exerting a more significant influence.
Source: Clarksons
