Coastal ships’ funding

Banks’ interest in helping to fund the coastal shipping sector has recently been rekindled, after a stagnation period that lasted almost five years. This switch has relied on two factors: The need for new investments in the coastal shipping sector and the reduction by about 20 percent of bank lending, from 2.1 billion euros in 2002 to just 1.69 billion euros in 2005. The decline in the bank liabilities of the five listed coastal shipping companies was achieved thanks to the smooth repayment of loans. This was due to their restructuring, leading to realistic repayment methods, and to the sale of ships by companies. A study by XRTC, a shipping funding consultancy subsidiary of French bank Natexis Banques Populaires, suggested that the restructuring of the companies’ loans has been a long and painful procedure which apparently is about to be completed successfully. The common point in those restructuring cases was a reduction in unsustainable loan installments and the considerable increase of the loan repayment profile. Shipping sources told Kathimerini that the new status of play in the coastal shipping market may have triggered the prospects of bank funding, «should the effort that began in the last couple of years from all sides involved, i.e. state, companies and banks, continue.» Bankers believe that the coastal shipping market has many dynamic features and opportunities, but also contains some risks to be taken seriously before new deals currently under negotiation are realized. The annual XRTC study on coastal shipping showed that the sector’s dynamism is based on a number of factors: – There are some dynamic company administrations with high quality and long experience in management practices during adverse market conditions. – New realistic restructurings of loan contracts were completed after the completion of loan refunding. – The government is aiming at upgrading port infrastructures in its shipping policy. – Entrepreneurs have entered the sector as strategic investors and shareholders. – Economy fares have been liberalized from Piraeus. – There is the scope for further mergers and partnerships, creating strong firms that are ready to respond to the increasing competition. On the other hand, there are several risks, too, attributed to the market’s weaknesses: – The increased borrowing despite the loans’ restructuring. – Insufficient infrastructure at both big and small ports. – Insufficient service on unpopular routes throughout the year. – High average fleet age and a reduced number of ships on domestic routes. – International economic and geopolitical impact both on passenger traffic and cargo and on fuel prices, leaving companies exposed and unsupported by the state.

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