Marine Money : Cyprus is an attractive hub for shipping and finance

“The entry of Cypriot banks to shipping finance is welcome and their stated aim to lend sensibly to sensible people is a strong safeguard that should build the business and not endanger the industry.”

The first Marine Money Cyprus conference on 26th April 2017 was a huge success in every respect.  Over 219 delegates and speakers, with about one third traveling in from 14 countries, exceeded expectations and demonstrated the commitment of the Cypriot shipping and finance community, and the impact and interest Cyprus is having in other markets.

The day made clear that Cyprus is on the map, is going places and is determined to grow it’s mark in shipping and finance in the eastern Mediterranean not least because the maritime hub in their eyes is the extended hub of Cyprus and Greece. Greece and Cyprus together make for a huge horizon of shipping interest and this combined market is firmly in the sights of the Cypriot banks and service companies.

Major takeaways from the conference included:

  • The Cypriot banking sector is healthy with high liquidity and strong balance sheets.  Both Hellenic Bank and Bank of Cyprus have developed and expanded their shipping teams and have high ambitions.
  • Cyprus is likely to benefit from the Greek economic situation and from Brexit with companies and individuals looking for stability and European commitment.
  • Within shipping we are now at the classic inflection point and we should see an improvement with demand still attractive and supply growth being moderated and removed from the system.

Cyprus and banking

  • In 2013 Cyprus had to go through a crisis period caused by irresponsible lending and too much focus on the Cypriot real estate market which subsequently ended in collapse.
  • Now the banks are recapitalized with abundant liquidity.  The question is what to do with the liquidity.
  • The banks are looking for an alternative to real estate and they do not have a good performance of lending abroad.  So shipping is a great option.
  • The banks like a cyclical industry and that timing appears to be good both from a shipping and from a banking point of view.
  • The aim of the banks is to be involved in a global industry but remain local.
  • The Cypriot banks want to cater principally for the Cypriot and Greek shipping markets, at first at least, because this is better understood and analysed.
  • Timing is good also in respect of the global economy which is moving from a period of deflation fears to reflation expectations.
  • The global economic activity is picking up with a recovery in investment, manufacturing and trade.
  • Global growth will increase to over 3% driven by the emerging markets.

Private equity panelists: Mr. Hans Oust Heiberg, Investment Director, Sole Shipping Mr. Philippos Philis, Chairman & Chief Executive Officer, Lemissoler Navigation Co. Ltd Mr. James Gereghty, Managing Director – Portfolio Manager and Head of Distressed Investing, Siguler Guff Mr. Hamish Norton, President, Star Bulk Carriers Corp. Mr. Andrew Hampson, Managing Director – Asset Backed Investments, Tufton Oceanic

Finance alternatives

  • Private equity may not be happy with the performance of the investment over the past few years in shipping, but generally are happy with the performance of the manager doing a difficult job in a challenging market.
  • Private equity has changed in the past years – deal duration has shortened and return expectations have reduced.  They still wish to partner with key operators in the various shipping sectors.
  • Private equity did not only invest in distressed assets but also in a distressed industry.  They knew this and expected things to turn around sooner.  Lessons were learned and it is doubtful that the same mistakes will be made again.  Any fresh investments will be on the back of thorough research, vetting and due diligence.
  • Private equity is not only looking at investing but also at lending with pricing about L+7-10%.

General

  • If $500 per day makes a difference in your operating expenses then Cyprus is an interesting place.  Vessels can be run cheaper out of Cyprus than Hamburg or elsewhere in northern Europe.  Some have made the decision to move to Cyprus already, others are considering it.
  • The Greek and Cypriot hubs are very closely interrelated.  Many services in Cyprus can be used by the Greek shipping community even if whole operations do not move to Cyprus.
  • Cyprus is safe, it has a high quality labour pool, it is a place of reasonable cost, it has a nice living environment, good geography, and now a potential source of shipping finance from the Cypriot banks.  All in all it is an attractive hub for shipping and finance.
  • Cyprus has the three elements needed for success.  It has access to capital, availability of ship management expertise and it has a robust legal and tax system.

Marine Money event organisers will be back in Cyprus with next year’s conference on 25 April 2018.

 

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