SHIP FINANCE PRACTICES IN MAJOR SHIPBUILDING ECONOMIES
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OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS August 2019 No. 75
This paper was approved and declassified by written procedure by the Council Working Party 6 on Shipbuilding (WP6) on 21 December 2018 and prepared for publication by the OECD Secretariat. Note to Delegations: This document is also available on O.N.E under the reference code: C/WP6(2018)14/FINAL This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Note by Turkey The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”. Note by all the European Union Member States of the OECD and the European Union The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus. © OECD 2019 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to This email address is being protected from spambots. You need JavaScript enabled to view it.
Table of contents Executive Summary .............................................................................................................................. 7 1. Introduction ....................................................................................................................................... 8 2. Trends in Ship Finance ................................................................................................................... 13 2.1. Sources of Capital....................................................................................................................... 13 2.1.1. Equity ................................................................................................................................... 13 2.1.2. Debt...................................................................................................................................... 14 2.2. The Roles of Public Intuitions and Export Credits..................................................................... 18 2.2.1. Export Credit Agencies........................................................................................................ 18 2.2.2. Other types of interventions by ECAs beside ECs............................................................... 21 2.2.3. Other public financial supports............................................................................................ 22 2.3. Other types of Ship Finance........................................................................................................ 22 2.3.1. Shipyard Finance.................................................................................................................. 22 2.3.2. Mergers and Acquisitions..................................................................................................... 24 3. Ship Finance Practices in Major Shipbuilding Economies.......................................................... 26 3.1. China........................................................................................................................................... 26 3.1.1. Shipbuilding industry export-import figures........................................................................ 26 3.1.2. Export Credits ...................................................................................................................... 28 3.1.3. Leasing ................................................................................................................................. 29 3.1.4. Equity-For-Debt Swaps (EDS)............................................................................................. 33 3.1.5. Mergers & Acquisitions....................................................................................................... 33 3.1.6. Shipyard finance................................................................................................................... 33 3.2. Japan ........................................................................................................................................... 34 3.2.1. Shipbuilding industry export-import figures........................................................................ 34 3.2.2. Export Credits ...................................................................................................................... 34 3.2.3. Leasing ................................................................................................................................. 35 3.2.4. Mergers & Acquisitions, cooperation agreements and joint ventures.................................. 37 3.2.5. Other financing types........................................................................................................... 37 3.3. Korea........................................................................................................................................... 38 3.3.1. Shipbuilding industry export-import figures........................................................................ 38 3.3.2. Export Credits ...................................................................................................................... 39 3.3.3. Government programs.......................................................................................................... 39 3.3.4. Capital markets..................................................................................................................... 41 3.4. Norway........................................................................................................................................ 41 3.4.1. Shipbuilding industry export-import figures........................................................................ 41 3.4.2. Export Credits ...................................................................................................................... 41 3.4.3. Commercial banks................................................................................................................ 42 3.4.4. Bonds.................................................................................................................................... 42 3.4.5. Equity ................................................................................................................................... 43 3.4.6. Mergers & Acquisitions....................................................................................................... 44 3.5. The European Union................................................................................................................... 44 3.5.1. Shipbuilding industry export-import figures........................................................................ 44 3.5.2. Policy framework ................................................................................................................. 46 3.5.3. Export Credits for selected EU members............................................................................. 47 SHIP FINANCE PRACTICES IN MAJOR SHIPBUILDING ECONOMIES │ 5 OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS 3.5.4. Commercial banks................................................................................................................ 47 3.5.5. Bonds.................................................................................................................................... 49 3.5.6. Venture Capital .................................................................................................................... 49 3.5.7. Mergers & Acqusitions ........................................................................................................ 49 3.5.8. Selected recent ship finance activities by EU’s actors......................................................... 49 3.6. Turkey......................................................................................................................................... 52 3.6.1. Shipbuilding industry export-import figures........................................................................ 52 3.6.2. Policy framework ................................................................................................................. 52 3.6.3. Export Credits ...................................................................................................................... 53 3.6.4. Recent trends on the industry............................................................................................... 53 3.7. The United States........................................................................................................................ 54 3.7.1. Shipbuilding industry export-import figures........................................................................ 54 3.7.2. Policy framework ................................................................................................................. 54 3.7.3. Commercial banks................................................................................................................ 55 3.7.4. Bonds.................................................................................................................................... 55 3.7.5. Leasing ................................................................................................................................. 55 3.7.6. Equity ................................................................................................................................... 56 3.7.7. Shipyard finance................................................................................................................... 56 References............................................................................................................................................ 58 Tables Table 2.1. ECs for ships under Arrangement and SSU terms (USD in millions), 2008-2017. ............. 18 Table 2.2. ECs supported under SSU –Annex I, 2008-2017 - USD in millions ................................... 20 Table 2.3. Top ten countries by country of the borrower of ECs for ships, 2016-2017........................ 21 Table 2.4. Countries providing ECs for ships ....................................................................................... 21 Table 2.5. Shareholder composition of the top ten shipyards, September - 2018 ................................. 23 Table 2.6. Shipyard financing transactions, 2007-2018 ........................................................................ 24 Table 2.7. Equity financing alternatives................................................................................................ 25 Table 2.8. Debt financing alternatives................................................................................................... 25 Table 3.1. NYK Summary of Green Bond............................................................................................ 38 Table 3.2. Top US Shipping Company Fleets by Value (in USD billion), June 2018. ......................... 56 Figures Figure 1.1. Fleet to trade ratio, 2007-2017.............................................................................................. 9 Figure 1.2. Total sources of ship finance and share of ECs under SSU terms...................................... 10 Figure 1.3. Three-Month London Interbank Offered Rate (based on USD) ......................................... 10 Figure 1.4. Interest/EBITDA for shipping companies .......................................................................... 11 Figure 2.1. Total capital raised thanks to bond and equity issuances / Ship completions 2007-2017 - USD in million / millions of cgt............................................................................................................. 13 Figure 2.2. Equity financing by types, 2007-2017 - USD in million .................................................... 14 Figure 2.3. Syndicated shipping loans, 2007-2017 - USD in million.................................................... 15 Figure 2.4. Bond proceeds, 2007-2017 - USD in million...................................................................... 15 Figure 2.5. Leasing Deals, 2007-2016 - USD in million....................................................................... 16 Figure 2.6. Selected Banks' New Business Volume, 2017- USD in billion.......................................... 17 Figure 2.7. Global shipping lending portfolios, 2006 - 2017 ................................................................ 18 Figure 2.8. ECs for ships under Arrangement and SSU terms for new buildings, 2008-2017, USD in millions.......................................................................................................................................... 19 6 │ SHIP FINANCE PRACTICES IN MAJOR SHIPBUILDING ECONOMIES OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS Figure 2.9. ECs supported under SSU –Annex I, according to ship-type over 2008-2017................... 20 Figure 3.1. 2017 Shipping Portfolio League Table, USD in billion...................................................... 27 Figure 3.2. Chinese Leasing Spending in 2016, USD in billion............................................................ 30 Figure 3.3. Top 5 Chinese leasing companies’ possession of vessels, December 2017........................ 31 Figure 3.4. Vessel JOLCO structure...................................................................................................... 35 Figure 3.5. EU buyers, aggregated over 2007 – 2017 ........................................................................... 45 Figure 3.6. Top shipping nations by value, in USD billion................................................................... 46 Figure 3.7. German banks' exposure to shipping loans (EUR in billions) ............................................ 51 Figure 3.8. Cash and bank credits to liabilities ratios, 2014 – 2016...................................................... 54 Boxes Box 2.1. Comparison of financing alternatives..................................................................................... 25 Box 3.1. CMB Financial Leasing orders five containerships............................................................... 32 Box 3.2. An example for multi-actor JOLCO ....................................................................................... 36 Box 3.3. Borealis Finance LLC bond issuance ..................................................................................... 43 Box 3.4. OTC GoodBulk equity issuance ............................................................................................. 43 Box 3.5. A credit facility example for two-new-buildings.................................................................... 48 Box 3.6. Shipping portfolios of European Commercial Banks............................................................. 51 Box 3.7. Refinance credit example – International Seaways ................................................................ 57