Navigating the changing OSV financial landscape

Norton Rose Fulbright partner Eleanor Martin said other “alternative financiers were coming in to fill the gap that the banks perhaps cannot fill themselves”.

She added that private equity lenders can provide finance at lower costs than banks due to their relationship with owners and executive management.

“Owners realise they can get a lower cost of capital because they have very strong, deep relationships with private equity,” said Ms Martin.

But there are challenges and risks, especially if owners overextend or experience lower demand for their assets.

“I remember structuring a deal some time ago, where the private equity company had come in and bought an OSV owner,” said Ms Martin.

She said there were more "specialised players” emerging for OSV finance and new types of financing coming “which is about strategic joint venture agreements.”

This could involve offshore oil and gas production companies teaming up with private equity houses and acquiring vessels, or providing finance to owners to build them.

"In some cases, the oil and gas companies can bring their expertise and access capital through the private equity relationships at a much lower margin,” said Ms Martin. 

Another source of finance is available from banks in the Middle East if offshore assets meet certain criteria. 

“Islamic finance is coming back onto the cards for shipping and offshore assets,” said Ms Martin.

Asset shareholding

Shipfinex founder and chief executive Vikas Pandey introduced a new form of vessel financing where individuals or companies can own shares in assets and trade them using a digital platform.

He said a few offshore players have started using the platform and are piloting its services to gain a greater understanding of its capabilities.

“We take the fees from a shipowner for listing the asset on the platform, as a token fee,” Mr Pandey explained. This asset is then available for anyone worldwide to provide finance for, starting with just US$1,000.

“Whatever capital is raised, we take 1.25% from the shipowners and from the investors,” said Mr Pandey. “Several small investors can then select the vessel where they want to invest, and what they want to invest in,” he added.

Information related to the vessel will be transparent. Lenders can invest and track the ship, track its performance, see the ports and anything related to the vessel, the management, and the commercial documents.

“Once they have invested, they will be able to get the earnings every quarter as the vessel makes money.”