After the trauma of the major foreign banks retreating from the Greek market, the local ship finance sector is turning to a new secondary market in bank debt
The global ship finance market has fundamentally changed over the last 15 years and nowhere is this more apparent than in Greece. Before the financial crisis of 2008, the Greek shipping finance market was dominated by non-Greek banks. The most prominent was the Royal Bank of Scotland, which through relationships built up by the legendary Rex Harrison, had access to most of the major Greek shipping families. Other foreign banks, mainly Norwegian, Benelux and US-based firms, held huge portfolios of Greek shipowner debt. The Greek banks were relatively under-represented in their own market, but every bank suffered to some degree in the 2008 crisis.
Today, the appetite of foreign banks for relationships with Greek shipowners is much smaller. Greek owners are still an important part of shipping, but the changes in the regulation of banks has curtailed the scale of lending to Greek owners. This has led to the emergence of alternative finance, in the form of private funds and Chinese leasing. The latter is still a major source of funds, but the last 12 months have seen another wave of change, with some Greek banks re-entering the ship finance market. Aegean Baltic Bank’s head of shipping Philppos Tsamanis explained to delegates at Capital Link’s 11th Annual Greek Shipping Forum in Athens in February, that the bank was formed in 2002 to specialise in financing shipping. It has been supportive of Greek owners and remains committed to continue to doing so, he said. “The [Aegean Baltic] bank increased the size of its portfolio by 54% in 2019, and we aim to increase that again by 40-50% in 2020”, said Mr Tsamanis.
The main issue for Greek shipowners is that the remaining Greek banks active in ship finance are mid-tier institutions. They do not have the size of capital or the lending capacity of the Royal Bank of Scotland and the other foreign banks now absent from the scene. Piraeus Bank’s head of shipping Konstantinos Petropoulos noted that the bank had grown its portfolio by US$1Bn in 2019, to reach an aggregate portfolio of US$2.1Bn. This is a very respectable level of growth, but it indicates that the bank is only able to support the small- to medium-size shipowner. The bank is looking to grow its relationships with family-owned private companies and Mr Petropoulos said that when it comes to supporting local Greek owners, “The lending criteria is the operating expertise and the proven ability to manage through all the shipping cycles.”
One new feature that highlights the relative maturity of the local finance scene is the sale of loans from the portfolios of Greek shipping banks, which is essential for those banks to free up capital to make new loans. Greek family shipping company Interunity has a fleet of chemical and product tankers and its director George Mangos is an example of a new generation of owner with experience outside of the sector (he practiced law and worked in corporate finance before returning to shipping). With his banker’s eye he notes: “The secondary loan market is viewed with a lot of suspicion. The shipping community in Greece is generally unfamiliar with the small group of financial investors who are the typical buyers of secondary debt and are anyway uncomfortable with the idea of their debt being traded. However, a healthy secondary market is absolutely critical for the proper functioning of the primary loan market on which many of them depend. If a bank cannot price the value of its portfolio, then it cannot provide loans.”