China Daily May 9, 2014 By Wong Joon San
Since the global financial crisis of 2008, the shipping industry has faced innumerable challenges, particularly financing. Bankers however have devised instruments and packages that have assisted many companies to meet their financial obligations.
David Beckett, partner at SC Lowy, an investment banker specializing in fixed incomes, says his company is bringing together large international private equity, to offer ship financing in the secondary debt market and in alternative financing. The approach draws largely on hedge funds as well as other market sources.
With offices in Hong Kong, London, New York, Seoul and Sydney, the company backed has dealt with syndicated loans for companies like Eagle Bulk, Genco, Eitzen, Torm, TMT, BLT and Zim.
“Most of the companies raise funds either for credit reasons or for expanding their portfolios,” says Beckett. “The credit issues could be related to claims for damages claims arising through litigation, or the funds could be used to provide liquidity.”
Beckett reveals that his company offered alternative financing to Korea Line Corp which had filed for bankruptcy, after two rounds of restructuring.
The company’s unsecured credit stood at $3 billion unsecured creditors, and had spent $150 million expenses per year.
SC Lowy, through an $85 million debtor-in-possession financing, managed to pay its debts partially. (DIP financing is a special form of financing provided for companies in financial distress including those under Chapter 11 bankruptcy protection in the US).
The deal helped the carrier continue its long-term contracts with Posco, Kepco, Kogas and to maintain its franchise value. This led ultimately to a successful merger & acquisition.
Korea Line Corp avoided bankruptcy and depletion of its stock, through SC Lowy’s alternative financing intervention. The shipping company remained afloat, and holds a current equity value at $500 million.
Bankers may still have a final say. Sometimes there is nothing that can be done for a shipping company facing financial problems and there appears to be no way forward.