Shipping firms may consider private equity

Shipping companies in the UAE and the Middle East may look for alternative financing like private equity as obtaining funds from banks becomes harder, analysts believe.

George D Cambanis, Senior Partner and Global Shipping Leader, Deloitte, based in Athens, told Emirates Business: "There are better prospects for private equity investment in the shipping sector in the Middle East as valuations have gone down and may even decline further. Banks in the region are not in a position to finance shipping industry anymore as their loan books have enough exposure to shipping companies. That's why there is room for private equity investments in shipping."

In February this year, Abu Dhabi's International Petroleum Investment Company (Ipic) announced a joint venture with Greek shipping company Restis group, putting in $1.5 billion (Dh5.5bn) to invest in shipping and transportation sectors, Cambanis said.

"Other private equity funds like Ipic are poised to buy assets or ships in 2010 as valuation is already low or may decline further. Other funds will be looking to invest in shipping companies in 2010 to take advantage of the cheaper vessels coming to the market," he said.

Cambanis said the outlook is not very positive for the shipping sector next year, and there is not much evidence that shipping rates (both the charter rates as well as freight rates) would go up. "What makes matters worse is that there is a historic ordering spree of new vessels. If all of these new vessels were to be delivered, there would be a lot more supply of vessels in the water, which can further depress the charter rates," he said.

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