Gulf shipping companies beset by financing problems

11/24/2007 03:22 AM | By Shakir Husain, Staff Reporter

Dubai: When Sharjah-based marine offshore services firm Whitesea Shipping and Supply ordered six new vessels from Argentina in September, it arranged funds from London.

In a country where banks are lending billions of dollars for all kinds of projects, it should have been easy to source $120 million, but Whitesea chief executive officer Seraj Alali says he found that local banks could not finance the deal because of their “internal policies and a lack of capability.”

Also, there are not many banks in the region which provide fin-ance to the shipping industry. “There is a lack of knowledge about marine financing in the region. It was cheaper to get money in London,” he adds.

Christian Mouchbahani, the Middle East head of investment bank Jefferies International, which has a strong global shipping portfolio, says banks in the region remain “uncomfortable” about shipping finance as it is not a familiar area for them.

“They are conservative about certain asset classes. I think that is the main reason,” says Mouchbahani, Jefferies’ Middle East and North Africa chief executive officer.

Even in a city like Dubai that has ambitions of becoming a global maritime hub, the shipping finance industry leaves a lot to be desired.

Lack of interest

“Banks in Dubai and other places in the GCC have not tried to find out how much money they can make by giving loans for ships. They do not have trained personnel to handle this business,” says Satish Mapara, a shipping and legal consultant.

Even big foreign banks operating in the region have not paid attention to this area of lending.

“These are the same foreign banks that have good experience of shipping finance outside the region, but in this part of the world they have not even looked at the industry’s requirements,” Mapara adds.

At the recent Dubai-Hamburg business forum, shipping finance was a recurring theme. Germany accounts for about 45 per cent of global shipping finance and Hamburg’s share of that is more than 80 per cent.

While large companies are able to finance their purchases both inside and outside the region, small er shipping operators are seen in bigger need of reliable local sources of funding. Saleh Al Shamekh, president of the National Shipping Company of Saudi Arabia (NSCSA) in Dubai, says banks in the region will take time to develop shipping finance expertise.

“In Europe they have a long history of shipping, they even have banks that only do shipping finance,” he adds.

Changing scenario

The burgeoning Islamic financing sector in the Gulf is also encouraging banks to take a plunge into the vital shipping segment.

“Islamic financing is more suited to asset-based deals and that makes sectors like shipping and aviation more attractive to [Sharia-compliant] banks,” Al Shamekh adds.

Regional banks are getting more interested in shipping, Mouchbahani agrees, pointing out that Dubai Islamic Bank has set up a shipping fund.

In Saudi Arabia, things are also changing.

“Five or six years ago we used to finance our purchases through a consortium of banks in London. Now we do our deals through Saudi banks that are interested in shipping,” Al Shamekh said.

 

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