maritime saudi arabia 2010 30th may – 1st june finance & investment in shipping marcus machin...
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Maritime Saudi Arabia 201030th May – 1st June
Finance & Investment in Shipping
Marcus Machin CEO Tufton Oceanic (Middle East) Limited
Page 2
Focus: Fund Management within Maritime and Offshore Oil Service and Energy Sectors.
Established: 1980’s by the merger of Oceanic Finance Corporation and International Shipping Investment Company
Offices: London, Isle of Man, Dubai, Hong Kong & Singapore
Staff: 60
No. of Funds: 7
AUM: USD 2.6 billion
Experience: Over 25 years of value added and award winning transactions in private equity, debt raising, public investments and advisory services
Ownership: Privately owned, majority ownership held by management while key employees hold significant interest in business unit subsidiaries
Value Creation
Regulated:
• Transaction Sourcing through our unique industry network and research base• Financial structuring and restructuring• Operational restructuring through leveraging our industry experience and networks• Selection of target marine and oil services industry sub-sectors• Active management of fund portfolios • Industry leader in establishment of Islamic investment funds
Tufton Oceanic Limited is authorised and regulated in the UK by the Financial Services Authority. Oceanic Asset Backed Finance Limited is licensed by the Isle of Man Financial Supervision Commission to conduct Investment Business. Tufton Oceanic (Middle East) Limited is authorised and regulated by the Dubai Financial Services Authority.
Tufton Oceanic Finance Group
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Fund Management
Advisory Services
Corporate Finance; Debt and Lease Finance arrangements; Advisory
* The ”Operating Lease Fund” is a combination of 2 managed accounts and other private investments. 8 investments were realised producing an IRR of 174%. The portfolio IRR including 4 unrealised investments is 115% since inception
Tufton Oceanic Product Range
Equity Funds Inception Activities AUM(Mar-10)
Oceanic Hedge Fund 2002 Long / Short equity fund USD 1,800 mil
Oceanic Small Cap Fund 2007 Pre IPO equity fund USD 100 mil
Transport Investment Fund 2010 Long / short equity fund USD 13 mil
Asset Backed Funds / Acquisitions
Oceanic Operating Lease* 2007 Vessel leases with residual value risk focus USD 82 mil
Oceanic Finance Lease
ACS
Oceanic Distressed Fund
2004
2009
Q2 2010
Vessel leases with credit risk focus
Acquisition of distressed shipping company
Distressed shipping and offshore investments
USD 307 mil
USD 273 mil
Page 4
Shipping Market – Market Segments and Sub-segments
• Cape Size/ Panamax/ Handy • Crude/ Product/ Chemical Tankers• LNG/LPG/Ethylene Carriers
• Container Ships
• RoRos• Reefers• Car Carriers
• Platform Supply Vessels/ AHTS• Construction Vessels / MSV• Maintenance Rigs• Heavy Lift Ships
• Semi-Submersible Rigs• Jack Up Rigs• FPSO / FSO• Drilling Ships
Dry Bulk Wet Bulk Container
General Cargo Offshore Support Offshore Production
Page 5
Sources of Finance for Shipping
Bank Market Cap as of March 2010, US$ bn Bank Market Cap as of Q2 2007, US$ bn
116 93106
9180
67 76
120
49
75100 116
255215
46 53 81 5042 35 39 37
51 81 9129
179
UBS Unicredit BNP Paribas Barclays SocieteGenerale
Credit Agricole
Deutsche Bank
Morgan Stanley
Credit Suisse
Goldman Sachs
Santander
Citigroup
RBS
HSBC
113
116 93106
9180
67 76
120
49
75100 116
255215
46 53 81 5042 35 39 37
51 81 9129
179
UBS Unicredit BNP Paribas Barclays SocieteGenerale
Credit Agricole
Deutsche Bank
Morgan Stanley
Credit Suisse
Goldman Sachs
Santander
Citigroup
RBS
HSBC
113
Bank DebtUS$437bn
Public EquityUS$252bn
Private EquityUS$81bn
Gov’t FleetUS$116bn Bond
US$42bn
Estimated UnfundedUS$175bn
Sources of Funding of the World Fleet
Source BloombergSelected Shipping Banks - CDS Spreads on 5 Year Senior
Corporate Bonds
0
50
100
150
200
250
300
350
BNP Paribas Fortisbank Nederlands Credit Agricole ING RBS Nordea DnB
Source: Bloomberg
bps
• International Banks have traditionally been the source of the single largest component of financing of the world shipping fleet
• The developments in the banks’ own businesses post financial crises means that this source of finance is less able to fund rapid future developments in both shipping and shipping infrastructure
• Alternative capital structures are increasingly a viable source of funding for shipping and shipping infrastructure projects internationally and within the GCC
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Kingdom of Saudi Arabia – Macro Economic Context
Chart: GDP growth to accelerate this year
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
2006 2007 2008 2009e 2010f 2011f
% Y
oY hydrocarbon growth
non-hydrocarbon growth
Real GDP growth
Hydrocarbons account for almost 30% of real GDP (2009 estimates)
18%
28%
7%7%
13%
8%
9%
10%
Hydrocarbon sector*
Government services
Financial services
Non oil manufacturing
Other
Wholesale & retail trade,restaurants & hotel
Construction
Transport, storage andcommunication
GDP breakdown by sector (2009 estimates)
24%28%
48%
Non-oil government sector
Non-oil private sector
Oil sector
Source: National sources, SHUAA Capital
*Includes oil-related manufacturing such as the petrochemical industry
Source: National estimates, SHUAA Capital
Source: National estimates, SHUAA Capital
• Saudi Arabia GDP growth reported to have remained positive during 2009 despite negative hydrocarbon sector growth
• 2010 – 2011 projections of Saudi Arabian GDP growth exceed 4.0% led by the non-hydrocarbon sector with consequent positive effect on imports of bulk and finished goods
• Continued expansion and diversification of the petrochemical sector in Saudi Arabia will serve to increase exports of Olefins and Aromatics – Saudi Arabia projected to increase share in global Ethylene market form 7.1% in 2009 to 10.5% in 2014
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Current Reported GCC Regional Vessel Orderbook
• In total 184 deep sea vessels are on order by the major GCC companies with, in aggregate, over 17 mil dwt delivering over the next two years
• Of these, 89 vessels have been ordered by the top 10 companies in the region, of which a significant proportion remain to be financed
• International banks, previously extremely supportive of regional owners have not been reported to have advanced new funding outside the government sector companies during 2010
Source: Clarksons 14/02/10
Rank Name Sector CountryDwt No Vessels Dwt No Vessels
1 Vela International 6,482,175 25 1,272,000 4 Tanker Saudi Arabia2 Nat.Shpg.Of S.Arabia 5,998,176 34 720,000 16 Tanker Saudi Arabia3 Kuwait Oil Tanker 3,321,969 25 1,272,000 4 Tanker Kuwait4 Qatar Gas (Nakilat) 2,858,925 22 390,894 3 LNG Qatar5 Emirates Trading 2,151,372 32 1,305,100 14 Bulker/ Tanker U.A.E.6 United Arab Shpg. 2,017,386 37 1,755,000 19 Container/ Tanker Kuwait7 Saudi Maritime Hldg. 1,586,680 5 640,000 2 Tanker Saudi Arabia8 Fal Shipping Co. 1,202,997 26 97,139 1 Tanker U.A.E.9 Emarat Maritime LLC 1,141,400 14 3,295,245 24 Bulker/ Tanker U.A.E.10 Gulf Energy Maritime 991,082 17 229,400 2 Tanker U.A.E.
Total 27,752,162 237 10,976,778 89
Current Fleet Orderbook
TOP 10 OWNERS BY DWT IN GCC
Page 8
Islamic Finance – Increasing importance but not immune to market forces
2008 Headlines
• “In 2008 Islamic Banking represented 22% market share in GCC against 10% in 2003.”
• “Islamic Assets in GCC reached $285bn in 2008 – 35% of global Islamic Finance assets exclusive of those held by major international banking groups that are also active in Islamic banking in the region incl Standard Chartered HSBC, Deutsche Bank and BNP Paribas”
• “29% of Islamic Finance in GCC in 2008 stemmed from Islamic windows of conventional banks”
• “Worldwide, cumulative Sukuk issuance outstanding topped $100 billion, with local currencies remaining the denomination of choice. New players such as General Electric Capital Corp and International Finance Corp also saw fit to tap the Sukuk market”.
2010 Headlines
• “Nakheel, developer of Dubai's palm-shaped islands, in December narrowly met a $4.1 billion maturity on an Islamic bond, or Sukuk, after neighbouring emirate Abu Dhabi provided it with $10 billion in funds.”
• “Gulf Finance House EC is negotiating with banks to roll over $100 million in an Islamic loan into a new two-year facility as it prepares to sell assets to improve liquidity”.
• “Kuwaiti Islamic lender Boubyan Bank reported a net loss for 2009 on Wednesday, after booking provisions against bad loans. Boubyan - which is 40 percent owned by the country's largest bank, National Bank of Kuwait (NBK) - made a net loss of $179.1 million in 2009”.
• “In 2007, the Sukuk market accounted for almost 50 per cent of the total GCC capital market issuance. In 2009, decreased to a meager 13 per cent. In 2010, so far, only one sukuk has been issued out of the GCC (5 year $450m Sukuk for Saudi based Dar Al Arkan rated AA3 / BB- / Ba2).
Sources: S&P, Arabian Business, Gulf News Rothschilds
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Islamic Ship Finance Examples and Structures
Charter Guarantor
Mortgage BankSPC and Ship Owning Co
accounts
Islamic Fund Company
Sponsor and Other Investors
Bareboat Charterer
100%
Sub-Lease Agreement
Islamic Fund Trust
Ship Owning Co
Advance Rental
Head LeaseIjara Lease
Islamic SPC Co
Ltd
100%
Lease Rentals
100%
Loan
Debt Service Payments
Shariah Compliant
Generic Investment Fund Vessel Ijarah Lease Structure
1. No ships financed in these facilities2. Convertible into equity on a listing
Year USD m Tenor Structure
2002Brunei Gas Carriers 129 5 yrs Ijara lease
2004Alislami Oceanic 76 5 yrs Ijara lease
Alislami Oceanic 141 7 yrs Musharaka (3)
Al Safeena 26 5 yrs Sukuk al ijara
Al Rubban 100 (est) <10 yrs Ijara (>3)
2006Alislami Oceanic 114 <9 yrs Musharaka (3)
NSCSA 160 (est) ? Murabaha (2)
DP World 1 3,500 2 yrs Sukuk 2
QatarGas II 1 500 15 yrs
2007NSCSA 1,320 Murabaha
MISC 742 Murabaha
Topaz Energy 50 Ijara
2009 KFH Oceanic 170 <5 yrs Ijara (3)
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Tufton Oceanic – Contact Details
Tufton Oceanic - London1 Albemarle StreetLondon W1S 4HAUK
Phone: +44 (0) 20 7518 6700Fax: +44 (0) 20 7518 6701Web: www.tuftonoceanic.com
Erik A. LindEmail: [email protected]: +44 (0) 20 7518 6751
Andrew HampsonEmail: [email protected]: +44 (0) 20 7518 6718
Tufton Oceanic - Middle East
Jonathan Hill
Email: [email protected]
Tel: +971 (0) 4 702 6504
Marcus Machin
Email: [email protected]
Tel: +971 (0)4 702 6503
Tufton Oceanic - Singapore (Representative Office)
Torkell Vold
Email: [email protected]
Tel: +65 6884 7875
Important Notice
Tufton Oceanic (Middle East) Limited is regulated by the Dubai Financial Services Authority. Tufton Oceanic Limited is regulated by the Financial Services Authority in England. Tufton Oceanic (Isle of Man) Limited is licensed by the Isle of Man Financial Supervision Commission to conduct Investment Business. Tufton Oceanic (Far East) Limited is regulated by the Securities and Futures Commission, Hong Kong.
Tufton Oceanic (Middle East) Limited issues this presentation, on a confidential basis for the sole purpose of providing information about the maritime and offshore oil services sectors and possible investment opportunities in those sectors. Recipients are therefore bound by a duty of confidentiality in respect of all the information contained in this presentation.
The views presented are solely those of Tufton Oceanic (Middle East) Limited and other Tufton Oceanic group companies. Whilst this presentation has been prepared in good faith, Tufton Oceanic (Middle East) Limited make no warranty or representation (express or implied) and accept no responsibility or liability for the accuracy of any opinions, forecasts or other material presented which have not been independently verified. Prospective investors should make their own investigations to confirm the accuracy or otherwise of the material presented herein. Any liability is expressly disclaimed.
No information set out or referred to in this presentation shall form the basis of any contract. Any prospective investor shall be required to acknowledge in any subsequent agreement that it has not relied on or been induced to enter into such an agreement by any representation or warranty save as expressly set out in any such agreement.
This document is presented on the express understanding that the recipients shall use it only for the purpose set out above. Tufton Oceanic (Middle East) Limited gives no undertaking to give the recipient’s access to any additional information or update this presentation or any information or to correct any inaccuracies in it which may become apparent.
If you have not received this document directly from Tufton Oceanic (Middle East) Limited your receipt is unauthorised.