International accountant and shipping adviser Moore Stephens says shipping companies should explore leasing opportunities as a way of adjusting their self-owned and chartered-in tonnage balance in response to the radical changes that have taken place in ship financing in recent years.
Phil Cowan, the firm’s Head of Corporate Finance , says, “The traditional thinking of a company needing to own all the resources it uses to operate has been successfully challenged for many years in the shipping industry by the use of extensive outsourcing. This has proved to be an effective way of improving efficiency and making better use of resources. But it could be argued that shipping still has something to learn from the aviation industry in this respect.
“Shipping and aviation are both capital-intensive, cyclical industries employing assets which have a long economic life. But whereas a well-established airline would probably own roughly a third of the planes it operates, and lease the rest, with about half of chartered-in aircraft typically under operating leases, shipping has not embraced the leasing concept to anything like the same extent. Of course ships and planes are very different, not least because ships are mostly tailor-made for the cargoes they carry. But leasing does offer some interesting opportunities for ship operators and Chinese lessors in shipping have developed rapidly over the past few years.”
In the latest issue of the Moore Stephens shipping newsletter, Bottom Line, Paul Chang, Managing Director and Global Head of Shipping at ICBC Financial Leasing Co Ltd, Beijing , says, “Professional operating lessors can offer a range of solutions to enable shipping companies to manage their balance sheets and capacity more effectively. The amounts currently being lent by banks for shipping deals are low, and loan profile and maturity have shortened. But with the correct leasing and finance structure, it is possible to put together a bespoke ship leasing and finance package. There are now 20 financial leasing companies backed by banks and large corporates in China, with more expected to be formed.”
Phil Cowan concludes, “Those considering leasing solutions for acquiring tonnage or restructuring existing tonnage ownership should seek professional advice in finding an appropriate financial leasing company with a successful track record.”
Moore Stephens, April 26, 2013