The Dutch Eye Shipping Debt Fund to Aid Shipowners

On August 4, the Netherlands received an approval by the European Commission (EC) to guarantee funds for regional small and medium-sized shipping companies.

The approval is the first step in a project initiated by the country’s ship financing institution Nesec aiming at setting up an EUR 250 million (around USD 295 million) shipping debt fund.

As explained by Nesec, the scheme’s objective is to provide first priority mortgage-backed lending to shipowners with the help of a debt fund. Thereby it will address the financing bottleneck that has arisen since the financial crisis.

The yet-to-be-established Nesec Shipping Debt Fund (NSDF) is targeted to be funded by institutional investors.

The fund is aimed at meeting the needs of companies operating mainly in the regional or intraEuropean trades with vessels of up to 15,000 dwt.

The Dutch state will guarantee up to 80% of the funding from these investors for a period of seven years, with a possibility to prolong the guarantee by two additional years. The guarantee will give the Dutch State an appropriate remuneration in line with market conditions, the EC said in a statement.

Separately, Nesec said the importance of the approval is that the EC ruled the guarantee does not constitute state aid under European Union rules, given that the state shall be paid a guarantee fee at market rates for the partial guarantee the state is making available.

Now that the regulatory framework is approved, the text of the guarantee is to be finalized with representatives of the state.

The next phase of the fund is planned for the second part of 2017. In this phase, the fund will be discussed with, and pitched to, institutional investors. Dependent on the outcome of these fundraising discussions a final decision shall be made whether or not the fund is viable, Nesec further said.

Should the outcome be positive, the fund is expected to go live in the second quarter of 2018.