After very busy years in 2018 and 2019, 2020 was a quieter year when it came to the sale of large shipping loan portfolios, although we did still see a significant amount of loan trading activity on a smaller scale. Nevertheless, continued volatility in the market and the incoming implementation of Basel IV mean that loan portfolio divestment is likely to continue once the COVID-19 dust settles.
It is, however, likely to become increasingly more challenging to find purchasers for these new loan portfolios. Firstly, banks have fewer “easy-sells” left on their books. Secondly, many private equity funds are now established players in the industry, having already acquired significant holdings, and they are becoming more selective about the future acquisitions which are of interest to them.
In addition, it is worth noting that, whilst some Asian buyers have taken the opportunity to expand their presence in the European market, they have generally preferred targeted performing portfolios over large acquisitions with a mix of vessels and loans of varying quality.
The key thing for banks looking to successfully divest themselves of further shipping loan portfolios will be to prepare themselves thoroughly for the sales process, so that they are able to meet the demanding information requirements of potential buyers. In addition, in order to entice buyers, they should be marketing portfolios with a firm view as to what the long-term strategic options are for those portfolios.
Banks’ shipping loan portfolio disposals have soared in recent years. But with fewer easy-sells on the books and private equity acquirers becoming pickier in a buyer’s market, closing the deal means banks need to prepare and market portfolios more rigorously.