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Many believe London’s historic role as a leading ship finance centre to be on the wane, not so much because of the prospect of »Brexit« but as result of the recent trend for established shipping banks to quit the sector or shrink their portfolios
While London has always enjoyed a strong tradition in debt finance for shipping, tended to lag behind other centres such[ds_preview] as New York and Oslo when it comes to the capital markets, shipowners having traditionally favoured the New York Stock Exchange or Oslo Børs to raise equity. However, a concerted effort to change all that is currently underway at by the London Stock Exchange (LSE) Group – whose planned merger with Deutsche Börse is currently the subject of a European Commission antitrust review.

Already LSE sent a delegation to the Posidonia event in Greece this June, in a bid to attract more shipping companies to list on the exchange. It previously managed to attract several smaller Greek owners to list on its Alternative Investment Market (AIM) in 2007, but after the financial crisis the following year has been less proactive in seeking shipping listing’s since.

LSE’s head of UK large caps Tom Attenborough outlined the advantages of London as a »global capital raising and investment destination« recently. He pointed out that LSE was a truly global exchange, located in a city with strong maritime infrastructure, and had enjoyed considerable success in attracting IPOs of late. Currently 22 marine transportation and service companies with a total market capitalization of $13.9bn are listed on the LSE’s main and sub markets, he added, a tally that LSE would like to grow further.

RBS (Royal Bank of Scotland), formerly the UK standard bearer for ship finance, is a prime example of a major shipping bank now trying to exit the sector. With over 250 years’ involvement in ship finance it remains the largest lender to the Greek market and boasted a total shipping loans portfolio of $12bn in 2014. In early 2015 the bank announced it was downsizing its shipping exposure, however, and put its $3bn worth of Greek business up for sale, followed a year later by $500m of Turkish loans. Interest was reportedly expressed by Credit Suisse, China Merchants and even troubled Deutsche Bank, but in September 2016 RBS said it was abandoning the sale altogether and winding down its global shipping business instead, the value of potential offers having proved unsatisfactory.

RBS’s exit decision follows a spike in non-performing or ‘bad’ debts during the market downturn in H1 2016, forcing the bank to take an impairment charge of nearly $350m in Q2. At end-June RBS’ total shipping exposure stood at $8.77bn.

Global banking group Citi is another pillar of the UK ship finance scene, its worldwide shipping and logistics team being run out of London by Michael Parker, a veteran of the sector with over 30 years’ experience. The group enjoys longstanding links with the Greek shipping community having financed Aristotle Onassis’ first supertanker in 1948, and like many shipping banks has a dedicated office in Athens, Citi Greece, which it opened as far back as the 1960s.

Indeed, close relations with the Greek shipping community can be seen as underpinning much of London’s modern track record in ship finance, thanks largely to the presence of the so-called »London Greeks« represented by the Greek Shipping Co-operation Committee, which boasts some 70 company members. Historically the GCC has also been a strong supporter of London’s Baltic Exchange – where the current chairman is ex-RBS ship finance head Lambros Varnavides, and the recently appointed new CEO is Mark Jackson, formerly with Greece’s A M Nomikos group.

Another large UK-origin shipping bank Standard Chartered – originally formed by the merger of British overseas banks in South Africa and the Far East. In shipping its focus has always tended to be on the developing regions of Asia, the Middle East and Africa, and in 2013 its global head of shipping finance, Nigel Anton, relocated from London to Asia, where the bank now has a pool of some 26 shipping finance bankers compared to only four in the UK.

Swedish group SEB is also notable as an overseas bank with an expanding ship loan portfolio that enjoys a strong presence in London, mainly to be closer to its international clients visiting the city. Besides responsibility for the UK market the office handles an expanding portfolio of global cruise and LNG business for the group.

Indeed, proximity to London’s world-leading range of maritime professional services in fields such as shipbroking, insurance, accountancy and above all marine law – where legal finance specialists play a key role in framing the exact terms of shipping-funding deals – is a major attraction to concluding deals in the UK. With the UK capital enjoying such a strong position as global financial services’ sector, most major banks involved in ship finance have a branch in London where they can discuss terms with visiting shipowners.

Nor is this likely to change, even given the prospect of Brexit in 2019, according to Harry Theochari, London-based finance specialist and global head of transport for law firm Norton Rose Fulbright. He believes that the UK leaving the EU will have »no real impact« on London as a ship finance centre precisely because of its »centuries-old traditions in brokerage, law, accounting, insurance and marine education,« which will serve to deter companies from relocating elsewhere, he told a recent seminar on »Shipping in the times of Brexit«.

And even if UK-based banks should lose their ‘passporting’ rights within the EU after a »hard Brexit« scenario, he adds, having a subsidiary in another EU country should allow them to trade freely throughout Europe as before.

That view is endorsed by outgoing Lord Mayor of the City of London Lord Mountevans, in his professional life a shipbroker with Clarksons. In his farewell speech in early October he stated the belief that shipping »might actually be one of the UK sectors that is least-affected by Brexit«. During his year in office he launched a UK Maritime Growth Study which amongst other recommendations proposed measures to shore up London’s position as a maritime services’ hub. ED