titre de la présentation 14, september 2010 banks and the cruise industry vincent pascal

Titre de la présentation

14, September 2010

Banks and the Cruise Industry

Vincent Pascal


2| Tuesday, 14 September 2010 |

Summary

1. The global context

2. Banks and the Shipping Industry

3. The particular case of the Cruise Industry




• Two years after Lehman Brothers’ collapse, there are clear signs that the worst is behind with the world economy back on a more stable path :

- Robust growth of key emerging economies

- International trade has reached back the volumes of 2008

- The financial system has been saved

- Weak countries have been bailed out

- Banks are making profits again




• But important “macro threats” remain :

1. Consumer demand / GDP growth- Sluggish in many developed economies- Have reached a celling in emerging economies?

2. Still too much debt in the global economy (governments, corporates, households)- Need to “de-leverage” impact on consumption?- Concerns about refinancing existing debt- Much less headroom left to bail out banks or countries again

3. Banks’ business faces important challenges and possibly limitations- Vigilance about default risks (corporate, sectorial, sovereign);- Need to deal with heritage of the financial crisis:

refocus on domestic market shrink balance sheets

- New bank regulations (Basel III) new lending more onerous for banks and borrowers?




• Conclusion

- Still a challenging outlook for international commercial banking in the short term

- Risk that not all (good) borrowers may be served




• Bankers’ view of the Shipping Industry :

- Volatile- Non investment-grade- Highly capital intensive- Not very transparent

- Esssential industry for worldwide trade- Long term business- Client relationship business

REQUIRES SPECIALISED KNOWLEDGE AND EXPERIENCE

REWARDING BUSINESS ON A LONG TERM BASIS




• Some good news:

The shipping crisis? What shipping crisis? No major bankruptcies so far

Shipping banks are coming back…

… but slowly and cautiously:

- Only 10 shipping banks out of 40 active today?- Smaller deal sizes, smaller tickets- Longer processing times- Conservative lending terms- Higher pricing levels vs. pre-financial crisis

• Conclusion

The availability of bank finance remains an issue for the short term.




• Snapshot of ship finance in 2010 :

• For all banks:- Necessary focus on restructuring existing loans- Sourcing of long term funds is expensive (“liquidity costs”)

• For some banks:- “Downsizing strategy” demanded by the (state-) shareholder- Internal integration challenges, e.g.:

Commerzbank / Dresdner bank / Deutsche Schiffsbank Bnp Paribas / Fortis.

→ less time for new lending business




Cruise is different from merchant shipping

• The distinctive features of the cruise industry look resilient to the crisis:

- Market with huge growth potential (low penetration in Europe)

- Good “value for money” product

- Cultural habit of summer / family holidays not reversed by the crisis so far

- The “financial formula” of the industry seems to work: supply-side driven + yield management

- Cruise shipbuilders in Europe / major shipping banks in Europe facilitates Export finance schemes

- Cruise ships = huge capex (a double-edged sword)




• Such resilience provides a reasonable outlook for the financing of cruise companies… but with several “caveats”:

- Banks will be more demanding: financial information and reporting increased levels of (quasi) equity and liquidity buffers Export finance guarantees = a “must”

- Securing finance commitments will take more time:

more banks needed to lift one project smaller individual participations longer credit committee process

- Conclusion: Only the more solid projects / companies may motivate banks Higher equity contribution and/or guarantees may be required from Cruise

companies



Thank you for your attention



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titre de la présentation 14, september 2010 banks and the cruise industry vincent pascal

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