Brokers and charterers of chemical tankers said, that in recent months, several banks were offering two-year deferments on the repayment of the principal amount of the loan taken to finance a chemical tanker as tanker operators find it increasingly difficult to break even and survive.
Banks are also encouraging shipping companies to join funds that inject fresh equity into the ships for them to survive. "A new class of such funds has emerged across Europe and Asia," a Singapore-based charterer of chemical tankers said.
"Normally the repayment of principal is factored into the monthly installments ... Several banks funding chemical tankers are now just asking for repayment of interest," an ABN AMRO banker involved in financing of chemical tankers said.
Sources polled across ship brokerage and chartering companies in Europe and Asia said that the incidents of banks stepping in with solutions to save chemical tanker companies from default has been quite high.
The banks known to be financing chemical tankers include Standard chartered, HSBC, BNP Paribas, Royal Bank of Scotland and the Dutch bank ING.
When Norstar a company with offices in Monaco and Singapore which had ordered three chemical tankers two years earlier found it difficult to raise finance this year, it entered into negotiations with its banker, the Royal Bank of Scotland.
A source close to the company said that the bank deferred the repayment of principal for two years in order to retain Norstar as a customer. "It's a normal practice for banks these days to negotiate the repayment," the source said.
The ownership of the three chemical tankers ordered by Norstar, the third of which is supposed to be delivered in two to three weeks from now, went to a New Jersey-based fund called the Horizon Global Shipping fund, while the management of the ship went to Norbulk Shipping of the UK, a company which is a part of the fund.
Norstar, which originally ordered the three ships is a part of the fund itself, and therefore a stakeholder in each of the three ships.
Further, each of the ships have been declared special purpose companies to keep them free of an impact from the performance of other ships run by the fund.
"Today, Norstar is not facing a financial problem," a senior company official told Platts.
Problems for the shipping companies includes a higher cost of financing and lower freight rates. "Raising finance to run chemical tankers has become very difficult. And the industry is emerging with a new solution daily," said a source at Baltic Shipping Private Limited, a Singapore based shipping
company.
Several such funds that involve injection of equity from several partners have come up in Germany, UK and other European countries. "Today, a chemical tanker may carry the flag of Singapore, but it may be operating under one such fund in Europe," a Singapore-based shipping broker said.
A 17,000-20,0000 mt dwt chemical tanker costs anywhere between $20 million to $35 million depending on the material used for construction and the country where its constructed.
Chemical tanker owners found themselves in trouble with banks in 2009 and 2010 as they had their ships financed at a higher cost in 2008, and found it difficult to recover cost because of the low freight rates when the ship finally struck the waters.
"Today a 17,000-20,000 mt dwt tankers on being leased is earning about $8,000 to $9,000 daily, when it should at least earn $12,000 to $13,000 daily to break even," a London based charterer of chemical tankers said.
Freight rates for chemical tankers had fallen between 40-50% year on year in mid-2009 when a new capacity equivalent to 20% of the then existing capacity had emerged. Freight rates have improved by 10% since then, but that still does not mean a recovery from the huge drop of 2009.
