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HANSA 11-2018

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Finanzierung | Financing

Finanzierung | Financing »Tufton will be active in German market« Not considering itself as a pure funding provider but as a shipowner, UK-based Tufton Oceanic has further plans both for the capital market and the stricken German shipping industry, writes Michael Meyer In an exclusive interview with HANSA, Andrew Hampson, Managing Director Asset Backed Investments, describes Tufton Oceanic as an owner and operator of tonnage. »Actually, the lack of capital creates a very good opportunity for us. Not only for ourselves taking advantage of troubled situations. It has a phenomenal restraining impact on the expansion of the global fleet.« However, he adds, the funding provision is something »we need to understand«, because he feels that one cannot do one’s job if one doesn’t understand, what the banks are doing, or any other form of fresh capital, be it Chinese leasing or US private equity. Tufton as a group has today about 1.3 bn $ under management, and just about over a billion of that is with the asset-backed segment. Currently, the fleet consists of over 75 vessels in total in all the structures. Besides two, all of them are 100% owned by different funds. These are diversified across different shipping segments. Hampson and his teams are strong believers in diversification, looking opportunistically all the time into each segment and working out where to better balance the portfolio. »I think there is a danger of being a single-purpose sector specialist. Long-term returns are possibly 7 to 8%, but you need to get to the finishing line and through the cycles. We believe that by constructing balanced portfolios, we can protect ourselves better against this cyclicality. And it also allows us to get out of the sector, when it is on the up and to re-invest in other sectors,« he argues. Other growing players, for example like German MPC with its Oslo-listed vehicle MPC Container Ships (MPCC), choose a different route, concentrating on a specific segment like feeder vessels. Tufton has around three dozens of these ships. The last addition for Tufton has been a handysize bulker for 12.9 mill. $ a couple of weeks ago. As of September 2018, around one quarter of the fleet are container ships, followed by bulkers (21%), oil tankers (10%) and chemical tankers (9%). Nearly 6% are general cargo vessels – a segment Tufton is quite interested in at the moment, due to the combination of a restriction on capital and a lack of new orders. »We saw in the past a lack of recovery for MPP, but I believe it will follow some of the fortunes of the dry bulk sector. Due to the activities of the KG system, the MPP is one of those with the next largest concentration after the container ships«, Hampson says. Actually, the vast majority of the ships Tufton owns today have been purchased through distressed KG situations. »Multipurpose shipping is an interesting sector« A new example of these kind of distressed assets for sale may be the over 40 units and their non-performing loans, for which German bank Nord LB is currently looking for a buyer. The managing director confirms generally that there already are talks about MPPs, »it is an interesting sector«. He thinks there is still a lot of opportunity in the German KG market: »It is fair to say, we will be active. We are talking with banks.« Tufton – not revealing more details – works with four German ship managers and is, according to Hampson, Photo: Meyer Andrew Hampson, Managing Director Asset Backed Investments at Tufton Oceanic pleased with their performance, even if they went through difficult times. »They have been spoiled by associations with German banks by earning more money than it would be competitive in a totally open market. Over the last years there has ben a trend to a slightly more real world in terms of pricing.« For the technical and commercial fleet management, Tufton has a special unit based in Cyprus. However, as it is not a full-fledged shipping company, they more act as »gatekeeper«, managing the managers. For further investments, Tufton will only use its 2017-listed vehicle. 91 mill. $ were raised with the IPO, fully invested in ships in the meantime. »At the moment, the London-listed vehicle is the only one, which is open for investment. The other portfolios for the pension fund managed accounts are currently at their maximum level. However, they are not permanently closed, potentially we sell ships from them, generating new ability,« Hampson confirms. Already a couple of weeks ago, Tufton had announced to go for another capital round. According to him, another 100 mill. $ would be a good size: »You need a number which is significant enough to be able to make an impact but not too much from the yield 20 HANSA International Maritime Journal – 155. Jahrgang – 2018 – Nr. 11

INTERNATIONAL MARITIME JOURNAL Finanzierung | Financing INTERNATIONAL MARITIME JOURNAL FORUM SCHIFFFAHRT FINANZIERUNG Fleet Fleet composition September 2018 2018 point of view. We invest currently about 50 to 60 mill. $ per quarter. So another 100 mill. $ would give us sufficient room to look again next year if we want more.« According to Hampson, the investors are non-shipping investors, having a diversified investment strategy and, in his opinion, a different view. »They are looking at their risk in a much more holistic perspective. They will for example look at the exposure to China because they might be invested in Chinese backed bonds or property. So then we try to avoid sectors, which are China-specific and will stay out of the larger containerships and capsize bulkers.« Therefore, Tufton will more likely end up in areas where you have either got smaller ships – up to ultramax in the bulkers, MR/LR in the tankers and sub-panamax in the container sector and in the general cargo sector which has, by nature, smaller vessels. Another possibility could be intra-regional trade, »where you are not as worried about some of those macroeconomic aspects«. Reports of ownership in different shipping companies distort the picture a bit, he emphasizes. Because one important aspect is the hedge fund business of Tufton, trading in different quoted stocks and sometimes achieving a specific reporting threshold. The only two corporate investments, as HANSA learned: Hafnia and Gram Car Carriers. Danish product tanker company Hafnia was a special situation. Tufton had initially invested into a company called BTS of finance investor Blackstone, Tufton and German shipowner Alfred Hartmann. Then, as part of the exit strategy for that investment, BTS was merged in what then became Hafnia Tankers. Tufton ended up as a major shareholder until BW group came along, buying a big share. The second investment is in Singaporean company Gram Car Carriers – again, where the owner needed other investors for consolidation purposes. However, as of today, it is said to be unlikely, that Tufton will do more of these kind of transactions. n Source: Tufton/HANSA 21,28% Fleet composition September 2018 10,14% What happened with Tufton? 9,12% 26,35% 5,70% 21,28% 3,40% 10,14% Container Bulk Bulk Oil Oil Tanker Tanker Chemical Tanker Tanker General General Cargo Cargo LPG LPG Prior to 2000, Tufton was a very different actor, being a funding provider and advisor. Since early 2000s, the business model was changed into a fund management firm. Basically there are two business streams. One is asset backed investment, primarily directly into vessels. The other is a small hedge fund, where publicly quoted equities are traded. The fund management started with first assets in 2005 – a finance leasing project in Dubai. The first funds under management in London were started in 2006. Since 2013, there has been a concentration on three large single investor accounts, which all are European pension funds, focussing purely on ships. In December 2017 a public vehicle was launched and listed at the London Stock Exchange. The vehicle invested 91 mill. $ in seven ships. 9,12% 26,35% 5,7 3, HANSA International Maritime Journal – 155. Jahrgang – 2018 – Nr. 11 21

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