The key thing to look for both as a lender and as an investor is that you’re dealing with experienced and honest and ethical management teams
NEW YORK--(BUSINESS WIRE)--With less competition in the market and a high demand for refinancing, the perfect time to be in the maritime finance business is right now, according to Svein Engh, Group Head and Managing Director of CIT Maritime Finance at CIT Group Inc.(NYSE: CIT) cit.com, a leading provider of financing to small businesses and middle market companies. These issues, among others, are discussed in “Opportunities in Maritime Finance,”cit.com/engh , the latest in a series of in-depth executive video Q&As featured in the award-winning CIT Executive Insights video series (cit.com/executiveinsights).
An Opportunity for Growth
As many banks exited the maritime market following the economic downturn, others have struggled with declining value of assets on their balance sheets and European banks are having a hard time with funding, explained Engh. “What that means for CIT is less competition, improved pricing, tighter terms and a much better risk reward ratio. So it’s really an opportune time for us to enter.”
The opportunities exist across many sectors, mainly around new deal originations, as well as in the secondary market. “We’ve had some success already in buying loans in the secondary market,” said Engh. “We have a pipeline that is building quickly.”
Oversupply Remains a Challenge and an Opportunity
“During that period [2004/2005 to 2008] when the rates were at historic highs, there was a lot of ordering of new vessels because the owners were flush with cash,” explained Engh. “After the financial crisis, you had too many ships for too little business and that overhang is still the main problem in the sector.”
On the flip side, not only did these companies order a lot of ships, but they did a lot of deals and those deals are now reaching maturity, leaving opportunities for lenders. “They have to be refinanced and there’s a lot less capacity. […] We certainly hope to play a role there,” said Engh.
Private Equity Taking Interest
Private equity firms have become more active in the market recently, but the industry may not always match up with the type of transaction most private equity firms are looking for. “The problem is if you’re a private equity player and you have a five-year window to buy and sell, within that five years it might not be the time to sell,” explained Engh. “So you want to sell when you can and not when you have to, and that’s one of the key issues to keep in mind when you invest in ships.”
The CIT Approach to Maritime Finance
When financing any business, it’s about much more than just providing funds. “The key thing to look for both as a lender and as an investor is that you’re dealing with experienced and honest and ethical management teams,” commented Engh. “The other thing is that we want to focus on companies with high quality assets because as long as you have good assets securing your loans, you can generally manage through cycles.”
Apart from the right time to be in the maritime market, the industry is a parallel match to the company’s deep expertise in the broader transportation market, with deep experience in aviation and rail.
“CIT has a very deep knowledge and understanding when it comes to transportation finance,” said Engh. “The mindset of CIT, with its focus on prudently growing assets, is perfect for Maritime. Having experienced and dedicated professionals in this business is a key driver for success.”
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Founded in 1908, CIT (NYSE:CIT) is a bank holding company with more than $35 billion in financing and leasing assets. It provides financing and leasing capital and advisory services to its clients and their customers across more than 30 industries. CIT maintains leadership positions in small business and middle market lending, factoring, retail finance,aerospace, equipment and rail leasing, and vendor finance. CIT operates CIT Bank (Member FDIC), its primary bank subsidiary, which, through its online bank BankOnCIT.com, offers a suite of savings options designed to help customers achieve a range of financial goals. cit.com