Printed reports on finance tend to be highly scripted. That’s why it’s worthwhile to peer behind the curtains every so often.
A recent announcement by the venerable (if that’s an appropriate word) buyout firm Kohlberg, Kravis & Roberts (KKR) aroused my interest, and may set off some lightbulbs among readers of Workboat whose vessels are active in the oil patch. KKR, with its very originally named entity “Maritime Finance,” joins a long list of financial high flyers that have entered the maritime world. What I found interesting is their stated intention to “… originate, structure, underwrite, invest in and distribute debt financings secured by high-quality maritime assets, including drilling rigs, development and production assets, subsea construction vessels …” Those are their words, not mine.
Conventional shipping clients, with vessels trading spot, have already asked me to pitch traditional deals to this new KKR entity that boasts its own equity of $580 million (implying a capacity to lend out even more). I said, “Don’t bother,” in spite of Maritime Finance’s stated intention to fill voids left as traditional banks retreat from ship lending.
However, I would have a different answer for owners of vessels that are tied to deepwater oil production projects with multiyear charters. Offshore energy, from the shallow waters out to the ultradeepwater, is where it’s at.
With various financial bubbles, “securitization,” which is what KKR intends to do, has become something of dirty word. It should not be. Energy projects, by their capital-intensive nature, usually have one or more deep-pocketed entities “paying the freight.” The credit of such entities (maybe investment grade, but maybe not) may be put to work in backing up debt instruments that can be traded.
Earlier this summer, we saw Harvey Gulf International Marine gain a credit rating. This will become more common as private companies seek to benefit from the new breed of non-traditional financiers coming into our business.