TOKYO: Japanese financial services firm Orix Corp (8591.T) said it was looking to buy more shipping loans in Europe after confirming that it would purchase $289 million worth of such debt from Royal Bank of Scotland (RBS.L) in a landmark deal.
European banks, major lenders to the shipping industry, have been reducing exposure to the sector because of the slump in the shipping industry and to meet stricter banking rules. Orix said it had agreed to acquire the loans from RBS, confirming a Reuters story on Friday, in what is likely to be the first major purchase of shipping loans in Europe by a Japanese player in recent years.
“Orix views these current market conditions as a favorable investment opportunity,” it said in a statement.
“And therefore, Orix aims to increase activity in investment grade shipping-related loans held primarily in Europe, such as those involved in the current acquisition, as well as to expand its business operations in the shipping sector.”
Sources had told Reuters on Friday that RBS had concluded agreements to sell at least $600 million worth of shipping loans from its portfolio as part of efforts to exit the sector and that Orix had agreed to buy $290 million worth of the loans. Germany’s Berenberg Bank would purchase around $300 million of loans, the sources said.
RBS on Monday also confirmed the sale of shipping loans to Orix. The Japanese company said it was taking advantage of the downturn in the shipping sector, which some had likened to a “perfect storm”, it said.
RBS initially tried to sell its entire Greek shipping business, which was valued at $3 billion at the time, and held talks with Orix and Berenberg among others. The Edinburgh-based bank announced last September it was winding down its global shipping business after earlier sales efforts were not successful.
Although 90 percent of world trade is transported by sea, the shipping industry is stuck in its deepest slump on record, as international trade slows and freight rates fall in a market with too many vessels.
RBS, which is more than 70 percent state owned, is in the middle of a restructuring, which includes asset sales, job cuts and tackling multi-billion dollar charges to settle litigation and pay regulatory fines for past misconduct.
The bank, which has had eight years of annual losses, was rescued with a more than 45 billion pound ($56 billion) bailout at the height of the financial crisis.
