New York-based hedge fund EnTrustPermal is to list a $250 million investment trust to lend to the shipping industry.
The vehicle, Blue Ocean Maritime Income, will seek an IPO on the London Stock Exchange of 250 million ordinary shares at an issue price of $1.
Blue Ocean will aim to generate long-term shareholder returns from income distributions as a result of direct lending and similar financing to vessel owners, operators and other maritime businesses.
Loans will be predominantly senior secured and made to small and medium-sized privately-owned shipping companies. The fund will target a NAV total return of 8-10 percent over the medium term.
EnTrustPermal said the shipping industry needs approximately $80 billion of finance annually. Banks have historically provided most loans to the sector but this has been significantly reduced since the financial crisis in 2008.
The firm founded its Blue Ocean shipping strategy in 2016 and has deployed more than $300 million to finance 55 vessels.
Blue Ocean Maritime Income will be managed by Svein Engh, who said: “While we continue to see capital inflow to direct lending vehicles and investment funds in sectors such as real estate or infrastructure, the maritime financing sector is in a different position; values are low, and the competition is limited, resulting in attractive risk-adjusted yield opportunities.”
He added that, as a non-bank lender, Blue Ocean is not impacted by Basel regulations and other factors which have restricted the activities of traditional shipping lenders.
The firm will look for businesses that provide steady, predictable cashflow with a low correlation to equity and bond markets. As well as targeting NAV total return of 8-10 percent per annum it will also target dividends equal to a yield of at least 3 percent up to 31 December 2019 and at least 7 percent each year from 2020.
The fund expects to formally list and begin dealing in ordinary shares on the specialist fund segment of the London Stock Exchange from 23 October 2018.