KKR’s maiden maritime vehicle sets sail

KKR has launched a specialist maritime financing unit which will provide asset-backed debt capital to the shipping and offshore oil field services industries, the firm confirmed in a statement.

The US-headquartered alternatives manager has provided almost half the $580 million of equity used to capitalise the new business unit, called Maritime Finance Company. Its contribution was made via its balance sheet, KKR Financial Holdings, and MerchCap Solutions (MCS), the firm’s recently-established mid-market merchant banking venture backed by partners CPPIB and Stone Point Capital.

MCS helped to arrange the remaining capital, sourcing commitments from family offices, mutual funds, hedge funds and specialist financial services investors.

KKR said the proceeds from the capital raising would be used to fund the company’s establishment and operation, provide capital for newly-originated maritime loans, and potentially acquire a seed portfolio of existing credits.

Maritime Finance will be led by Kristan Bodden and Gabriel Tolchinsky, both former partners at Helios Advisors.

“This is an area that has historically been served by European banks,” Bodden said. “The current dislocation in the European banking sector has created a substantial funding gap in maritime asset financing. With Maritime Finance, we are capitalizing on an opportunity to fill an obvious void while at the same time aiming to provide compelling returns and attractive yields for our investors.”

KKR cited a report from AMA Capital Partners that suggested more than $220 billion of debt capital is required by the maritime sector through the end of 2014. “An enormous capital commitment is required to deliver the current maritime orderbook. Total offshore and shipping orderbooks are valued at $238 billion at cost and the lack of financing is impacting orderbook growth beyond 2016,” the report added.

KKR will reportedly focus on financing offshore oil-focused companies initially, rather than traditional shipping businesses, using the rigs themselves to secure the loans. Reports suggest KKR could look to take MFC public in due course. KKR could not be reached for further comment on this point at the time of going to press.