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Dubai mulls forming $1b shipping investment fund

Dubai - Many European banks are either exiting or scaling back lending to the shipping sector, which has left a funding black hole estimated at tens of billions of dollars this year.

Dubai is looking into creating a $1 billion investment fund focused on shipping to develop the maritime sector and ride out a global industry downturn, three finance sources familiar with the plans say.
The sources said the Dubai Maritime City Authority, the government entity responsible for developing the maritime industry in the emirate, was examining ways to establish a fund to provide financial investment support to Dubai-based firms.
"There is interest in this idea (from Dubai). At this stage it is fact finding," one source said.
The Dubai Maritime City Authority was not immediately available to comment.
A second source said there had been initial discussions so far, adding that a tender could be issued by the authority in the coming months to hire an adviser.
The sources said the funds would not replace financing from banks, but could be used to help companies buy ships or stage transactions such as initial public offerings and mergers.
The second source said the fund could either be financed by private investors or state-owned banks, or both, with the loans it provided likely to be guaranteed by the government.
The sources said if the fund were established quickly, it could be used to support a bid to acquire United Arab Chemical Carriers (UACC), a shipping firm whose biggest shareholder, Dubai-run United Arab Shipping Company, is trying to sell it as part of conditions for a merger with German container line Hapag Lloyd. UACC has been estimated to be valued at $200 million.
Two of the sources said the need for an investment fund had arisen due to difficulties that shipping-related ventures faced accessing bank capital and export credit financing.
Like other maritime hubs, the UAE and its main shipping centre Dubai are facing a near decade long downturn in global shipping, which has hurt profitability and brought down companies such as South Korean container line Hanjin.
Many European banks are either exiting or scaling back lending to the shipping sector, which has left a funding black hole estimated at tens of billions of dollars this year. Regional banks also do not have dedicated shipping finance desks.
With 90 per cent of world trade transported by sea, the sources said the idea for the initiative was also aimed at ensuring more strategic stability for Dubai. Gulf Arab countries have aimed to diversify their economies away from oil.
At the same time, Iran, still struggling to attract foreign investment after Western sanctions were lifted in January 2016, is also aiming to boost its shipping sector and revitalise international trade after years of isolation.

The UAE's shipping fleet is estimated to be valued at $9.9 billion and ranked in 17th place, according to ship valuation company VesselsValue. No. 1 ship owning nation Greece's fleet is valued at just over $95 billion.