KKR forms Maritime Finance Company

US$580m company to fill void left by exit of traditional lenders.
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Global investment firm KKR has announced the formation of Maritime Finance Company – a new specialty finance company created to lend to the maritime industry.

Led by former Helios Advisors partners Kristan Bodden and Gabriel Tolchinsky, Maritime Finance is an asset-based lender focused on maritime assets in the offshore oil field services and traditional shipping sectors.

The company will 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 and other traditional shipping assets.

Maritime Finance will initially be capitalised with US$580 million of equity, more than 45% of which has been provided by KKR, including through its balance sheet, KKR Financial Holdings LLC and MerchCap Solutions, KKR's recently established mid-market focused merchant banking venture with CPPIB and Stone Point Capital.

The balance of the capital was arranged by MCS and included participation from various family offices, mutual funds, hedge funds and specialist financial services investors. Proceeds will be used by the company to fund its establishment and operation, provide capital for newly originated maritime financings and potentially acquire a seed portfolio of outstanding loans.

Bodden, CEO of Maritime Finance and an investor in maritime assets for 13 years, stated: “This is an area that has historically been served by European banks. The current dislocation in the European banking sector has created a substantial funding gap in maritime asset financing. With Maritime Finance, we are capitalising on an opportunity to fill an obvious void while at the same time aiming to provide compelling returns and attractive yields for our investors.”

According to AMA Capital Partners, more than US$220 billion of debt capital is required by the maritime sector through the end of 2014 and an enormous capital commitment is required to deliver the current maritime orderbook. Total offshore and shipping orderbooks are valued at US$238 billion at cost and the lack of financing is impacting orderbook growth beyond 2016.

“This transaction is a perfect example of how KKR is delivering tailored solutions to clients through our capital markets and asset management platforms,” said Craig Farr, CEO of KFN and global head of KKR Capital Markets. “In this case, we are backing an investment team with a track record of strong performance to lend to an industry that is experiencing severe dislocation.

“KFN was able to deploy US$150 million to Maritime Finance as a result of its flexible capital and access to the KKR platform, including MCS. With assistance from Stone Point in identifying and diligencing the Helios team, MCS delivered what we believe is a creative way to fill the void resulting from the ongoing deleveraging of European banks.”
 

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