Private equity giant KKR sees big opportunity in the maritime industry, and it's launching a new financing business to capitalize on its growth.
The $84 billion New York firm known for its giant leveraged buyout deals has been busy diversifying its business, and is now adding a maritime financing company to lend to the maritime industry.
Dubbed Maritime Finance, KKR and its merchant banking partners CPPIB and Stone Point Capital, are starting with $580 million in equity.
Of that $150 million is from KKR Financial, the largest investor, and the remainder from third party investors and KKR's own balance sheet.
KKR says its new venture will fill a financing gap as traditional lenders like European banks have scaled back their loans to the maritime industry. The industry will require over $220 billion of debt capital through the end of 2014, according to estimates.
KKR's Maritime Finance will specialize in asset-based lending meaning it will hold maritime assets as collateral. It 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.
Other big players in the asset based lending space include CIT, the firm lead by John Thain. CIT re-entered the shipping finance business as European banks pulled away. Svein Engh, head of CIT Maritime Finance, says the area is attractive because there's less competition, prices are up, terms are tighter and the risk reward ratio is better.
Entering the maritime financing arena helps expand KKR's offerings beyond pure private equity. Though its bread and butter business is still tied to its PE unit, the firm, founded by Henry Kravis and George Roberts, has a booming asset management division with some $28 billion in assets. The company has also added a fund of funds business, launched retail mutual funds, capital markets, real estate and energy businesses.
