Page 33: of Marine News Magazine (October 2017)

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MARINE FINANCE

S C MALLER OMPANIES

Key Equipment Finance, part of Cleveland based Key-

Bank NA, has been in business since the early 1970s. Paolo de Alessandrini, Senior Vice President at KeyBank, based in the Great Lakes region, told MarineNews that his team: “knows the industry and the equipment, we are experts.”

Asked about the longevity of the equipment ? nance busi- ness – Key Equipment Finance (KEF), he said: “We are very careful about our client selection. Credit metrics are critical; they drive the risk pro? les.” KEF’s Director of

Commercial Marine Finance, Ronnie Evans, based near

Baton Rouge, emphasized this point, saying “Credit is the driver behind today’s market, and amortization [the length of time in which a loan is paid back] drives many

Pierce Fenner & Smith was the lead arranger in $450 mil- credit decisions.” lion syndicate with Bank of America, N.A. acting as admin- Separately, Walter Rabin, President and CEO of Sig- istrative agent for the group that participated in the deal. nature Financial (wholly owned by Signature Bank), a

Most recently, in mid June 2017, Hornbeck Offshore veteran of the business, explained the trade-offs between announced that it had re? nanced a $200 million senior the asset and the corporate side of lending. Active in the secured revolving credit facility set to expire in February ? nance of inland, coastal and equipment used in harbors, 2020 with a new “? rst lien” credit (described as providing Signature Financial provides both loan and lease ? nance. up to $300 million of term loans) maturing in June, 2023. They are “…guided by what our customers want,” ac-

Term Loan B deals have characteristics of loans (with cording to Mr. Rabin. Five years after moving over with some repayment of principal along the way) but may also a team from another bank, his group now numbers more exhibit bond-style “bullet” amortization (where much of than 100 people. the principal is repaid at maturity). During a 2013 expan- In a practical rather than legal sense, the lines between sion phase, Harvey Gulf International Marine re? nanced leases and loans may blur; for example, a term loan for an existing loans and raised approximately $1 billion of cred- asset’s entire value (or nearly), over a lengthy time period, it- that included $600 million of Term Loan B debt. may have similar impacts as a lease transaction. KEF’s Ev-

Larger (balance sheets of $1billion+) non-listed out? ts ans emphasized the point, saying, “Most clients would like may also seek capital from Private Equity (PE) investors. to ? nance for as long as they can; on new assets, we typical-

Harvey Gulf went this route in 2008, when a “middle mar- ly see tenors of 7 to 10 years. But the amortization pro? le, ket” PE house Jordan Company (packager of the “Reso- which determines the balloon to be repaid at the end, is lute” private funds), took a majority position in Harvey also important. It’s a big part of the credit underwriting.”

Gulf to help fuel its transition from a towing out? t to an Signature Financial’s Rabin offered some insights into offshore service provider. Paducah-based Marquette Tow- the considerations that go into lending decisions. He ex- ing has bene? ted from multiple investors from the PE sec- plained, “Similar to other types of equipment ? nance, we tor. In early 2015, KRG Capital Partners, a middle market need to think about the ? nancial pro? le of the client,” specialist with a liking for “platform” companies, sold its with the latter touching on issues of corporate credit. Cau- interest in Marquette, onward to another investor – in this tioning that each deal has its own wrinkles, he continued, case, BDT Capital Partners, LLC, a private equity arm of “We start by looking at the value of the asset, consider-

Chicago-based BDT & Company, LLC. At the time of the ing the structure, the term, amortization pro? les, and of deal, BDT pointed to a long term horizon to fund growth, course, we look at exits; asking ourselves what steps we alongside the Eckstein family, for Marquette Towing. In a might take if something goes wrong.” But banking is all theme which runs throughout this article; industry expertise about relationships – knowing the customer and its busi- really matters, and it is here where the Richmond, VA of- ness, as well as the industries they serve. Rabin adds, “We ? ce of Harris Williams & Co. (a boutique investment bank look at borrower, how long they’ve been in business, and, with a specialty in transportation, logistics and distribution if there’s a charter, we look at the relationship with the cli- companies) was instrumental in structuring this deal. ent’s customer.” www.marinelink.com

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