"The investment landscape within the maritime industry has evolved since the early 2000s. Following the financial crash in 2008, traditional banks have been exercising more caution, whilst tightening capital adequacy regulations for ship lending have made lending to shipping companies less attractive," Tobias Backer, Executive Director, Pelagic Credit suggests
Pelagic Credit is the new investment platform created by Cypriot shipowner and shipping fund manager Pelagic Partners and, in an exclusive interview with CBN, Backer goes on to explain, "This shift has led to a rise in the influence of more agile lending structures that are better equipped to support such a dynamic, yet volatile, investment market."
He continues that Pelagic Credit, which listed on the Oslo Stock Exchange at the begining of last week, seeks to address this shift by focusing on vessels employed under long-term bareboat lease structures. As Backer points out, "This model provides clear contractual revenue visibility while limiting operating risk. For investors, it offers a way to participate in the maritime markets through a platform that prioritises stability and disciplined capital deployment rather than directly responding to market volatility."
Pelagic Credit has just been successfully listed on the Oslo Stock Exchange. What strategic gap in the maritime financing market were you aiming to address with this platform?
Pelagic Credit is a ship owning company that owns vessels leased out on long-term contracts. It represents a unique product within public markets that is designed to bridge the current capital funding gap within the maritime industry. Recent developments in the market have reduced the available investment options for parties looking to invest in maritime companies with stable cash flows.
The platform focuses on structured leasing transactions with vessels employed on long-term agreements that focus on counterparty-risk, rather than responding to market volatility. As a result, Pelagic Credit provides investors with a partnership-driven approach to maritime investment through a transparent, yield-oriented platform that is supported by anchor investment from its parent company Pelagic Partners.
Recent developments in capital markets have reduced investment options in ship owning companies backed by long-term contracts. What has changed in recent years, and how does Pelagic Credit respond to these changes?
The maritime industry is inherently capital-intensive and requires significant investment to support the growth in fleet development, infrastructure, as well as technological integration. Not to mention the financial implications presented by a rapidly aging global fleet that will see approximately 15,000 vessels reach the end of their economic life within the next 10 years. A fact that is then combined with the projected €39b per year investment required to support the meeting of the sector’s 2050 decarbonisation targets. As a result, the industry is currently facing a significant capital challenge when it comes to ship finance and investment.
The investment landscape within the maritime industry has evolved since the early 2000s. Following the financial crash in 2008, traditional banks have been exercising more caution, whilst tightening capital adequacy regulations for ship lending have made lending to shipping companies less attractive.
This shift has led to a rise in the influence of more agile lending structures that are better equipped to support such a dynamic, yet volatile, investment market.
Pelagic Credit seeks to address this shift by focusing on vessels employed under long-term bareboat lease structures. This model provides clear contractual revenue visibility while limiting operating risk. For investors, it offers a way to participate in the maritime markets through a platform that prioritises stability and disciplined capital deployment rather than directly responding to market volatility.
The company raised an initial $75 million and expects follow-on capital raises later this year. What is the long-term capital ambition for Pelagic Credit?
Based on its strong deal flow pipeline, alongside the investment right of first refusal from affiliated companies, Pelagic Credit anticipates the successful deployment of the initial capital raise in the near term and expects to proceed with follow-on capital raises over the course of the year. Ultimately, Pelagic Credit aims to be the market leader for structured ship leasing and lending solutions in the maritime space.
You currently start with an initial fleet of four vessels chartered on five-year leases. How quickly do you expect the fleet and investment portfolio to expand?
We expect the platform to expand steadily over the coming year. Our approach is to grow the fleet in line with the right opportunities with the right clients, rather than targeting a specific pace of expansion.
Since the listing, we have already begun deploying capital and executing on transactions that align with our strategy, such as the offshore support vessel, Nautical Singapore, which demonstrates our strength as diversified specialists within maritime investment, that utilises a deep understanding of the fast-changing dynamics of the shipping markets, with a network that provides greater access to deal flows and investment opportunities.
The priority for us is disciplined capital deployment, building a diversified portfolio of vessels that are backed by long-term contracted employment and strong counterparties.
The maritime industry is undergoing major changes, from decarbonisation to new trade routes and geopolitical shifts. How do these global developments influence your investment strategy?
Despite significant geopolitical uncertainty, shipping markets continue to show resilience in the face of sustained volatility. Our strength as diversified specialists, with access and insight that is spread throughout all shipping and offshore segments, allows us to adapt quickly to changing dynamics within the market. Unlike traditional fund managers, who tend to approach shipping investment in terms of ‘pure asset plays’, thereby making them less responsive to shifting market dynamics. Most other players in this space also have a short-term outlook, whereas we are building Pelagic Credit with a long-term vision to continue growing beyond the lifespan of the transactions that we will be closing in the next few years.
As well as investing our own capital, we work closely with our partners and use our in-depth knowledge to effectively manage our assets, and the cyclical nature of the market, to deliver consistent yields and strong, sustainable returns for our investors.”
Pelagic Partners is headquartered in Cyprus, a country with a strong shipping tradition. How important is Cyprus as a base for maritime investment platforms like Pelagic Credit? Also, do you believe Cyprus has the potential to become a stronger hub for shipping investment funds and maritime finance, and what would help accelerate that development?
The shipping sector in Cyprus plays a significant role within the national economy with a 7% contribution to GDP, as well as strengthening the country’s global competitiveness on the international stage. Combined with a strong strategic geographic location, an attractive legislative and operational shipping infrastructure, as well as an efficient and highly competitive tax framework, Cyprus is one of the most robust, diversified and competitive shipping centres in the world.
As a shipping region, Cyprus is associated with reliability and stability, which is a key tenet of our investment philosophy and fund structure. The funds industry in Cyprus has been steadily growing over the past few years and with it also being a major shipping hub, we saw an opportunity to combine both these factors and create a comfort zone for investors in what is traditionally a volatile market. Pelagic Partners was therefore established as a shipowner and fund manager to challenge the established investment landscape, where shipping funds were largely undertaken by industry outsiders from other segments with little sector knowledge or an appreciation of its fast-shifting dynamics.
