Bayside Wades Into Shipping in Search of New Investments

Bayside Capital, the credit investment unit of HIG Capital LLC, bought a fleet of chemical tankers on bets the vessels offer a better opportunity than distressed shipping loans.

Bayside has acquired six stainless steel tankers from distressed Japanese companies since 2013 and ordered 14 new vessels from Chinese shipyards, according to Ahmed Hamdani, the U.K. managing director for Bayside. The private-equity firm may seek to sell shares in a company controlling the vessels, which it values at more than $800 million, Hamdani said at a presentation in London this morning.

Distressed debt investors were expecting European banks to offload shipping loans after the financial crisis, according to Hamdani, as the industry suffered from a glut of new vessels and slowing growth in transport volumes. With lenders eventually selling less debt than anticipated, demand for the available shipping loan portfolios soared, pushing prices above their asset value, he said.

“A lot of distressed funds raised a lot of money on the expectation that European banks were going to sell and they didn’t,” said Hamdani. “So, when we looked at it, we said, ‘Why do we need to pay more for the loan than for the asset?’”

Demand for chemical tankers will grow at an average 4 percent a year and charter rates will climb as high as $17,000 a day by 2017, from $14,000 in 2013, Hamdani said, citing Bayside’s own figures and industry estimates.

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