#MaritimeFinance - As shipping companies are increasingly being forced to seek alternative sources of finance, is Ireland’s asset leasing hub the solution?

Ireland’s strength as a global hub for asset leasing is examined by tax advisors KPMG and legal firm Dillon Eustace in a recent report commissioned by the Irish Maritime Development Office (IMDO).

The report looks at Ireland’s advantages as a location for maritime commerce and how the rules and regulations which have supported the development of Ireland’s aviation sector translate to the maritime sector.

Recent Government activity to bring attention to the sector, via the annual Ocean Wealth Conference, is gaining momentum as interest in Ireland as a destination for maritime business grows.

Trends in maritime finance

Changing trends in maritime finance have been widely remarked upon in the media, with traditional lenders pulling back and some pulling out all together. An equilibrium has been reached, wherein ‘the new normal’ – those shipping banks who are still providing senior debt – are focused only on Tier One borrowers, leaving a continued void for senior debt provision to Tier Two borrowers.

These shifts in the market have opened demand for new forms of financing and increasingly we have seen private equity leaping to bridge that gap.

Ireland, with its beneficial tax structures and extensive asset finance experience, is well positioned to become the home of the new generation of finance solutions to the shipping industry. Many existing operators in the asset financing sector, previously focussed solely on aviation, have already diversified their asset base to include manufacturing equipment, medical devices, rail stock and are increasingly looking to maritime assets.

While there are notable differences in the nature of the asset class, perhaps most notably the volatility of the value of the asset and its cyclical nature, the beneficial structures and treatment available are unchanged. The Irish Government aims to attract more of this business and facilitate the growth of a thriving maritime finance sector in Ireland.

After a period of initial research of the opportunities, the IMDO commissioned KPMG and Dillon Eustace to collaborate on a report which is available HERE.

The report looks at Ireland’s overall offering for foreign direct investment and how that underpins the future development of maritime commerce in Ireland. It also examines the legal and tax conditions which have made Ireland a global leader in aviation financing and how that translates on the maritime side.

It highlights specific business, economic and tax based advantages, such as Ireland’s 12.5% corporation tax rate, supported by a stable and certain tax environment, as well as one of the most beneficial tonnage tax regimes in Europe.

The report also examines some of the success which Ireland has had in other industries, and how Ireland’s readily available skilled labour force, as well as being an English speaking member of the Eurozone and of the EU has helped that growth.

Aviation roots

Ireland has strong historic links with aviation and has established itself as a global hub for the aviation industry; it is the jurisdiction of choice for aviation finance and particularly for aircraft lease securitisation.

During the 1980s, Guinness Peat Aviation (GPA), based in Co Clare, became the world's largest commercial aircraft lessor. “The pool of expertise that emerged from GPA went on to establish Ireland as the world’s leading aviation leasing jurisdiction, with GPA’s legacy directors and staff going on to found what have become some of the biggest aircraft lessors in the world," says Jim Healy, director of shipping tax services with KPMG Ireland. "Indeed most significant transactions in the sector have involved Irish leasing companies. The industry looks set to grow further, with very large orders being placed by Irish lessors.”

Half of the top 50 leasing companies in the world are based in Ireland and more than half of the world’s leased aircraft are managed from here. It is this ready availability of the world’s leading experts in asset financing and securitisation, as well as the support structures in place which are the foundations of Ireland’s ambitions to create a global hub for maritime commerce.

Ireland is a leading issuer location for securitisation, a favoured location for asset ownership and the largest hedge fund domicile in Europe. Nearly €4 trillion assets are currently under administration in Ireland, according to the latest figures released by the Central Bank of Ireland and Irish Funds Industry Association. There are over 6,000 Irish domiciled funds alone and 36,000 finance professionals working in Dublin’s IFSC.

“Ireland has grown to be one of the world’s leading financial services centres,” says Lorcan Tiernan, partner in Dillon Eustace. “Irish professional advisors have been at the cutting edge of the most complex financial structures for many years and bring a broad range of transactional skills to the area of finance. As a group we comfortably navigate the most complex deals and offer innovative solutions across industries and all of these skills can and are being brought to bear in the area of maritime commerce.”

Demand-led developments

The IMDO carried out a programme of engagement in Asia in September, sponsoring the Marine Money conference in Singapore and launching the ‘Ship Finance: Opportunities for the International Shipping Industry’ report at a complementary event.

There was high demand for the event, with over 90 registered delegates and significant interest in the latest developments in the Irish market.

Speakers at this and its sister event in Hong Kong included Standard Chartered’s Nigel Anton, Ardmore Shipping’s Mark Cameron and Conor Warde of Clyde & Co. Both Standard Chartered and Ardmore Shipping have significant operations in Ireland, alongside a variety of maritime names such as d’Amico Shipping, Moore Stephens, the Denholm Group, Liebherr and Peninsula Petroleum.

The event in Singapore was sponsored by Bank of Ireland and CJC Law, both of whom presented. Speaking at the event, the IMDO’s director Liam Lacey outlined some of the measures already taken by government and some of those envisaged to further support and develop the industry, adding that “Ireland is a stable, English speaking, European jurisdiction with ambitious maritime plans, and we are ideally placed to meet growing demands from the Industry for stability and certainty. It is a truly exciting time to be involved in the industry in Ireland."

There is significant Government support and momentum for the development of the maritime sector in Ireland. The Government strategy for the sector is covered in a wider document published in 2012 called Harnessing Our Ocean Wealth (HOOW). A follow-up report released in June of this year details specific projects which will allow Ireland to meet ambitious targets laid out as part of HOOW, including doubling the Sectors’ contribution to GDP by 2030.

Those initiatives in the maritime space include the creation of an ocean yacht racing hub, the construction of an International Shipping Services Centre and specific recommendations to create a responsive regulatory environment and a dedicated body with the responsibility for the development of the entire sector.

What now?

Ireland has one of the most competitive tonnage tax regimes in Europe, a globally leading financial services industry and significant support from the Irish Government to develop the Maritime industry. So the only question for those who have yet to consider doing business in Ireland is 'why?'.