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A look at the thorough
work of Joe Hovorka of Raymond James Securities helps to explain the
viewpoint. Hovorka predicts a possible announcement of ship
financing for Oasis as early as May/June.
He points out that in the current credit environment, liquidity
concerns are foremost for investors. Even so, the national
governments in Europe try to protect industries perceived as
critical, so the structure of the global shipbuilding industry
should continue unabated.
"We believe that it is likely that both Carnival and Royal Caribbean
will continue to have adequate access to the loans for newbuilds as
well as receive attractive interest rates on those loans," predicts
Hovorka, pointing to export credits as the reason.
Hovorka explains that the Organization for Economic Co-operation &
Development defines an export credit as "an insurance, guarantee or
financing arrangement which enables a foreign buyer of exported
goods and/or services to defer payment over a period of time."
Export credit agencies are quasi-governmental finance agencies, in
most cases, wholly or partially state-owned. Their role in
shipbuilding commenced, reports Hovorka, because from 1978 to 1988
more than 100 shipyards were shuttered around the globe, and many
countries tried to stimulate the industry with a combination of cash
subsidies and generous export credits.
Hovorka refers to funding concerns over Oasis as unfounded, pointing
out that Finnvera (Finland's export credit agency) announced last
year that it signed an official guarantee agreement for the
construction financing of both Oasis and Allure of the Seas: "Given
the large price tag for the Oasis ship ($1.2 billion), it is very
likely that Finnvera and Royal Caribbean are still in the
negotiating process over the guarantee terms of the bank loan….With
credit markets still in relative disarray and credit generally
contracting, it only makes sense that the participating bank
syndicate would seek to minimize their exposure to such a large loan
in this environment.
"While it is impossible to completely remove all default risk from a
company that utilizes debt as part of its capital structure, we
believe that fears regarding the cruise lines' access to ship
financing are exaggerated," concludes Hovorka.
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