Shipping companies and port authorities in Africa often experience difficultly buying or financing new work vessels, tugs and towboats. That prevents them from offering more professional services, causing them to miss out on international service contracts. Change is possible thanks to Africa Ship Lease Holding, which provides lease solutions to SME clients in Africa on behalf of the Damen Shipyards Group. Invest International, together with the Rabobank and Damen family, is investing in this special purpose company set up in the Netherlands.
Damen Shipyards Group is well known in Africa. In recent years the reputable Dutch shipping company has exported more than 1200 vessels to the continent. Africa offers huge potential, and there are plenty of opportunities to supply more vessels. However, Damen saw that the financial resources to buy vessels were often lacking, especially among SME clients. That prompted Damen to set up a leasing company as a way of supporting SME clients in African countries and helping Damen to achieve its growth targets.
Financing this venture fully through a regular bank proved unfeasible. Specialist knowledge of the market is required in order to invest in Africa, and investors must accept a higher risk. The solution came in the form of an innovative co-financing structure involving a number of parties. On 24 May 2018 the FMO development bank (now a shareholder in Invest International) agreed, in a club deal with the Rabobank, a senior secured loan facility for Africa Ship Lease Holding B.V. In combination with equity capital from the Damen family, this meant that sufficient money was available to launch the lease activities.
With the hire purchase solution, shipping companies in Africa can buy new Damen work vessels and tugboats like on the photo and professionalize their services.
The secured loan facility is deployed to purchase vessels built by Damen. Each vessel is leased by a specific customer, and the customer can purchase it during the lease period. This leasing solution enables private companies and port authorities in Africa to operate ultra-modern Damen vessels, which are state of the art in terms of safety, sustainability and efficiency. They can then explore new business opportunities and expand their operations. That creates professional services, new contracts, sustainable operations and extra employment, thereby boosting private sector development.
“Partnerships that generate business for Dutch companies in emerging markets, thereby stimulating the private sector. The goal of Invest International.”
The leasing of vessels by African customers of Damen Shipyards Group has been successful up to now. Jan-Wim Dekker, CCO of the Damen Shipyards Group explains: “We’re looking at expansion possibilities now that market interest is increasing. The so-called hire purchase solution lowers the threshold to invest in more advanced work vessels and, thus, to offer a more professional and sustainable range of services. If a shipping firm ultimately decides to purchase the leased vessel, the money is reinvested in the company and can facilitate new shipping purchases and lease constructions. In that way it works like a revolving credit facility. Good for our customers and good for us.”
Invest International, together with the Rabobank and Damen family, invests in Africa Ship Lease Holding, a so-called special purpose company set up in the Netherlands.
“This project means an incentive for shipping companies, professional services, new contracts and jobs.”
Bart DeSmet, Investment Manager at Invest International and contact for Damen Shipyards Group, adds: “The transaction aligns with the strategy of Invest International to play a key role in financing the export of capital goods and services from Dutch companies to clients in emerging markets, among them Africa, where Damen is active. The transaction also stimulates the development of the private sector in African countries. That in turn helps to achieve the Sustainable Development Goal 9 (Industry, innovation and infrastructure).”
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