Pillarstone to Snap Up Europe Shipping Loans

Pillarstone, the platform set up by U.S. private equity firm KKR to buy non-core bank assets in Europe, looks set to take on more shipping loans after appointing an industry veteran to run its shipping business.

Pillarstone, which was set up last year by KKR Credit to provide capital and manage exposures to non-core and underperforming bank assets in Europe, has appointed Jens Martin Jensen as a partner in charge of shipping in the region.

Jensen was previously CEO of Frontline Management, part of Frontline, one the world's biggest tanker companies. He has worked in shipping for more than 30 years, including at Denmark's AP Moller-Maersk and at Island Shipbrokers in Singapore.

Pillarstone said it is interested in providing capital and operational expertise to troubled shipping businesses, and helping banks cut their exposure.

"It's become very clear there is a problem here, where we think our model can help," John Davison, CEO of Pillarstone, told IFR.

He said there are substantial non-performing loans, many banks want to exit or reduce exposures, and a lack of financing could disrupt operations further in the coming years.

"We're knocking on an open door," Davison said. "We bring new money, we have a lot of turnaround and operational expertise and we have a collaborative model. The intention is we work with the shipowners and banks."

Among dozens of banks who have sold or are still trying to sell shipping industry exposures are Commerzbank, Lloyds, Royal Bank of Scotland, Deutsche Bank, Nordea and BNP Paribas.

There are estimated to be about $400 billion of shipping loans globally, and many banks that became big lenders have struggled to get rid of loans during an eight-year shipping downturn.

Pillarstone launched last year in Italy to take on non-core loans. In April, it signed a deal with Italian shipping firm Premuda, which involved taking on and managing exposure from UniCredit, Intesa Sanpaolo and Banca Carige.

Among the banks still with significant exposure are RBS and Commerzbank.

RBS has been trying to cut its shipping loans for years and has cut it by £1.3bn this year, but it still had exposure at default of £6.2bn at the end of September.

Pillarstone said it aims to inject capital and work alongside firms to help them recover and grow. As it is not a straight buyout, where banks would take a loss up-front, banks can share some of the upside as the performance of the corporate borrowers improves, it says.