Oaktree-backed fund clinches $400m for alternative finance

Tobias Backer-led venture steps up to the plate with an eye on filling gap left by departure of traditional lenders

A fund backed by private equity’s Oaktree Capital Management has closed its first capital raise with $400m set to be deployed to shipping and offshore vessel owners.

Fleetscape Capital Holdings, headed by Oaktree senior shipping and offshore advisor Tobias Backer, is the latest alternative provider in what is becoming a crowded marketplace seeking to fill the gap left by the shrinkage of traditional financing.

Fleetscape and others see opportunity, given the withdrawal of traditional shipping banks from the sector and the effective closing of the initial public offering market on the equity side.

Fleetscape says its products will include outright loans, sale-leasebacks and preferred equity.

“Those are the ways we look to deploy capital — we’re going to fill the missing capital gap between owner’s equity and bank debt,” Backer told TradeWinds this week.

Its products will be marketed to a global client base, with greatest focus on the quality of counterparties rather than a particular asset class.

“We’re very counterparty focused,” Backer told TradeWinds this week. “We lend to clients, not the assets. That makes us a little different from others.”

"We’re very counterparty focused. We lend to clients, not the assets. That makes us a little different from others"

General return targets for the fund are expected to be “in the low to mid-teens”, with a term of between three to eight years.

“We do price risk differently, but we don't really differentiate whether it's a senior loan or equity in a lease — we have return hurdles we need to meet,” Backer said.

Shipowners will find the cost of capital not only higher than traditional lenders, but also pricier than margins from banks such as DVB and Macquarie which look to fill a gap in the mid-to-high single digits on interest.

It is one reason Fleetscape is likely to find itself working hand-in-hand with such lenders, Backer explains.

“Banks are not really our competitors,” he said. “They're a very good source of deal flow. They’ll come to us with a client who may need 70% or 80% financing and say ‘we can't do it — can you help?’”

Backer explains that banks in such cases typically can do a 50% to 60% loan ratio, so Fleetscape can step in to achieve the higher ratio either through a sale-leaseback or a senior-junior loan structure.

Fleetscape feels the generally lower climate for vessel valuations has helped protect against downside risk in entering the market now, Backer says.

Most of the $400m was newly sourced from outside investors, he adds. Some comes from funds managed by Oaktree.

122c47413143e5a15ac2687dceb46844 Oaktree senior vice president Guillaume Bayol  Photo: Oaktree Capital Management

Oaktree senior vice president Guillaume Bayol also cites confidence in the venture.

He said: “By combining Oaktree’s history of investing in the maritime space and our experience in structuring tailor-made transactions, we believe that Fleetscape will be a leading creative, flexible and innovative investment partner for the shipping and offshore industries for the long term."