Financing Sources for Shipping - A Case Study at Wonsild & Son

University essay from Lunds universitet/Företagsekonomiska institutionen

Abstract: Title: Financing sources for shipping. – a case study at Wonsild & Son Author: Daniel Hultin Tutors: Niclas Andrén, Department of Business Administration, School of Econonomics and Business Administration, Lund University. Everth Larsson. Department of Logistics, Lund Institute of Technology, Lund University. Søren Hahnemann, Wonsild & Son A/S, Copenhagen. Problem discussion: o What is the best-suited form of equity and debt for the financing of Wonsild & Sons chemical tanker vessel? o How is the “optimal” financing solution for the company compared with the current one? o How can this “optimal” finance be obtained? Purpose: The purpose of the study is to on a broad basis investigate if the financing solutions of Wonsild & Son’s vessels can be improved. Method: The methodology used can be described as inductive, which is appropriate with aspect on the purpose of the study. The study is based around two new built case vessel ordered by Wonsild & Son in 2003. The study is primarily based upon interviews with employees at ten commercial banks in northern Europe. The banks can be considered to be representative for the shipping banking industry in region. The information obtained from the interviews can be considered to be of the primary type. The information obtained form the interviews is analysed with both shipping specific, and general finance theories. The results in the study can be considered to have a high degree of validity, thanks to the large use of primary data. Regarding the reliability it is however hard to make any statements without actually testing the recommendations in real life, something that lies out of the scope of the thesis. Conclusions: The study shows that private equity and commercial bank loan debt are the most appropriate financing forms for the studied case vessels. The study also shows that there are differences between the banks attitude and willingness to provide finance to the case vessels. These differences can be explained by the banks experience with the vessel type. Banks with a greater experience with the vessel type are more positive towards the case and are more willing to provide finance than ones that are less experienced with the vessel type. Among the group of banks that are less experienced with the vessel type is the bank that currently is providing vessel finance for Wonsild & Son. It is, as a result of these findings, recommended that Wonsild & Son enters negotiations about vessel financing with the banks that have a great experience with the vessel type presented in the case. It is also recommended that the vessels shall be owned under a A/S form. This is recommended in order to improve the financing situation at Wonsild & Son.

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