New shipping fund targets 7% yield from global freight boom

Taylor Maritime Investments aims to raise $250m (£179m) and become London's second shipping fund to offer income investors a big yield from the spike in vessel charter rates as world trade recovers from coronavirus restrictions.

A new shipping fund is looking to list in London, targeting a 7% dividend yield from the boom in charter rates caused by the resumption in trade after coronavirus restrictions last year. 

Taylor Maritime Investments is aiming to raise $250m (£179m) in an initial public offering (IPO), which will also be open to private investors, with plans to acquire a seed portfolio of second-hand vessels which are then leased out or ‘chartered’.

The launch will provide some competition for £205m Tufton Oceanic (SHIP ), the 7.1% yielding investment company which is currently the lone voyager in the shipping leasing sub-sector.

The new Guernsey-based fund will be managed by Taylor Maritime, a privately held ship-owning and management business founded in 2014, with teams based in Hong Kong and London.

The seed portfolio consists of 23 Handysize and Supramax ships, which are all fully operational and income-generating, and are expected to be purchased soon after the listing. According to the intention to float document published today, these classes of vessels have historically demonstrated average annual yields over 7%.

That will enable the investment company to target an initial dividend yield of 7% in its first year. Once fully invested, the fund managers will target a total return including dividends from the underlying portfolio of 10-12% per annum.

The seed assets have an estimated average remaining life of 17 years. Of the 23 ships, 17 are already under the commercial management of Taylor Maritime, while the rest are being sourced from vendors with established relationships with the managers. About $24m worth of the seed assets will be acquired in exchange for shares in the new fund, issued in consideration.

Beyond the seed portfolio, the managers have identified an approximately $500m pipeline of further deals.

Compared to the established Tufton Oceanic, the Taylor Maritime fund is likely to have a greater emphasis on Handysize ships, a smaller class of ship with flexibility in terms of goods it can carry and ports it can enter.

Tufton Oceanic has itself expanded with a tap issue recently, raising $14.7m (£10.5m).

Taylor Maritime’s principals have been active global buyers of Handysize and Supramax dry bulk ships, having made over $1.3bn of asset purchases and sales since 1987, according to the intention to float.

The executive team is led by founder Edward Buttery, who began his career in 2005 at Clarksons (CKN) shipbrokers, before moving through a series of shipping and banking roles.

It is understood that about $100m of existing Taylor Maritime investors’ funds will also be rolled into this fundraise.

As an internally managed investment company, the fund will not bear any management fees. However, annual costs, including salaries of the executives and directors, are not expected to exceed 1.2% of NAV.

In a statement, Buttery said: ‘Our internal management structure ensures we are fully aligned with investors with no external management, performance or acquisition fees, whilst our long-term ungeared capital structure will support sustainable returns for investors over the long term.’

Corporate broker Jefferies is acting as sole sponsor and global coordinator to the launch.

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