Middle Eastern Financier Buys Danish Ship Finance

UAE-based investment firm Magellan Group has purchased a majority stake in Danish Ship Finance, a landmark financial institution based in Copenhagen. The price paid was about $750 million, Magellan told Bloomberg. 

Danish Ship Finance was founded in 1961 to provide mortgage financing for the shipping industry, with backing from Denmark’s national bank and a consortium of shipping interests. It originally focused on financing Danish-built and Danish-owned vessels, but as the work of shipbuilding moved overseas, it broadened its portfolio to include a range of international ships. It is known for its focus on blue-chip shipowning clients, and it takes a conservative “low-risk” approach to lending. Its current loan book covers more than 600 ships, and is valued at $5 billion. It was purchased in 2016 by a consortium of Scandinavian interests, including a private equity company and two pension funds; these owners have been looking to sell the firm since 2022, and that effort has now concluded with the sale of a 90 percent stake to Magellan (subject to regulatory approval). 

Magellan has its roots in Zakher Marine International (ZMI), an offshore oil and gas service company that provides OSVs, jackup barges, anchor handlers and other vessels to the energy industry in the Mideast. It has a fleet of about two dozen jackups and three dozen offshore vessels. ZMI’s founder sold this business to UAE oil and gas company Adnoc two years ago, and is now buying Danish Ship Finance with the proceeds. 

“What we want to do is see how we can help grow the business, whether it’s adding advisory, adding syndications, helping build up on the client roster,” Magellan CIO Ahmed Omar told Bloomberg. 

The core lending business has been slowing, at least temporarily, according to Danish Ship Finance. The company posted its third-highest net profit ever in 2023, bringing in $118 million. It raised $540 million in new A-rated bond financing, improved its climate alignment performance, and brought in ten new clients. However, in an environment of strong shipowner earnings, its customers have been paying down their mortgages ahead of schedule. Danish Ship Finance has offset the decline in interest income and secured additional profits through its investment activities, which brought in $50 million in pre-tax income last year. 

In addition to its robust balance sheet, Danish Ship Finance is known for its ambitious climate goals. Its aim is to have the majority of its lending linked to sustainable shipping by the end of 2024, and after 2025, it will only lend to customers who are “actively engaged in the sustainable transition.”