Advertorial: Nigel, can you tell me about what led you to the creation of your new opportunity?
Last year we completed a successful raise for our hydro EIS, however, following theremoval of renewable energy businesses benefitting from qualifying for EIS relief, TIME has been seeking new asset backed EIS opportunities. Our focus was on trades we considered to be real investments genuinely in line with the intentions of the Enterprise Investment Scheme, rather than overly contrived vehicles that rely too heavily on the tax breaks. One of the areas which TIME has been monitoring for many years is shipping and this is a sector we feel is an ideal fit with EIS.
How does TIME:EIS work?
TIME:EIS invests in dry bulk shipping, offering investors an asset backed opportunity in a global industry that has been established for hundreds of years. This non-contentious business model makes TIME:EIS an excellent fit within the EIS regulations – which is why advance assurance from HM Revenue & Customs has already been granted. Asset backing will take the form of physical ownership of assets i.e. ships, providing added security for investors.
TIME:EIS targets an initial fund raise of £20 million, split across four tranches.
Shipping is a diverse industry and following substantial research and analysis of market trends, TIME has taken the decision to focus on the dry bulk shipping sector, targetingHandymax and Supramax vessels. The base case target return for TIME:EIS is £1.27 plus up to 30 pence income tax relief.
What makes shipping an attractive investment opportunity?
The dry bulk shipping industry currently faces considerable challenges, with charter rates barely covering operating costs and therefore many ship owners and operators that have to cover the costs of debt are operating at a loss. Against a backdrop of increasing worldwide demand for the transport of goods, it is easy to see why industry forecasters are expecting an improvement in the next three to five years.
Shipping has substantial tax free upside potential should charter rates, and as a result, vessel values, rise. As TIME expects them to, over the next three to five years. Government support for new sources of finance for the shipping industry is strongly evidenced, with the Chief Secretary to the Treasury announcing in September 2015 that, “the British Government will pull out all the stops to keep the UK a world-leading maritime centre”. The Department for Transport also released their September 2015 Maritime Growth Study in which they support investment in UK shipping businesses. The Department for Transport stated that, “A thriving maritime sector is extremely important in supporting the wider UK economy”.
The asset backed nature of shipping, in the form of physical ownership of vessels, also provides attractive downside protection for investors. With a typical lifespan of 25+ years, ships are normally sold on at a price linked to the current and expected charter rates, as well as retaining a significant scrap value for the steel they are built from. It is important to highlight that TIME:EIS will not be utilising any borrowings for vessel acquisition. This means we will be able to react promptly to the right opportunities for asset acquisition, without having to satisfy bank lending arrangements.