September 22, 2017 — A new joint venture between a Wall Street firm and a Norwegian lender plans to make millions available for medium- and large-scale fishing and fish farming projects.
The effort between New York City-based Simpler Funding and Oslo, Norway’s Lighthouse Finance will bring the seafood sector access to an estimated $300 million to $400m annually via a method known as asset finance that serves as an alternative to conventional methods, the firms’ executives told Undercurrent News.
Traditional loans typically rely on a business’s physical assets as collateral, which can be repossessed and resold relatively easily in case of default. That works well for assets such as real estate, but investors without deep knowledge of an industry such as seafood are often reluctant to risk putting themselves in the position of repossessing collateral such as a recirculating aquaculture system (RAS) facility that they don’t know how to operate.
Asset finance
Asset finance works a bit differently. For an experienced aquaculture operator that wants to operate a RAS facility, for example, a corporation known as a special purpose vehicle (SPV) is formed to finance up to 100% of the cost of the asset’s construction. Outside investors fund the SPV, an independent entity that remains the owner of the RAS facility, which is then leased to the operator.
In Norway, where salmon farming has emerged as an economic force almost rivaling energy, Lighthouse CEO Roy Hoias said that he and colleagues in asset finance realized two things very quickly in the early days: That the industry was poised to grow quickly, and that that aquaculture wasn’t “the first choice for banks” and for traditional financing markets.