What was the deal?

Legally established as a trust in 1760, Shoreham Port handles some two million tonnes of commercial cargo and 14,000 leisure boat movements. It is a key economic hub on the south coast, and is the third-largest fishing port in England. 

HSBC provided a loan of £20m and a revolving credit facility (RCF) of £6m, both for a five-year term. The lending consolidated the group’s existing facilities into one and provided capital for future projects. Funding will expand cargo-handling facilities and terminal capacity to meet increasing demand, as well as develop its commercial property estate. It is a certified EcoPort with a project to create a cost-effective green hydrogen fuel for locally-based fleets.

How were you introduced to the deal?

We were invited to pitch to provide debt advisory services for the refinancing of the port’s main debt facility, about two-thirds of its total debt. Over the years, its funding had been piecemeal, with one larger loan and then individual financing for specific projects.

What was the strategy?

Following our appointment and working with the port’s leadership team, led by chief executive Tom Willis and finance director Sara Bassett, it quickly became apparent that as soon as the main loan was refinanced, then another refinance would be needed on another loan, and so on. With the need to continually invest in the infrastructure of the port, and take advantage of its sustainability credentials, we advised that the port should refinance everything to future-proof the business with an RCF, which would create the space for further investment. The leadership team could plan the development of the port, rather than always looking at the funding question. By changing the repayment profile to a full bullet it increased the headroom of available borrowing.

Who were the advisers?

We provided lead and debt advisory services. DMH Stallard was legal adviser and RSM carried out financial due diligence. HSBC received legal advice from Blake Morgan.

What were the challenges?

By far and away the most difficult challenge was the leverage. The approach had been to take loans that were fully amortising, which put pressure on the business even before the current higher interest rate environment. Our approach was to demonstrate to lenders that this was effectively a ‘yield play’ based on an incredibly strong property portfolio. There was no need to amortise the loan as that would miss what the port was about – real estate rather than cash-flow lending was most appropriate. As a trust, essentially there are no shareholders. Reshaping the proposition and focusing on the security and income changed the dynamic, allowing for a five-year bullet on the full facility.

What were the lessons learned?

Particularly interesting to us was HSBC’s commitment to environmental, social and governance (ESG). It immediately saw that sustainability was central to Shoreham Port’s masterplan. Indeed, as custodian the leadership team must hand the port on to the next generation in a better state than when they received it. This manifested itself with HSBC adding an ESG element to the loan, so as ESG targets are met interest rates being charged reduce, encouraging further investment into the port. Banks want to lend to businesses that focus on ESG, as it helps their ESG credentials, too.