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New maritime fund on investment trail

Almost a year after collaborating on a BW Group and Hafnia Tankers tie-up, Freddie Lee and Carsten Mortensen have launched their own venture. Dee4 Capital Partners has already raised $41m of its intended $100m. While three product tankers are its first targets, investments will not be limited to only one segment

Private equity outfit Dee4 Capital Partners has set itself the target of creating a relatively small fund size, not exceeding $100m, and deploying the capital raised within a two-year investment period

SHIPPING’s latest private equity venture is on the hunt for fresh asset acquisitions and new investors.

Copenhagen-based Dee4 Capital Partners, founded by former BW Group chief executive Carsten Mortensen and Tankers co-founder Freddie Lee, launched this month with a $41m capital raising. 

“The period from establishing the fund to first close has been extremely short,” Mr Lee told Lloyd’s List. “This enables us to spend as much time as possible in closing in on the right transactions and assets and making good returns for our investors.”

The fund’s 17 investors include foundations, family offices and shipping executives. Mr Lee and Mr Mortensen have invested a “significant amount”.

“The idea is to deploy the fund relatively quickly,” Mr Lee said. “We think there are good opportunities now. It is a relatively small fund and a significant proportion of it will be allocated to the first transaction.”

The fund’s first transaction is the acquisition of three product tankers, one of the most promising shipping segments thanks to the 2020 sulphur cap, which will require the movement of low-sulphur fuels for bunkers across the world.

Mr Lee did not reveal the seller or size of the ships but said they were quite “mature” in terms of age. 

“This fits with the thesis that the demand-supply dynamics of the product tanker industry will shortly improve, particularly with IMO 2020. The investment is underpinned by a relatively low cash flow break-even and scrap value of the vessels,” he said.

The deal is expected to close within the next month and Dee4 Capital is in negotiations with a leading Scandinavian shipping bank to assist with the financing.

“This will give us firepower in the fund to do more transactions,” he said.

Product tankers are underpinned by one of the most positive outlooks in the industry for the next year, but Mr Lee and Mr Mortensen will not invest solely in this segment and will maintain an agnostic stance when it comes to sub sectors, judging each potential deal on individual merit. 

“What we are looking for is opportunities where — due to specific market circumstances — there is a discrepancy between short-term valuations and long-term fundamentals,” said Mr Lee. “We have a few [other segments] in mind, but 100% of our focus right now is closing the first acquisitions, running the fund and then speaking to more investors,” he said.

The global 2020 sulphur cap will elevate costs for the industry as a whole, but it has also given risk-takers and ambitious opportunities, whether those have come by installing scrubbers to capitalise on the price differential between fuels or by investing in shipping segments that are expected to outperform others thanks to the new rules.

Mr Lee said the time was right to set up the fund owing to the availability of capital, opportunity and the right people. 

“I am pleased to say that all three came together at once here. I believe now is therefore the right time to get this going,” he said.

According to the Danish Register of Companies, Dee4 Capital lists five entities with a minimum 5% stake in the firm. Mr Mortensen’s CAMO capital and investment vehicle Teix Partners, founded and ran by former Maersk boss Nils Smedegaard Andersen, each own 5% to 9.99% of the fund.

Singaporean shipping company Global United Shipping, shoemaker Ecco and LF Investments, each own between 10% and 14.99%. 

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