“CONVERTS” to SHIPPING – Funding Redemption

Part 1 of 2
By Geoff Uttmark

The market for convertible securities is growing. Once mainly the preserve of institutions like mutual funds, pension funds and high net worth private investors, instruments in the form of convertible bonds, debentures and preferred stock are now developing a broader investor base. Convertible bonds and convertible preferred shares now form the largest proportion of the international equity-linked securities market. This is a market with an estimated $ 400 billion capitalization and some 3,000 individual issues and one in which, in our view, shipping is surprisingly under-represented given the similarity of desirable attributes shared by attractive “converts” and attractive shipping deals. In 1982 India’s Great Eastern Shipping Company issued $10 m of convertible debentures (MM, Volume 17, Number 2). In 1992 Taiwan’s Sincere Navigation Corp. issued $50 m of convertible Euro-bonds, and in 1997 US ship builder Halter Marine (since acquired to create Friede Goldman Halter, symbol FGH) issued $185 m of 4.5% convertible bonds due in 2004. Other issues are out there, but we think there is room for many more. Indeed, convertible debt appears to Marine Money to make a strong case as the instrument of choice in many shipping capital structures. And this instrument that is particularly appropriate to shipping can be counted on to be of increasingly greater interest to investors generally, should global equity markets continue to encounter rough seas as they have in the past month.

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