Swimming Naked

In the words of the esteemed Warren Buffett, “you never know who is swimming naked until the tide goes out.” So seems to be the case in the shipping high yield market. Charter rates have crashed, cash flow has dried up, plummeting second hand values have erased equity and the falling tide of the Biffex has left many deals exposed.

With every passing financial quarter it becomes more apparent that without an infusion of additional equity or other sources of financing a substantial number of shipping deals will either default or fail to generate enough free cash flow to make strategic acquisitions of undervalued tonnage. In this article, and in the coming issues of Marine Money, we will revisit the deals which we think illustrate the structural elements that have been successful and those that haven’t. While we cannot cast blame on those that did not see the Asian Crisis coming, we do believe that the shipping industry has proven cycle after cycle, crisis after crisis, that lenders should assume the worst.

This is only an excerpt of Swimming Naked

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