Assessing Alternatives To The Junk Bond For Shipowners

by Rhys Thomas, Chairman,Tufton Oceanic Limited

Shipowners, up-and-coming or already established, have one constant concern which is how to expand or renew their fleets; this concern is immediately followed by wondering how best to finance their ambitions.

Since mid 1997, a new phenomenon has appeared on the Ship Finance scene, the High Yield or Junk bond. Although not new to other industries ($125 billion issued in 1997, of which less than 1% was shipping), to the relative new boy, the shipowner, Wall Street altered its look and seemed more like Las Vegas. So why look at any alternatives to the Bonds? Why ask questions? After all, many wise men have extolled the advantage of ready cash. As the Yiddish saying goes

“With money in your pocket, you are wise, you are handsome, and you sing well too.”

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