Company News

APL resigned as a member of the Trans-Pacific Westbound Rate Agreement (TWRA). The resignation reflects the company’s intention to remain a leader in the Pacific markets as the industry readies for deregulation which will take effect on May 1, 1999, with the recent passage of the Ocean Shipping Reform Act.

APL commended the U.S. Congress for concluding the debate and policy review surrounding deregulation of the ocean transportation industry. They welcome the continued strong role of the Federal Maritime Commission in developing new regulations to accommodate this landmark legislation and look forward to working with the FMC and other parties to develop effective, simple procedures that will allow their customers to take full advantage of the new law.
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Movers & Shakers

HVIDE MARINE INCORPORATED announced the appointment of James S. Kimbrell as President of Hvide Marine Towing, the Company’s offshore and harbor towing division.  He will also be elected a Vice President  of Hvide Marine Incorporated.  Mr. Kimbrell, 59, was formally Executive Vice President, Chief Financial Officer and a Director of Bay Transportation Company, Inc. of Tampa, Florida, which Hvide acquired last October.  He succeeds Robert A. Santos, who is retiring from active service after a 36-year career with the Company.

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Please “Mine” the Gap

by James R. Lawrence

Introduction
Characterizing the financial performance of an industry as complex as shipping is quite difficult. The industry has many different players – from independent owners to shippers to investors. And there are many different types of shipping strategies, followed with more or less success in a highly variable market environment. And, of course, there are many different kinds of ships.

Marine Money has maintained a database on the financial returns of public and private (those which, for one reason or another, file returns) shipping companies for ten years – share price results, profitability, cash flow and other performance measures and ratios which come and go in vogue – paper measures. For an even longer period of time, Marsoft has kept a marvelous database on vessel prices, earnings and costs – steel measures.
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Confessions of a Maritime Mingler

by Matt McCleery

New York’s maritime minglers filtered into the University Club yesterday to attend Nedship Bank’s “Spotlight Luncheon” on the dry bulk market. This inaugural event, which the bank hopes to sponsor quarterly, had the eerie combination of grief and jocularity otherwise reserved for Irish wakes. Anyone who dares to question the Dutch bank’s cautious style should take note that the event was held on the first floor of the austere establishment, no doubt so that if any of the deeply depressed guests decided to hurl themselves out the window, litigation would be kept to a minimum.

The luncheon was hosted by Tony Guernee and featured a diverse panel of speakers consisting of Ellen Groeneveld, a shipping industry analyst from Nedship Bank, Photkion Potamianos, a shipping equity analyst from DLJ, Sean Day, president of Navios and Paul Sa, CEO of Stanships.
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Marine Transport Corp. (MTLX): When 1+1 = (1+1)?

by Geoff Uttmark

The OMI annual meeting was moving along like a trimmed tanker in a following sea. “If there’s no further business, then we’ll entertain a motion to adjourn,” was dutifully seconded. But before the ayes and nays could be counted, a shareholder’s plea broke the cadence. “You’ve sent me a book that’s as big as War and Peace,” was the bewildered assessment of the 373 page proxy statement and prospectus that would culminate in a radical change of course for OMI and would once again bring Marine Transport Lines public. “Won’t you please tell us about it?” So began a discourse on the “new math” of Figure 1 that threatened to outlast the coffee and danish.

Abridge may not be a comforting word in maritime circles, but abridge we dare. In brief, acquiescence by OMI’s shareholders to “War and Peace” accomplished the following:
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Helping the “Man with Many Bonds”

As the Publisher of Marine Money, I am in the unique position of hearing both sides of every story. In one ear I hear the shipping industry complaining that the investment community needs to learn more about shipowning. In the other ear I hear the financial community bemoan the fact that foreign based shipowners come to the United States to extract capital and in many cases have the audacity to hold their Annual General Meetings in Piraeus and Bermuda.

I am at the same time encouraged and alarmed by these two simultaneous monologues. I am encouraged because bridging the gap between the finance community and the ship owning community has been the mission of my publication for the last 10 years. I am alarmed for precisely the same reason.
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High Yield News

GLOBAL OCEAN’S CORPORATE CREDIT RATING was lowered to “B” from “B+” by S&P London, Standard & Poor’s CreditWire of 9/11/98 reports. At the same time, the foreign currency senior unsecured rating was lowered to single “B-” from single “B+”. The outlook is stable.

The downgrade reflects deterioration in the company’s financial profile and poor near-term prospects for the feeder container and dry-bulk shipping markets. Also, the lower rating on the senior unsecured notes reflects the fact that secured debt has increased more than expected.
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Company News

CANADIAN PACIFIC and TRANSPORTATION MARITIMA MEXICANA, the London-based container shipping business of CP and the Mexican transportation conglomerate, have agreed to form a 50-50 joint venture merging the container shipping business of TMM, Lykes Lines and Ivaran Lines. CP Ships owns both Lykes and Ivaran Lines. Contship Containerlines, Cast and Canada Maritime, all owned by CP Ships will not be a part of the joint venture.

The venture will have a revenue base of $1.2 billion and will operate 40 ships linking North America, Europe, and Asia with Latin America and the Caribbean. The venture is an expansion by Canadian Pacific to develop its business beyond the company’s Canadian base.
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“75….No Bids!”

by Matt McCleery

Whether or not you choose to believe the rumours out of Hong Kong that Lehman Brothers is on the verge of collapse or that Merrill Lynch is so exposed in Brazil that investors that have cash with the institution are calling to make sure it is federally insured, the fact is that the much of the US bond markets look pretty grim. Even the steady hand of good leadership is absent with the President of the most powerful nation in the world fighting for his own political life.

So you can blame it on Monica Lewinski’s dress or you can blame it on Russia, Asia or Latin America, but the one thing on which you can’t blame the bloodbath that is going on in the shipping high yield bond market is profit taking. Here’s an all too familiar scenario:
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The Penny Opera

by Geoffrey Uttmark

To appreciate the performers and not just the performance, it is essential to have the right seat. This is true in equity markets, just as it is in theaters. Regardless of whether the outcome of an investment is financial euphoria or deflated pocket book and ego, in time most individual investors view things somewhat more philosophically, tacit concession to the emotional side of investing that accepts occasional defeat as the price of acting individualistically and intuitively.

Independent ship owners and individual investors would not trade the drama and suspense of their decision-making for all the professional managers in London and New York. They see markets and companies as they see themselves – sometimes right, sometimes wrong, sometimes misbehaving, and by definition almost always unpredictable, just to keep things interesting. No concentrating about the mean for this group. “Give me an edge and I’ll make it a ledge” could be the common rally cry of aspiring thespians, independent ship owners and individual investors who are looking for more in life than safety and security.
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