A High Risk/Low Return Industry: Can the Risk/Reward Balance Be Improved?

by Peter Stokes, Managing Director, Maritime Consultants Limited, as presented at the LSE Shipping Finance Conference in November, 1997

I believe I have spoken at all but one of the LSE shipping finance conferences to date, and I suppose that this fact alone persuaded the organisers of this year’s event to ask me to present a kind of retrospective assessment of the last decade, together with some thoughts on prospects for the future. I am painfully conscious of the fact, however, that frequent appearances on conference platforms tend to encourage bad habits- for example repetitiveness, predictability and a wholly unjustified confidence in the importance of one’s own views and the eagerness of others to hear them. In preparing this presentation, I have tried to avoid falling into these traps, but inevitably the general thrust of my arguments will be familiar to those of you who have been attending conferences for as long as I have been speaking at them. Continue Reading

Cautious Optimism at Halla Shipyard

In Ernest Hemingway’s 1926 novel The Sun Also Rises, Jake Barnes asks his friend Mike, a Scottish aristocrat, how he had managed to lose his fortune. “Two ways,” Mike says, ” first gradually, then suddenly.” While Hemingway may not have been a shipping man, based on the foregoing, he would probably argue that Halla’s bankruptcy was a long time coming. He would not be wrong.

Suddenly
Let us first look at how Halla “suddenly” went bankrupt. Like its mother country, which showed economic health until the eve of bedlam, Halla Engineering & Heavy Industry Co., Korea’s 12th largest chaebol, was enjoying success up until the very moment that it began to hemorrhage money. In fact, only weeks before Halla moved 5 of its 18 subsidiaries (including the Samho Yard) into receivership, that company was touting its $104 million contract to build two crude oil tankers for Jahre Dahl Bergesen (bringing total orders for 1997 over $1 billion) and the fact that the yard had a backlog of 44 ships with an aggregate of 2.3 million grts. Continue Reading

Greek Shipping Analysed in Terms of Type of Vess

This is the second of a two part research analysis of the types of vessels
managed by Greek shipping companies.

By Ted Petropoulos, MD of Petrofin S.A. and
Isabella Constantinidou, Research Analyst of Petrofin S.A.

IThus far…

In the previous issue we examined the patterns of ownership according to type of vessel that emerge in the smaller fleets, i.e. 1-2, 3-4  and 5-8 vessel fleets.  From the examination of these fleets the following distinct trends have emerged:

1. 84.4% of the entire Greek shipping presence belong to the smaller fleet categories (i.e. 705 shipmanagement companies managing 1,960 vessels), out of which 71.12% of these vessels are overage, namely over 20 years of age (i.e. 1,394 vessels out of 1,960).
2. The younger the fleets the more specialised they are, whereas the older the fleets the more fragmented in terms of types of vessels. Continue Reading

The Watchmaker’s Art

by Philip Rankin, Director, Marine Risk Management

When I first learned to drive a car, at the same time I learned all there was to know about the car’s workings. I reduced a car bought for £15 to its component parts and reassembled it entirely. Twenty years on, when I look under the hood of a car of today, I recoil, baffled by new boxes and devices whose purposes are unclear and whose maintenance is strictly in the hands of highly-equipped professionals.

The same reflection applies to computers – compressed over a much shorter evolutionary scale. I could understand the workings of good old Basic programming language, but Microsoft Windows 95 is an impenetrable mystery.

And yet things – cars, computers – still persist in going wrong. The difference today is that when things go wrong, I (and many like me I am sure) are helpless to do anything about it. Continue Reading

A Stormy Recovery for Loss of Hire

by Donald J. Kennedy, Partner, Carter, Ledyard & Milburn, New York

In August 26, 1992 Hurricane Andrew struck the U.S. Gulf Coast with such force that the Jack Bates – a semi-submersible drilling rig which was “stacked” at the time – broke free of its moorings, drifted 32 miles and went aground. The rig was extensively damaged and underwent repairs for three months. The owner of the rig, Reading & Bates Drilling Co., submitted insurance claims for damage and loss of hire and eventually was paid, but the route to recovery for the loss of hire was as stormy as Hurricane Andrew itself.

Reading & Bates Drilling Co. (R&B) obtained a Primary Package and an Excess Package policies for insurance of the Jack Bates from U.S. and London underwriters. The Primary Package included coverages for hull & machinery, physical damage, loss of hire, and excess liability. Each policy section was a separate policy of insurance, and each had its own terms and conditions including dispute resolution procedures. However, the Primary Package had a combined single limit for hull & machinery, loss of hire and other covered incidents of $20 million. The claims under the hull and loss of hire policies eventually would exceed that amount. Continue Reading

Shipping and Capital Markets: Back to the Future

by Alan Ginsberg

As presented to Hong Kong Shipowners on November 20, 1997 at The American Club

A Brief History
If you asked me a year ago whether I believed that the U.S. capital markets would have a significant impact on the shipping industry, I probably would have said “no.” I would have argued that the shipping industry’s financial record with investors was still too spotty. For every Teekay there was an OMI; for every Anangel American there was a lingering B+H deal. Only a handful of companies, most with billion dollar balance sheets, had been able to access the public debt markets. At best, shipping was holding its ground in the capital markets.

As late as this past winter, I saw the successful Knightsbridge Tankers equity offering as more of a refinement of the Lazard Freres’ innovative Nordic American Tankers warrant deal than as representative of any broader trend. On the debt side, I watched Cambridge Partners copy the First International Petroleum Transport’s two tranche deal with Shell with their own bareboat charter deals – first with Chevron and now with British Petroleum – but I was still unconvinced that investors fully understood the risks involved with unsecured second tranches, choosing to focus solely on the AAA credit rated secured first tranches. Continue Reading

Proactivity Pays Dividends & Promises More

by Dagfinn Lunde, Managing Director, Intertanko

The International Association of Independent Tanker Owners (INTERTANKO) can look back on 1997 with pride. Many Association-backed initiatives aimed at improving the safety and environmental protection performance of tanker shipping were adopted at international meetings while, at another level, a number of interventions which sought to relieve the industry of an unfair commercial burden achieved success.

In addition, two further INTERTANKO Tanker Events were held, in Athens in May 1997 and in London in October 1997, to universal acclaim. Both meetings more than fulfilled their aim of providing a forum where people from all sectors of the tanker industry, not just the association’s membership, could meet to talk about the issues of the day. In addition, the gatherings provided an opportunity for INTERTANKO to flag these issues to a wider audience, beyond the walls of the conference hall. The press coverage of the two events, indeed of INTERTANKO activities throughout the entire year, has been extensive, as the Association has adopted the same proactive approach with the media that it has with government and industry. Continue Reading

The Shipping Industry 2020: The Last 25 Years

by Donald B. Frost, Principal, D. B. Frost & Associates

Here it is December 2020 – a perfect time to look back. My task – to highlight the events and changes that the shipping industry has experienced over the last 25 years – has been more difficult than expected. Time tends to have a “smoothing” effect on past events and developments, so picking those that really changed things has been challenging. That said, the changes in shipping between 1995 and 2020 have indeed been significant.

On a broad level, shipping responded to the effects of individual national economies blurring together in a manner unlike most other industries, because it was already global. Marketing and finance made the transition smoothly. Operations had the biggest challenges as we entered the new millennium. However, I think the most far reaching challenge, as we entered the 21st Century, was the shipping industry’s realization that, while it called itself a service industry, it had been functioning as a hardware (ship) driven business. We saw this change (assets to service) first in the container lines consolidations at the turn of the century, and the process of change in this area is still progressing today. Continue Reading

Lloyd’s Ship Finance Conference Wrap-up

Whether you believe that junk bonds are a revolutionary step for the shipping industry or that good judgment has been eclipsed by a high tanker market courting a cash-laden fund managers, you would not have been alone at this year’s Lloyd’s Shipping Economist finance conference.

While the vast majority of the papers had nothing to do with high yield debt, “junk” got a lot of attention. The reason may be that, while there have been a plethora of changes in the shipping industry (consolidation, ISM, STCW, OPA, to name a few), there have not been so many changes in the banking industry, unless one considers the erosion of spreads as new, and the majority of delegates were bankers. While there have been periods when shipping companies have gone from “golden child” to the “whipping boy” of the capital markets, the pipeline of high yield deals is presently full and if you believe that the market speaks, what it has said this year is “More, Please.” Continue Reading

Listings Confirm Oslo’s International Appeal

by Tore J. Fjell, Senior Vice President and Oddleif Hatlem, Market Adviser, Oslo Stock Exchange

This year has been one of the most successful in the history of the Oslo Stock Exchange and the separate shipping and offshore industries list has shown particular strength. As of November, 49 new companies had been approved for listing – bringing the total from 172 at the beginning of the year to over 210 by the end of November.

Shipping and offshore companies represent a large proportion of the total listed companies on the OSE. By the end of October, the market value of the shipping and offshore shares listed was US$18 billion (21% of total OSE market value). Of a total of 210 companies, 59 (28%) were shipping or offshore companies. In all, 15 of the companies in the sector are foreign-based. Continue Reading