The Changing Face of Greek Ship Management

by Mr. Ted Petropoulos, MD of Petrofin SA, Greece

Greek shipping (consisting of directly or indirectly owned and/or managed vessels) has been propelled to the top position among maritime nations. This is an undisputed fact, irrespective of which yardstick is used: DWT, number of vessels, S&P activity, fleet values and so on. The development of Greek shipping over the years has received a lot of attention and has been thoroughly analysed.

The purpose of this article is: [a] to shed some light onto the evolving qualities and skills of Greek ship management; [b] to identify the main trends and problems faced by Greek ship management; [c] to compare Greek ship management with that of other nations; and [d] to make some predictions about the future of Greek ship management and its ability to compete effectively in the international maritime market. Continue Reading

Golden Ocean: Every Deal Has A Price

We hear it all the time: a done deal is a good deal. Whether a company with an initial public or secondary offering is able to hit its target share price and quantity, or a company raising debt in the public markets can achieve its interest rate and deal size, the bottom line is to get the deal done. By way of example, last fall OMI Corp.’s prospectus detailed its plans to issue 12 million common shares at $8 each. The deal got done at $7 per share with 10 million shares issued. While it is easy to look at a $26 million drop in gross proceeds (equal to nearly 30% of the total dollar value raised), and declare the issuance unsuccessful, the bottom line today is that the stock has recently traded at over $12 per share. Similarly, while neither B+H Equimar nor Global Ocean were under the same financial pressure as OMI was, it is highly unlikely that the opportunity to get their hands on ten-year money would have precluded either of them from paying another 100 basis points for their money if that is what the markets demanded. Therefore, by our definition, irrespective of terms and conditions, Golden Ocean Group’s high yield offering was successful. Continue Reading

Strategies in Lending from the Perspective of a Mid-Sized Bank

By Michael J. Cusack, Vice President, The First National Bank Of Maryland

The following speech was presented at MarineMoney’s 8th Annual Ship Finance Forum held in New York on June 25-26.

To appreciate the perspective and strategic outlook of a mid-sized bank on the maritime industry, allow me to briefly describe The First National Bank of Maryland’s evolution in ship financing. First Maryland, a full-service, commercial bank established over 150 years ago, became during the course of the 1980′s a wholly-owned subsidiary of Allied Irish Banks, the leading financial institution in Ireland with assets in excess of $50 billion. Following the imminent acquisition of Dauphin Deposit Corporation, headquartered in Harrisburg, Pennsylvania, First Maryland will grow from $11 billion to $17 billion in assets placing it within the top 50 U.S. banks. As lending opportunities evolved, First Maryland identified and pursued a successful strategy of establishing specialized units to focus on industry niches such as Healthcare, Communications, Real Estate, and Transportation and Leasing, the latter comprising the International Maritime Division. Continue Reading

Rhubarb Amongst Other Fruits: The Sale and Purchase Debate

by Thomas P, Mayr, London

When I read the article in the June issue of Marine Money entitled Apples and Oranges, I did not know whether to feel pleased or displeased. The thought that an article I wrote for the Lloyd’s Shipping Economist

- “How to Recognize True Value for Money” (March 1997) – stirred someone to perhaps think critically about the sale and purchase market for a while was indeed flattering. Yet Mr. Levine’s comments indicate that he so failed to grasp the point of my article, that it dampened my enthusiasm for his critique. So, for the benefit of Mr. Levine and the rest of the readership of Marine Money, I would like to attempt to make myself more clear.

First of all, the topic of my article was the vessel sale and purchase market and the overused catch-phrase ‘buy low, sell high’ which is often used to justify asset play. I suggested that to understand the contrarian’s investment behavior, one first must have working knowledge of how ships are valued and an appreciation for the range over which vessel prices fluctuate. Furthermore one must appreciate that second-hand prices are inextricably entwined with their operating cash flows, which paradoxically calls into question the whole notion of pure ‘asset play.’ Continue Reading

Are They Masters of Credit or Hype?

To be wholly honest, for those who follow ship finance as closely as we do, these are exciting times. Within thirty days, two high-yield deals have been completed (B+H Equimar, Global Ocean) and two more (Golden Ocean, Navigator Gas Transport) are on the road. Further, from an issuer’s point of view, we see nothing but blue skies ahead. We are currently preparing a comparative review of the B+H Equimar and Global Ocean offerings for our next issue.

What is going on and why? It has been well documented that bankers and investment fund managers are faced with extraordinary inflows of funds for which they have to find a home and are under pressure to show superior returns. The Investment Company Institute recently reported that most of the money flowing into mutual funds continues to head into funds that invest primarily in American stocks, as it has for the last three years. But funds investing in junk bonds and overseas stock markets also fared well in the second quarter of this year. Continue Reading

Developing Market Value

By Guy Morel, MC Shipping

The following speech was presented at Marine Money’s 8th Annual Ship Finance Forum held in New York on June 25-26.

It’s been almost ten years since many of us entered into this tenuous marriage between shipping and the US financial markets. Let’s just say this up front: it was a short honeymoon. But now, from the perspective of nearly a decade, we’re experienced enough to honestly ask ourselves, what have we – as shipping people – learned from our years in the public markets? And, to be more direct, should shipping be in the public domain? Before I answer that question, let’s take a step back and get some perspective using one company’s experience – MC Shipping.

We brought MC Shipping public in an IPO in 1989. The deal was banked by Salomon Brothers and sponsored by the Vlasov Group, which by now – everybody knows – is a leading private shipowner based in Monaco. MC Shipping was originally structured as a limited-life company. Our objective was to buy used ocean-going vessels, operate them profitably, and pay the excess cash flow to shareholders in the form of dividends. Ultimately, our goal was to liquidate the company by disposing of the ships and distributing the proceeds. We purchased eight general cargo ships with the $45 million raised in the IPO, mixed between feeder containerships and multi-purpose vessels which carry both dry cargo and containers. Continue Reading

Conference Round-up Owners to New York: Show us the Money

by Alan Ginsberg

New York may not own or operate the ships like Greece or Oslo; it  may not charter them like London can.  But in one category, New York continues to draw shipowners like nowhere else can: the lure of money.  The very site of Michael Hudner striding confidently to the podium at our ship finance conference last week drove home the point; the completion of his $125 million first preferred mortgage note financing was reduced to a paper signing formality which he would complete immediately following his speech.

Yes, the Michael Hudner, of all those B+H deals, the Braer, and then that messy well-publicized break-up with his commercial manager. In December, after years of trying, Mr. Hudner finally rolled all his ships into one company (accumulating an absolute majority position along the way) and quietly amassed a fleet of ten handy-size products carriers and three handy-size bulkers, an aged fleet as always. Our readers will have to wait until next week for our review of this speculative “Equimar Shipholdings. Ltd.” offering. Continue Reading

When Is a Barge Not a Vessel? Answer: When It’s in Bankruptcy

by Robert M. Schwartz, Esquire, Hill Betts & Nash LLP

In a recent case, the United States Bankruptcy Court has once again demonstrated that illiquidity provides an exception to the Law of the Sea.1 The Treasure Bay court invalidated a $115 million First Preferred Ship Mortgage because, it held, the two barges involved were not “vessels” for the purposes of the U.S. recording statutes. In so doing, and by its disregard for earlier actions taken by the U.S. Coast Guard, the Bankruptcy Court invaded certain areas reserved by Congress for the U.S. Coast Guard’s determination as well as committing serious error in the interpretation of U.S. maritime law. The case has great import regarding the stability of marine finance transactions involving U.S. flag vessels and, along with the Lykes Bros. Steamship Company case decided last year, constitutes a trend which could chill marine finance.

The Bankruptcy Court reasoned   that the barges which were moored and used as gambling casinos never met the definition of “vessel” for purposes of perfecting a ship mortgage because, (1) the structures were not constructed to be used as anything but floating gambling casinos, (2) the structures were moored or otherwise secured “at all relevant times at permanent locations” and (3) they were “not capable of movement and never moved across navigable waters in the course of normal operations. There was no transportation function that could be incidental to the primary purpose of the two structures-the operation of gambling casinos.” 2 Continue Reading

Are Shipping Loans Safer? Good Times, Bad Times?

by Philip Rankin, Marine Risk Management AS

I had better get my retaliation in first. My company is an active player in the hands-on business of – in shorthand – repossessing ships for banks. So most people’s “bad” market is our “good” market. We are the little weather man who comes out in the rain. Any impression you gain, gentle reader, that what I offer represents wish fulfillment is entirely justified. I hope, however, that there are, nevertheless, some objective truths about the current market.

There is a definite feeling about that shipping may have turned a corner into an era of balance and prosperity. No doubt there is some justification for this, sector by sector. The tanker owning market, for example, is finally dispensing with the “bulge” of unwanted ships built twenty years ago in the 1970′s when the demand for shipping of oil was erroneously expected to go ever upward to the stars. The confusion induced by the possible impact and application of the United States’ Oil Pollution Act 1990 has effectively restrained new building over the intervening seven years – so OPA has done a good to the tanker owners that they would be unlikely to have done for themselves. Continue Reading

Market Review: Bulk, Tanker and Containership

So far in 1997, the shipping markets have offered up a rich variety of financial opportunity and risk. For the first three months of the year, dry bulk rates increased sharply but – just as owners began to think the future was assured – the market began to fall away in April. The tanker market regained its upward momentum in 1997, with some spectacular rates reported in the Caribbean. Containership rates continued their fall, and the market psychology deteriorated sharply.

The volatility in the markets over the last six months is a reminder – if any is needed – that shipping remains a very dynamic market. The review below, provided by Marsoft Inc., highlights some of the factors that are driving the markets now.

Dry Bulk Market Highlights
It has been a real roller-coaster ride for owners and shippers in the dry bulk market so far this year. Rates increased rapidly during the first quarter of 1997, as a recovery that began at the end of 1996 seemed to gain strength. But the rally ran out of gas just as things were beginning to get interesting, and rates moved steadily lower throughout April, before stabilizing at a low level in May. Continue Reading