Handover Won’t Affect HK-Taiwan Links

by K. K. Chadha, Hong Kong

Shipping links between Hong Kong and Taiwan are unlikely to be affected after the British colony returns to Chinese rule on July 1, industry officials said.

The shipowners’ associations of Hong Kong and Taiwan are working closely to ensure that vessels registered in the two jurisdictions will be able to call at each other’s ports after the handover. “We are confident that a solution will be announced very shortly which will be acceptable to all parties concerned,” said George Chao, chairman of the Hong Kong Shipowners Association (HKSOA).

Some owners, charterers and shipmanagers operating Hong Kong-registered vessels had expressed anxiety about how these ships will be treated at Taiwanese ports after June 30. Although Chinese authorities have already decreed that shipping and air links between Hong Kong and Taiwan can continue after the handover, Beijing has also signaled that it may not tolerate Taiwan-flagged vessels calling at Hong Kong because that would contravene its cherished “one China” principle. “When Taiwan-registered ships enter Hong Kong ports, no flag may be flown that creates a ‘two China’ problem,” a Chinese State Council spokesman said last month. Beijing considers Taiwan a province of China. Continue Reading

FRONTLINE

EXCHANGE:
Stockholm

SHARE PRICE (DEC. 31, 1996):
SEK 23.70

1996 TRADING RANGE (THROUGH NOV. 26):
SEK 16.80 – 24

MARKET CAP. (AS OF SEPT. 30, 1996):
US$334,084,500 (based on 98,550,000 shares outstanding after the non-cash share issue)

OVERVIEW
•    Frontline is a Stockholm-based shipping company that operates a fleet of OBO Carriers, Tankers, Bulk Carriers and Wood Chip Carriers.
•    Frontline’s fleet is divided between wholly owned, partly owned and chartered vessels.
•    In the fall of 1996, Frontline issued 55,300,000 new shares in non-cash share issues. As part of the issues, the company purchased six modern tankers as well as two OBO carriers that had previously sailed in Frontline’s pool. Continue Reading

Lykes Countdown and Other News

Lykes may not last the first quarter, at least if the current attitude among some of its major lending parties does not soften.  Lykes’ use of Chapter XI to try to keep its newbuilding finance in place at the expense of its other creditors – coming on the heels of several other equally outrageous financial collapses – has driven some of the industry’s more serious players to say enough is enough. Criticism of less than corporately professional shipping practices is on the rise, and Lykes – American, old line as it is – appears unlikely to be spared.

Ole Skaarup, Chairman and founder of Skaarup Shipping Corporation, announced he would step down as CEO of the Skaarup Group of Companies effective December 31, 1995.  Dr. Skaarup guided the company for over forty five years, establishing during that period a reputation for innovative and creative solutions to bulk shipping challenges.  Clients included National Gypsum, US Steel, the oil majors and many other industrial giants.  Frank Parker will succeed Dr. Skaarup as CEO.  John Stocker, former Head of the US Shipbuilder’s Council and currently President of two Skaarup shipbuilding companies, will become a Director in the company.  Dr. Skaarup remains Chairman of the Board. Continue Reading

Continental Banking Review

by Alan Ginsberg

We will cut right to the chase: discussions held late last year with ship finance bankers based in France, Germany and the Netherlands have yielded a majority opinion that there will be no banking crisis with respect to the ongoing difficulties in both the dry bulk and the containership markets.

Containership Overview
Bankers, second only in their historical optimism to shipowners, acknowledge that there is a significant overtonnaging situation, while in classic fashion steadfastly believing that the industry will “grow out of it.” We are not as optimistic that demand will continue to grow unabated for a seeming indefinite period of time. Further, with respect to scrapping, as containership vessels are subject to different stresses than bulk carriers and putting aside the issues of speed and consumption, thirty-year useful lives are quite possible. Nevertheless, bankers we visited with believe that their clients have sufficient liquidity to weather the current storm and they remain committed to assist those who do require restructuring. Continue Reading

Concerns of the Unwelcome Guests

by Graham Barnes, Nicholson Leslie BankAssure Limited

Shipping bankers’ only formal communication with any P&I club comes through the club manager’s standard club Letter of Undertaking, which conveys the impression that mortgagees are ‘the unwelcome guests at the party.References to club rules rejecting assignment of P&I cover and the cessation of cover upon a shipowner mortgaging his vessel without the agreement of club managers are unaccommodating, if not belittling, to guests essential to club members in financing their purchase of ships from which the P&I club subsequently benefits with further premium or calls.

Unlike Letters of Undertaking from insurance brokers on the Hull & Machinery, War and other insurances placed on the open market, P&I club Letters of Undertaking are extremely limited. P&I club managers’ Letters of Undertaking merely confirm that a mortgaged vessel is entered with the P&I club subject to the member’s terms of entry, give a conditional loss payable clause and an undertaking only to advise of non-renewal or cancellation by the club for non-payment of premium or calls. There is no mention of notice being given of club managers suspending cover, or cover becoming discretionary due to the failure of the shipowner to meet the recommendations of the club’s surveyors. Club managers even decline to give mortgagees a copy of the Certificate of Entry detailing the P&I cover terms, the deductibles and any limitations of cover under the club rules; these, they say, have to be obtained from the member. Continue Reading

ARGONAUT

EXCHANGE: Stockholm

SHARE PRICE (DEC. 31, 1996):
A shares: SEK 13.30; B shares: SEK 13.60

1996 TRADING RANGE (THROUGH NOV. 26):
A shares: SEK 10 – 13.50; B shares: SEK 9.95 – 14.10

MARKET CAP. (SEPT. 30, 1996):
US$193,454,845

OVERVIEW
•    Stockholm-based Argonaut was founded in 1983 and today has one of the world’s most modern crude oil tanker fleets in the 200,000-300,000 dwt segment.
•    The company’s vessels operate in both timecharter and the spot market.
•    Argonaut’s fleet is marketed in cooperation with Nordström & Thulin AB. Chartering and commercial operations take place at Argonaut’s office in Stockholm.
•    The company handles technical management and crewing in cooperation with Ugland Interocean Management Ltd. through their joint ship management organization, Argonaut Ugland Maritime Services (AUMS). Continue Reading

ARGONAUT

EXCHANGE: Stockholm

SHARE PRICE (DEC. 31, 1996):
A shares: SEK 13.30; B shares: SEK 13.60

1996 TRADING RANGE (THROUGH NOV. 26):
A shares: SEK 10 – 13.50; B shares: SEK 9.95 – 14.10

MARKET CAP. (SEPT. 30, 1996):
US$193,454,845

OVERVIEW
•    Stockholm-based Argonaut was founded in 1983 and today has one of the world’s most modern crude oil tanker fleets in the 200,000-300,000 dwt segment.
•    The company’s vessels operate in both timecharter and the spot market.
•    Argonaut’s fleet is marketed in cooperation with Nordström & Thulin AB. Chartering and commercial operations take place at Argonaut’s office in Stockholm.

•    The company handles technical management and crewing in cooperation with Ugland Interocean Management Ltd. through their joint ship management organization, Argonaut Ugland Maritime Services (AUMS). Continue Reading

Ship Market Life Signs: A New Analytical Tool

by Sydney P. Levine, President, Shipping Intelligence, Inc., New York

The recent media coverage about the probable purchase of 49% of Stelmar Tankers by the Diogenes Fund provides an opportunity to explain and then use a new analytical tool – Ship Market Life Signs.

First, the explanation.

For some time, we at Shipping Intelligence have been working on a new way to describe the bulk shipping markets, both wet and dry. We wanted our description to cover ship prices and charter rates or, more generally, asset value and earning power. Further, it would have to relate the current market to history, an important factor in the cyclical shipping business. And finally, it would have to be concise and easy to grasp as a whole, not just a group of unrelated numbers. Continue Reading

Can Residual Values Be Assured?

by David Howard, L.P.H. Pitman Limited

Since the insurance market’s appetite for underwriting marine residual value has been mixed, I will briefly outline the current position of residual value insurance. I have come to the conclusion that only by pooling insurers, financiers and shipowners positions can we originate a market product.

Bankers prefer to be involved in projects which have the “Morpheus quality” i.e. the risks are so reduced they can sleep at night! They are concerned about risk and price volatility, and there has been considerable price movement in the shipping market. Bankers have traditionally sought three ways out for a loan. These are: i) cash flow from project; ii) cash flow from borrowing company; iii) asset value of project and/or borrowing company.

If all three can be in place and have a value assigned to them by a third party, then the bankers will normally be much more flexible in allocating funds to projects. As we know, the problem with ship financing is that there is no objective third party that can provide information, data or even statistics to cover all of these exit routes. If we could give residual value to ships, then the balance sheets of shipping firms would be enhanced and their ability to finance similarly increased. Continue Reading

Lloyd’s Ship Finance Conference Wrap-Up

So what have we learned?” asked a somewhat exhausted Chairman Morten Arntzen of Chase Manhattan Bank after last month’s latest 48-hour Lloyd’s Ship Finance Conference/Marathon. Curiously enough, we learned a lot. Principally, we learned from Ted Petropoulos of Petrofin Financial Services that while the total number of banks offering ship finance continues to grow with no end in sight, the number of “major” banks offering ship finance has begun to level off. While this item is not particularly newsworthy, his follow-on comments – that this overall increase will ultimately prove to be positive for the ship finance community in the long term – raised enough eyebrows for us to ask for his permission to reprint his speech which we encourage you to read.

In our view, the big winner of the Conference was none other than our home-grown Dr. Arlie Sterling of Marsoft Inc. and M.I.T. fame. It would appear after many long years that Marsoft has been able to convince an increasing number of bankers that they can, in fact, better support their credit decisions by heeding Marsoft’s advice. Arlie was proper to beam with pride when presenting slides showing the accuracy of Marsoft’s forecasts of panamax and aframax timecharter rates from October 1992 to date. We only wish that there had been a few Greek and/or Norwegian owners in attendance to challenge him. Continue Reading