Bergesen D.Y. AS

Bergesen owns one of the largest VLCC/ULCC and LPG fleets in the world. Its tanker fleet tops 6,000,00 dwt and its LPG fleet 1,300,000 cbm. In addition, it has a 65% interest in a dry cargo fleet of more than 1,400,000 dwt. Furthermore, the Bergesen D.Y. Group has real estate and financial investments as well as interests in onshore and offshore industries through its subsidiary Teknisk Bureau in Stavanger.

Recently, Bergesen, in a highly publicized deal, acquired 50.1% of Den Norske Amerikalinje AS (NAL). On top of this, Bergesen acquired approximately 34% of Havtor AS and, on November 20, 1995, the two companies announced that their Boards of Directors have agreed to merge the two companies with Bergesen appearing as the acquiring company. The merger is proposed to take effect on January 1, 1996. According to the agreement, Havtor shareholders will receive 11 Bergesen shares for every 70 Havtor shares. Bergesen will issue an additional 18,937,149 shares with the total number of Bergesen shares at 75,759,661 after the completion of the deal. The companies have yet to decide on management, operation and organization issues. Continue Reading

Actinor Shipping

The end of 1995 will mark Actinor’s third full year of independent operations after its demerger from Hafslund Nycomed in May 1992. Since December 1992, Actinor’s stock has been appreciated by 142%, indicating a successful implementation of the company’s strategy which calls for a maximization of returns to shareholders through a conservative and low risk approach to shipping investments. 

Actinor owns a diversified fleet of 11 vessels with an average age of ten years.  It also has a 50% interest in an oil-rig (Rigmar 301). All vessels bear long term charters, with seven expiring after the year 2000. It is part of the company’s strategy to own a broad spectrum of vessel types as this practice is considered good hedging against the ups and downs in the different market sectors. Actinor pays a great deal of attention to the proper maintenance of its vessels in an effort to retain the highest possible value at the end of their charter periods. Although maintenance is undertaken by the charterers, Actinor performs periodical quality assurance inspections to assure that the vessels are maintained properly. Continue Reading

What Makes a Charter? Part One of a Two-Part Series

by Philip Rankin

This question might seem to admit of an obvious answer – a deal between a shipowner and a charterer to carry a cargo from A to B. However there is rather more to this than may meet the eye. It is an important question for parties other than the owner and charterer because their legal and commercial relationship with either party is affected by it.

For a ship financier, as well as for the owner, charters are the source of his income from the ship’s earnings. Broadly, the owner has only two ways of making money – speculative sale and purchase, asset play, and regular earnings from the ship’s employment, which for an independent non-industrial or non-integrated shipowner means charter income. Continue Reading

What Makes a Charter? Part Two of a Two-Part Series

by Philip Rankin

Part One of this series examined the need for shipowners and their bankers to look wider than just the ship in putting themselves out on the chartering market. Part Two examines what influences freight rates and who gets Commissions out of the freight bill.

It is worth remembering that the documented charterer on a Charterparty very regularly is not the owner, shipper or consignee of the cargo being carried. Many trading companies, for numerous security and tax reasons, use wholly-owned subsidiary companies based in, say, Panama or Liberia for chartering purposes. The companies will be backed by a parent company guarantee, but may have the important consequence that the cargo cannot be arrested or detained on account of the default of the charterer. Continue Reading

Shipping Does Matter…and How!

A little bit of navel gazing is perhaps excusable in any organization contemplating a 20-year anniversary and the International Maritime Industries Forum is no exception. That the organization has survived is not just a tribute to the energy of its founders and officers, but probably an indication of how long it is taking shipping to lick its wounds from one blow after another in the last 20 years – financial and environmental.

So a more upbeat message was welcome and, despite urging caution in all matters maritime, the message delivered by Dr. Helmut Sohman of Hong Kong-based World Wide Shipping was: “Shipping does matter – and how!” illustrated by his estimation that the bulk trades alone contribute over $50 billion a year to the world’s economy. Using 1994 pricings and ignoring vessels under 15,000 tonnes deadweight for simplicity, Dr. Sohman commented that the figures would be even greater if the freight rates paid were anywhere near profit levels. Continue Reading

Safmarine: A Confident South African Gem

How times change. From being an outcast in world society, South Africa is now being courted by international investors. From being politically incorrect to have dealings with South Africa, it is now positively politically incorrect not to as the nation struggles to develop economically and hold onto its fragile democracy.

Against this background trade to and from South Africa has boomed. The ports are groaning, literally, under the strain.  The container shipping lines are booming, and bulk shipments are exceeding predictions.

Enter Safren, the country’s huge transport and property group, quoted on the Johannesburg Stock Exchange.  Its shipping subsidiary Safmarine, which next year celebrates its 50th anniversary, recorded an increase in operating profit of 48.7 percent in the year to June 30.  This boosted earnings for the group to R392.2 millions ($107 million) – a 15.2 percent increase on the previous year. Continue Reading

Riding the Waves

From the favorite getaway of the newly-wed and the nearly-dead to the average vacationer’s agenda, and on the priority list of most financiers, the cruise industry has been the pleasant surprise of the shipping industry for the past 15 years. To those who complain that capital markets are indiscriminately negatively positioned towards shipping companies, the cruise companies’ case should be a good answer and proof that the capital markets do not deny financing to anyone as long as their prerequisites are fulfilled.  

Exhibiting a sustained growth for 15 consecutive years, the cruise sector has moved from being a side-player to becoming one of the most important parts of the shipping industry. Currently, the orderbook for cruiseships amounts to $8.5 billion, which is equal to the aggregate orderbook for VLCCs, Suezmax and Aframax tankers. This mammoth orderbook is mainly financed through commercial loans, some of them unsecured, and public offerings of bonds. 

The capital markets provide the major operators such favorable terms that most of the operators even skip the OECD subsidies which became relatively expensive after the drop in interest rates. On top of this, equity investors are willing to invest in cruise companies or, at least, in the major ones. Continue Reading

Royal Caribbean Cruises Ltd.

Royal Caribbean Cruises Ltd. (RCCL), a NYSE listed company, is the world’s second largest cruise company after Carnival Corp. It operates nine cruiseships with a total capacity of 15,020 berths and it has five additional ships on order with a total value of more than $1.4 billion that will increase its capacity by more than 60% to 24,700 berths.  Currently, it offers more than 50 itineraries and 140 destinations in the Caribbean, Mexico, Bahamas, Alaska, Panama Canal, Bermuda, Europe, Far East and Hawaii.  

From 1984 to 1994, RCCL experienced a growth of 17.4% in passengers carried vs. a cruise industry average of 9.2% for the same period. However, from 1992 to 1993, the increase in the number of passengers was an anemic 2.8%, and declined even further from 1993 to 1994 to 1.6%.  Currently, RCCL has an approximate 19% market share of the North American cruise market.  Since it was first introduced to the NYSE, RCCL’s stock price reached an all time high of $30.5 in October 1994 and currently trades close to $23.   Continue Reading

Nordic American Deal: Breaking New Ground and Causing Concern

$5 on a Total Flyer

While the structure of the recently completed Nordic American deal drew early praise which, considering the fact it was oversubscribed, is understandable; upon closer examination, the returns for investors are poor and quite conceivably disastrous. Yet the warrant structure for newbuildings is genuinely creative, and a Carnival or OSG might examine the benefits.

   The structure is interesting from an investment banking point of view: warrants, all equity, BP’s tax advantaged position and a good fall back structure in case the warrants are not exercised, but that is quite different from thinking it makes sense for investors. The deal protects investors on the downside of freight rates. But the next step has to be dealing with the residual value risk.

    The reasons are simple.  And, we are not alone in looking at the deal’s numbers and reaching the conclusion that investors will be lucky to get their money back.  The warrants opened at a discount to their $5.00 sale price.  They are trading today at $4.75 and we would not be surprised to see them at $2.00 well before the two year option date. Continue Reading

For Kvaerner Reefer Fleet, It’s a Matter of Price

Despite off season, Kvaerner a.s. may already be making moves to divest some or all of its reefer fleet, since reefer scrappings are probably past their peak and  despite the quiet season – markets are currently better than they were last year at this time. The market is expected to improve another 8-12% next year. But, waiting until the end of the cycle isn’t necessarily the best strategy for Kvaerner, which removed shipping as a core business and placed it under the aegis of its finance department last May. After the sale of its gas shipping to Havtor, the reefer fleet of eight vessels represents Kvaerner’s largest remaining shipping element. “It’s just a matter of pride,” one analyst said, regarding the sale of the 400,000 cbft plus ships. Continue Reading