Ship Mortgages

In an attempt to revamp its ship registry business, Honduras has passed a new maritime law to reform its registration and vessel mortgage recording procedures.  The new law went into effect on January 1, 1995.  For a ship registry, having the trust and confidence of the finance community and legal establishment that services it can be critical,  more critical even than a safe reputation.

We are reminded of one startup registry that decided the best marketing dollar spent was to ask several law firms to review his mortgage laws and render an opinion on them.  He knew, of course, that his laws were already an amalgam of their work as reflected in the laws of several other registries.  Still, it would be hard for them to criticize the laws later – he was, after all, a client. Continue Reading

Orient Overseas (International) Limited

For Orient Overseas (International) Limited (OOIL), 1994 was a mixed bag. Operating results experienced a tremendous improvement but were offset by the investment funds’ poor performance.  Operating income increased threefold to $75.6 million in 1994, from $25.6 million in 1993, after an impressive performance of the international containerized transportation division (OOCL) that contributed $55.4 million to the operating income compared to $9.2 million in 1993.  OOIL’s container terminal operations contributed $10.6 million – $15.2 million in 1993 – and an additional $6.1 million came from the Wall Street Plaza, an office and commercial property located at 88 Pine Street, New York, as the remaining $3.5 million originated from other activities.  

On the other hand, OOIL’s investment portfolio, hurt by the decline in bond prices from rising US interest rates – especially in the first half of the year – and the weak stock markets around the world, closed 1994 with a loss of $30 million vs. a profit of $42 million in 1993.  Exceptional items had a smaller contribution in 1994, pitching in $50.7 million as opposed to $121.8 million in 1993.  As a result, net income for 1994 contracted to a mere $59.1 million vs. $136.5 million in 1993, and Earnings per Share (EPS) dropped to US 10.9 cents from US 27.7 cents in 1993.  However, the dividend allocated to shareholders was increased by 24% over 1993 to US 1.61 cents (HK$0.125).  The decline in profits didn’t stop OOIL from becoming the best performing share in the Hong Kong stock market in 1994.  Its value increased by 68% for the year, closing at HK$5.05 on December 31, 1994.  The Hang Seng index declined by 32% during the same period.  Obviously, OOIL’s ability to generate operating income didn’t go unnoticed or unappreciated.  And, we agree that in the long run this ability is much more important than a temporary drawback due to poor investment portfolio performance. Continue Reading

NatWest Securities Tackles Shipping From London

Smedvig Tankships has close London connections.  They have an office there and the family is fond of the city, yet when NatWest promoted their public listing, it was through a Bermuda company with a listing in Oslo.  

NatWest Securities, the securities arm of NatWest Market, which is the investment banking division of the NatWest Group, employs 1,400 people in the equities business.  Their analysts, rated number one in Europe, follow some 1,400 companies worldwide, including some 50 shipping or shipping and distribution related companies. Continue Reading

Hot Time in the Old Town

It is hot all over. Oslo, London, New York, Piraeus, Hong Kong – name a capital for shipping and chances are the heat is on. It’s summer, but the same is true for many markets.  Even the ravaged VLCC market is showing signs of the long-predicted revival.  Shipping is also enjoying a warm reception in various capital markets.  

Teekay Shipping, which is featured inside, successfully completed its IPO, raising $130 million.  OMI, whose string of quarterly reported losses stretches way back, has seen its share price move up almost 30% in the last month. Lazard Freres is bringing a large private debt offering to the markets shortly. Continue Reading

Hapag-Lloyd

Like many other companies involved in the liner business, Hapag-Lloyd also implemented reorganization programs in the past few years in order to confront stagnant to falling freight rates and intense global competition.

Hapag-Lloyd has been hurt by the devaluation of the dollar, like many other companies, as most of its revenues are dollar denominated while most of its expenses are denominated in other currencies, such as the Deutsche Mark.

Following the containership sector’s trend, Hapag-Lloyd has been actively seeking the formation of alliances (consortia) with other liner companies, aiming to increase operational efficiencies, greater market presence and alleviation from the increased investment demands. Hapag-Lloyd has joined forces with NYK, Neptune Orient Lines and P&O to serve the Northern Europe/Asia route and USEC/Asia route via the Suez canal. Continue Reading

PRAGMATIC GREEK OWNERS RENEW FLEETS ASSISTED BY BANKS

Asset play opportunities, normally the lifeblood of the Greek shipping market, are not going to be as significant in the 1990s as they were in the 1980s. So says one young shipping executive who wants his company to be known as a pioneer in Greek shipping and a front runner of change.

“There have been some good developments,” Vassilis Kertsikoff of Eletson Corp. said.  “More corporate entities are emerging with proper structures and procedures.”

The pioneer-minded Eletson executive explained that the move toward a more corporate-minded ethos in Greece goes hand-in-hand with the perceived need to be more self-sufficient, reducing international exposure particularly in London, and stepping up to meet the challenges that have been brought about by trends of the trade – trends especially demanding in the tanker trade.

“To go forward, fleet renewal is the answer,” Kertsikoff said.  Today, the focus of the international shipping community is on marine safety and pollution. This has forced Greek owners, described by one banker as “ruthlessly pragmatic,” to do a reality check. Thus, Greeks, normally the gurus of the secondhand S&P market, are now looking to newbuilding. Continue Reading

Containerships: A Dynamic Sector in Motion

It seems as if all the players who are involved in the containership market are so absorbed in building and chartering new ships that no one considers the potential consequences that oversupply would have on this sector of the shipping industry.  Is it reality, though, or wishful thinking that demand will keep growing at a pace such that oversupply conditions will not occur, at least in the near future?  It is true that containerized trade increases rapidly as international trade increases, but supply is building up at the same time as well.  Inevitably, at some point, supply will exceed demand and everyone with fundamental economic knowledge knows what happens then.  The question is: “How soon will this happen?”  The most optimistic believe that such a situation will not present itself soon and that only minor adjustments will take place when it happens.  On the other hand, the pessimists foresee a collapse of the charter rates that will lead to a major shake up of the industry.  Almost everyone agrees, though, that whatever the developments, rates for containerships of different size and age will be affected in different ways and degrees, with the larger and younger containerships retaining a privileged position.  The same is true for liner companies of different size.  The bigger players are in a much better position to withstand adverse market conditions.  In addition, they take preemptive steps to hedge against a downturn in the market.  The smaller liner companies have already been limited to a niche player role and are expected to have much more difficulty in coping with oversupply conditions. Continue Reading

Who Would Provide Funds for the Tanker Sector These Days?

by Philip Rankin

Gone, seemingly, is the reassuring cushion of inflation keeping the security value buoyant. Gone with it are meaty double-figure interest rates. Almost gone is a decent blue-chip timecharterer market, ready to provide guaranteed employment and income for the asset.

Most sectors of shipping and ship finance are captivated by industrialization – a buzzword that means turning shipowning enterprises, and often the enterprises of the cargoes they carry, into homogeneous businesses in which each section contributes in turn to the overall results. For example, old ships subsidize new, until the “new” become old; and market fluctuations, which rarely occur consistently in all sections at once, allow grain shipments to subsidize cars one quarter, and cars to subsidize grain the next. 

Unfortunately for oil tankers, precisely the opposite now exists. Anxious to avoid the risk of the whole operation being swept away by one accidental American spill, bigger general shipping companies very publicly have spun off their tanker companies into sealed and separate units: Hoegh gave birth to Bona, for example. Continue Reading

Vision First, Then Work Backwards: Carefully Considering Equity Issues

While Investment Banker Hamish Norton enumerated the disadvantages of raising capital through the US equity markets at the sixth annual Ship Finance conference in New York June 22-23, shipowner J. Erik Hvide, on the cusp of an initial public offering (IPO) himself, listened attentively. Afterwards he told Marine Money that the only disadvantage the Lazard Freres & Co. LLC Managing Director listed which now caused concern was the litigious nature of shareholders – number seven on the banker’s list.

The other disadvantages have been weighed and satisfactorily addressed by the company, Hvide said. 

The company, Florida-based Hvide Marine Inc., is a tanker, tug, barge and offshore services operator, with plans to go public sometime before the end of the year with a $60-$100 million issue. Probably Hvide, who is chairman and CEO, was undaunted by the prohibitions because the offering is part of an overall growth strategy first articulated in 1993, which has already been borne out by many, many acquisitions. These have included Popich Brothers Water Transport, Global Offshore Marine Inc., Tribe Fleet, Inc., Aleutian Command Partnership and Sun State Maritime, Inc. Continue Reading

Accessing US Capital Markets – Debt and Equity Offerings

by Robert Schreiner

Capital requirements for newbuildings are growing at such a pace that the principal owner, chief executive or chief financial officer of today’s shipping company should now be looking to a variety of financing alternatives in addition to traditional bank finance.

US markets have tremendous appetite; and the non-US shipping company pursuing a long-term strategy which includes raising large amounts of capital and building a strong US-investor base should put itself in the position of being able to access US capital markets from time to time. 

Typically, a company approaches the capital markets with a debt issue. Depending on the success of the offering, the company may go back to the debt market within nine to 12 months, but more frequently it returns within 18-24 months. The company’s underwriters, who often have the right of first refusal, will go back to their clients and suggest if and when the time is right for another issue. Continue Reading