How Diogenes Met Criteria of Major Investment Houses

Diogenes Investment Ltd. – the tanker investment fund managed as a joint venture between Marsoft and Lehman Brothers – describes itself as an “investor driven” fund. Marine Money talked with some of the people behind the fund to learn more about what that meant.

According to Dr. Paul Eckbo, one of Diogenes’ managing directors, the Diogenes concept grew out of extensive discussions  with the fund’s major investors. The investors felt that the stage was set for an attractive tanker market investment play, but that there was no existing vehicle for putting funds into the market in a disciplined and risk-controlled fashion. They wanted an investment approach that addressed several priorities:

• Take advantage of a cyclical play in the tanker market and, in that context, allocate its assets across the major segments of the fleet to diversify the fund’s exposure;

• Clear and explicit investor exit strategies in place before investments are undertaken and no operating role for the fund that could compromise its exit decision;

• OPA-related risk – to the greatest possible extent – eliminated; Continue Reading

Clarkson’s Standoff With Management of Shareholding Continues

Seemingly intent on making management responsive to shareholder’s investments, Castalia shipping fund partners criticized Horace Clarkson’s return levels and core business strategies at Clarkson’s AGM in May.

Clarkson is Castalia’s largest single holding and, according to Castalia’s March 31 shareholders’ letter, a “principal factor behind the Fund’s strong performance in the first quarter.” But Castalia partners were not interested in niceties at the meeting and questioned Clarkson’s money-losing insurance broking business, perceived operating profitability weakness and more than generous bonus packages for managers.

With a larger proportion than normal of the Fund’s net assets in shares of Clarkson – 32.3% of Castalia’s net assets – the partners’ interest is not casual. And, because Castalia is representing the interests of several other significant investors, speculation about Castalia’s potential takeover bid is not out of bounds. Continue Reading

Capital Markets Cost of Money Down

Owners Exploring Options
Griffin in New York

Pent up demand combined with the recent trend in interest rates – anticipated by many to trickle down to high yield markets by the third quarter – should result in many shipping deals coming to the debt market before the year is out.

Several initial public offerings (IPOs), including pending filings like Hvide Maritime Inc.’s, are also expected to come to the front.

Hvide filed its IPO issue April 1994; but subsequently, the market fell, and the company, on advice of investment banker C.S. First Boston, has been waiting for improvement. “We expect to go ahead with the IPO at the end of the third quarter or the beginning of the fourth quarter,” a Hvide manager told Marine Money. Continue Reading

Types of Finance and Their Parameters: Part Two

by Andrian Dacy

In the last issue, Marine Money compared the advantages and disadvantages of different sources of capital: bank debt, finance company debt and leasing. In this issue, we continue our comparison of raising capital, taking a closer look at bond issues, private placements and public equity.

Bond Issues
Bond issues are typically arranged by commercial or investment banks, and are purchased by corporations, insurance companies, mutual funds and private investors. The cost of a bond issue is calculated by a spread over US Treasuries, and based on the risk of the company and/or the specific transaction. Pricing depends on: the tenor of the transaction; whether or not fixed funding is sought; and the interest rate environment. Since most shipping companies are not considered investment grade, their long-term paper is categorized as high yield or junk debt, and priced accordingly. Given present conditions, rates for a mid-size operator for a 10-year, fixed rate transaction would begin in the region of 12%. Continue Reading

Owners on Banks

While results from an informal poll of finance managers and officers of major shipowning companies did not throw into relief major news-breaking trends, they did shed light on the very interesting financing habits of the world’s shipowning community.

For example, responses to the question: “Have lending banks been more favorably disposed to shipping in the last year?” ranged from yes and no to maybe. Answers on other questions were equally variable, such as: “Are your mortgage loans fixed rate or floating?”; “Have you refinanced in the last 12 to 18 months?” and “What is the optimum debt-to-equity ratio for a shipping company?”

Documenting responses on a percentage profile basis may not be worthwhile, but a case-by-case look is definitely in order. After all, isn’t ship finance synonymous with case-by-case? Continue Reading

Nedlloyd Hedges Currency to Hold Up 1995 Results

In defense of the weak dollar, Nedlloyd Group of the Netherlands has hedged DfI500 million against further strengthening of the guilder and other currencies in 1995. Chairman Leo Berndsen said, “We have hedged the dollar short term, which should enable us to make at least the same result in 1995 as in 1994.”

Nedlloyd’s position underscores the complicated nature of shipping in which many companies are increasingly buying goods and services in strong currencies and still earning mostly in the weak dollar. Last year, Nedlloyd saw net profit turnaround to Dfl92 million, up from a loss of Dfl112 million in 1993. The turnaround occurred despite turnover, which was essentially flat, increasing just 3% to Dfl6.6 billion, up from Dfl6.5 billion. Continue Reading

In the Money

Some may have been surprised recently to see Concordia’s share price on published stock exchange listings come down by nearly half last month to SKr12-12.50 per share from SKr20-21 per share. The reason for the reduction was a share split when the company issued a convertible debenture loan to replace on old debenture which expired April 30.

Under the old debenture, the share conversion price was SKr45, but the new convertible price is SKr11.50. When the loan was re-issued April 19, the listed share, trading at SKr20-21, was “deep in the money,”  a term used to describe option contracts of a stock whose current market price is above the striking price of a call option or below the striking price of a put option.  Continue Reading

Going “Integrated” is Not Fully Guaranteed Gas Carrier’s Hopes To Draw Following Uncertain

Achieving sufficient scale for public shares to be liquid and attractive to national and international investors was the aim of a recent LPG merger of three Norwegian companies.

The merger of Havtor AS and AS Havtor Management with the gas carrier business of Kvaerner a.s. and PR Nemo, along with vessels/vessel interests from a sprinkling of international companies such as Neste OY and International Shipholding Corp. (ISC), almost triples the equity level in the listed company to NKr 4.3 billion, up from NKr1.6 billion.

As of April 1, the new company, Havtor (Merged), had liquid current assets totaling NKr 437 million; and it holds 10-100% interest in 46 gas carriers, six bulk carriers, two Probo vessels and one product tanker. The gas carriers, with two exceptions, are employed in chartering pools. Three of the bulk carriers have already been sold off, with expectation that sale of the remaining three will soon leave the company as a nearly pure gas carrier play.  Still, management said it will not abandon the dry bulk completely, but play on the market cycles. Continue Reading

Germany’s Successful Tax-Based Ship Finance Soon Faces Judgment

by Bridget Hogan, London

Despite ongoing attacks from foreign opponents, German ship finance is quietly motoring along after dramatic expansion last year. And, although it shows no sign of diminishing, the German government will need to defend its ship/share scheme in the European Court at some stage later this year.

The Germans argue there is a difference between a subsidy and an industrial incentive; and this reasoning was acceptable under an earlier European Union ruling much to the disgust of Danish and Dutch opponents.

In 1994, DM1.63 billion was raised from German share sales, 45% more than in 1993. This money helped finance 93 newbuildings and 16 secondhand ship purchases.

Non-German shipyards and, in some cases, shipping lines are looking anxiously at the success of the scheme which seems to have won official sanction. They fear the German-owned fleet is achieving a high level of domination of the shipping scene, particularly in containership chartering. Continue Reading

German Shipyards Drop the Gauntlet

By Yanni Bousnakis

When the biggest recession in history hit the shipbuilding industry in the 1980′s, European shipyards suffered huge losses. At the same time, the Far East was increasing production capacity at an unimaginable pace. South Korea alone boosted output by more than 550% in the 10 years between 1980 and 1990, and became the undisputed second force in the shipbuilding industry behind Japan.

Meanwhile, European shipyards, formerly a dominant force, slipped to approximately 23% in 1980, and shrank even further in the next decade to represent less than 18% in 1990.

Germany’s Shipyards
Germany’s shipbuilding industry managed to get through the 1980′s relatively intact, and retained most of its market share during this period through productivity improvements and government subsidies. Continue Reading