Nedlloyd Conflict Exposes Shareholders’ Impotence

The simmering battle at Nedlloyd between Torstein Hagen and management has exposed serious deficiencies in Dutch corporate law. The most contentious issues center on management/shareholder relations. Because of the complex management structure aimed at safeguarding shareholders’ interests, investors are virtually impotent, while management is almost impregnable. Henk Lind, a lawyer with the Vereniging van Effecten-bezitters (VEB), the Union of Dutch shareholders, told Marine Money, “Legislation implemented in the late seventies effectively wiped out most Dutch shareholders’ rights and control over management. Their only sanction against the directors is to reject the annual report, whether they agree with the accuracy of the results or not.” This course of action can backfire, as it means that the directors are prevented from making a dividend.

In the case of Nedlloyd, the question of blocked dividends does not arise, as the company is not planning to make a distribution. But experts believe that the rejection of a report is strictly limited. Professor Van Schelsgaarde, professor of corporate law at Utrecht University, has said that, if Nedlloyd shareholders took this course of action again, they would be abusing their rights.    Continue Reading

Jadranska Plovidba Spearheads Privitization Drive in Yugoslav Shipping

As the shackles of state control are lifted from industry in Eastern Europe, the move towards privatization is gathering momentum. In Yugoslavia, the process has been given further impetus by a state edict, which has decreed that all companies are to have a substantial element of private ownership by the middle of 1992. Among the front runners in the transition to private investment is Jadranska Slobodna Plovidba (JSP) of Split, which has some radical plans on the drawing board, including the formation of four privately owned joint ventures. Each one will be registered overseas and will take over responsibility for a specific part of the JSP business.

The ambitious privatization scheme is the culmination of a radical restructuring program implemented over the past year, aimed at resolving serious financial problems. Last year, the Yugoslav government removed the national operating subsidy, based on 10% of turnover. Partly as a consequence, JSP lost $20m, and it became evident that the company could face further difficulties without state support. In order to ensure its continued survival, Miksa Giovanelli was drafted in as managing director to revamp the company, and more commercially orientated managers were appointed to replace the old guard. Significantly Giovanelli, despite his Italian name, is actually Croatian, as are all the other managers in the company. The commercial management has been introduced on an elected basis, with Mr. Giovanelli being given some four years to sort out the company’s problems.   Continue Reading

The Insurance Market – The Shipowners’ Dilemma

The last two to three years have been a difficult period for underwriters as well as shipowners.  On the one hand, claims activity has been on the rise; on the other hand, the capacity in reinsurance markets has been shrinking. As a result, it is inevitable that insurance rates will continue to rise until some level of equilibrium is achieved and underwriters generate profits that are “normal” for this type of business.  The shipowner, in the meantime, is confronted with the challenging task of obtaining quality cover at optimum rates. The state of the insurance market from a shipowner’s/shipmanager’s perspective is examined, and some of the options of which a shipowner should be cognizant are outlined below.

The insurance markets, particularly in the United Kingdom, have been plagued with over capacity in the past several years, resulting in intense competition and price cutting among underwriters.  While this has been welcomed by the shipowning community at large, it is natural to expect that underwriters are not as happy about this.

Against this backdrop, there have been a number of very large catastrophic losses which are slowly passing through to the underwriters.  The Piper Alpha loss in 1988 and, more recently, losses from the Exxon Valdez, Hurricane Hugo, the San Francisco earthquake and  the Phillips Petroleum Refinery explosion are examples which have had tremendous impact on the profitability of underwriters.  The 1990 Oil Pollution Act in the United States – and its attendant liability implications – is another significant piece of legislation that has caused a lot of concern and nervousness among underwriters.  Additionally, underwriters have reported higher levels of claims activity on the marine side, all of which combined together has caused turmoil in the underwriting community and resulted in some excess of loss underwriters and some primary underwriters withdrawing from the market. Continue Reading

DnB Seeks Buyers in Wake of Metro Marine Failure

Two high speed ferries that were on the auction block in New York City last month failed to attract any interest from bidders, but many observers believe water transportation has a bright future for transporting commuters.

Det Norske Bank, which held the mortgages on the vessels, was the only bidder for the Metro Manhattan and Metro Atlantic. It will now look for purchasers in the United States and abroad.     Carl Fredrik Joys, at DNB’s office in New York, said there were no acceptable bidders for the two craft, which were in the portfolio of Bergen Bank when DNB acquired it. “When we took over, it was clear this was a work-out situation,” he said.

The Metro Manhattan was delivered at a cost of $4.2 million and the Metro Atlantic for $4.5 million, “but I guess we would willing to accept lower prices,” says Joys. Each ship has a capacity of about 350.  Continue Reading

Every Tanker Calling on the US is Illegal

OPA 90, along with the billion plus dollar claims out of Piper Alpha and the Exxon Valdez, has changed in a “Draconian” fashion the costs of coverage in the marine insurance market, according to Johnson and Higgins’ Michael Northmore.

Now a back room confrontation which could ultimately mean that tankers calling at US ports are doing so illegally is about to spill over.  P&I clubs have been able to purchase reinsurance of about $1.25bn to make themselves whole for member losses.  The one exception is in the area of oil pollution liability, where the reinsurers will not offer it and the clubs are not anxious to buy it above $500m.

Under OPA 90, the US Coast Guard must draft regulations which would, in effect, make the Clubs directly responsible for the liability costs associated with a spill of a member shipowner. US Congress is pressing the Coast Guard to be very strict in this regard, and it is expected the Coast Guard rules will, indeed, make the Clubs directly liable, even if the owner were to have breached a warranty. Continue Reading

Bollore Wins Battle for Delmas-Vieljeux

French entrepreneur Vincent Bollore is poised to take control of leading liner group Delmas Vieljeux after a protracted power struggle lasting more than five years. The industrial and shipping conglomerate Bollore Technologies has recently acquired a 9% shareholding in the Delmas holding company Compagnie Financiere Delmas for Fr750m ($127m), increasing its equity stake to 31%. This does not in itself give Bollore control of the group, nor is it high enough to trigger off an automatic bid for the company – required at the 33.3% level. But it is expected that Bollore will be able to draw on the support of powerful allies, notably the Axa Insurance Group, the largest shareholder with 33.4%, and a 40% shareholder in Bollore itself, and on disaffected members of the Vieljeux family. Vincent Bollore will now achieve his long term objective of securing a seat on the Delmas board, and may even take outright control of the company, if Axa sells its share in Delmas.   Continue Reading

B. Skaugen Launches Drive Into Dry Bulk Sector

The prevailing strength of the dry bulk market and expectations of better times ahead have prompted B. Skaugen Shipping to move into this sector of the market. The Norwegian group recently established a new company, B. Skaugen Bulk Shipping, to act as a charterer of bulk tonnage under the management of Mr. R. Wik. The move also coincides with the acquisition of three handymax vessels. Following the purchase of the 37,000 dwt World Mercury, Skaugen paid $14.85m for the 38,000 dwt Ocean Great, built 1983. A third vessel, the 39,200 dwt Western Skautop, was delivered as a newbuilding last November, and is currently on time charter to the Western Bulk Carriers pool. Employment plans for the remaining two vessels have yet to be finalized. The latest Skaugen acquisition has coincided with a general upsurge in interest in handymax vessels, which have been in particularly strong demand in the carriage of steel out of Brazil for the Middle East.    Continue Reading

Asset Play or Business Venture

Charles Fabrikant, president of Seacor Holdings Inc., has been involved in the shipping business since 1973, full time since 1976 when he gave up practicing law.  Mr. Fabrikant, says his interest currently consists of two parts:

•  Seacor Marine which has 50 vessels of the supply boat variety, though not all work in the oil patch. Typically 200-220 feet in length, they are deployed in the Gulf of Mexico, North Sea, and West Africa. Seacor also has some anchor handling tugs, some of which are used to carry containers in feeder services.

•  SCF Corp. operates a fleet of about 150 dry cargo barges and about a half dozen towboats on the Mississippi- Ohio River complex.

What follows are excerpts from a conversation Marine Money had recently with Mr. Fabrikant, in which we discussed his attitudes on shipping as an investment opportunity and a business venture.

MM:     How do you evaluate the shipping companies in which you’re thinking of investing? Continue Reading

Unibank Finances Chiquita Newbuildings

Financing for the last two of six Chiquita reefer newbuildings has recently been arranged by the Danish bank Unibank and a Difko partnership, in a deal worth over Kr500m.

Under the terms of the deal, K/S Difko LXXVI has taken over two shipbuilding contracts previously agreed between Danyard A/S, part of the J. Lauritzen Group, and two of Danyard’s wholly owned subsidiaries. The cost of the vessels will be Kr257.43m ($39.85m) and Kr255.38m. The purchase price of the second vessel is lower because of the longer construction period.

The deal is structured around the typical Danish bond scheme with bank loans issued to the Difko partnership, which is also raising Anparter equity.  Continue Reading

Shipowners Take Cautious Approach to Fixed Rate Swaps

The recent downturn in short term interest rates poses both a dilemma and a window of opportunity for ship-owners. As indicated in the last issue of Marine Money, they are at their lowest level in over four years. Indeed, according to Citibank, three month LIBOR at 6.06% is at its lowest level since 1987, when rates dropped to a ten to fifteen year low. When assessed in an historical perspective, the argument that they can only go one way – upwards – seems to be a strong one.

This view has been implicit among a cross-section of banks canvassed by Marine Money, although there are those who hold an opposing viewpoint and, inevitably, a number of non-believers. Paul Ward, Financial Engineering specialist at Citibank, articulating the bank’s current thinking on interest rates, said “We expect US short term interest rates to rise, and long term rates to fall between 0.5 and 0.75% between June and September.” The five-year rate was quoted at 8.43% by the bank.

The fall in long term rates may be manipulated by the US Government in an effort to stimulate exports by reducing the value of the dollar, according to Citibank. Conversely a rise in short term rates may be expedient to curb a rise in inflation in the event of a credit boom. However, Mr. Ward conceded that there was a body of opinion arguing that the US would not allow long term rates to fall out of kilter with rates in the rest of the world for fear of exacerbating the budget deficit.    Continue Reading