Bond Fever Gives Way to Chills: The Heyday is Over, But Shipping’s Bond Market is Still Open

The situation in the high yield bond market – of which shipping bonds are a part – is, as one would expect, in the doldrums with no relief in sight before the end of the second quarter. Some improvement is expected in the last half of the year, and many predict a rally next year to reward new investors now venturing into the market. But, for most of 1995, trading will continue to be light in shipping, and the only people smiling are issuers who had the foresight in 1993 to lock in on capital at the lowest yield in decades.

Eletson Corp., the Greek tanker owner, is one of the savvy few now paying 91/4% for long-term capital that would cost 11% in today’s world. Still, these bonds are trading below par: for investors, as long-term interest rates rise, the value of bonds fall, and as long-term interest rates fall, the value of bonds rises. “Price drops due to overall shifts in interest rates discourage trading. But Eletson is trading exactly where it should be as a strongly-rated, well-managed shipping company,” Jay Nawrocki of Citicorp Securities in New York said. “In Eletson’s case, the relative iliquidity of the entire market is hardly a problem given the fact that many of the current holders are buy and hold types who like the credit and are happy being in the paper,” he explained.

This is only an excerpt of Bond Fever Gives Way to Chills: The Heyday is Over, But Shipping’s Bond Market is Still Open

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.