Where the Sun Never Sets

Nora Huvane was kind enough to file the following report from Oslo:

The mood in Oslo today largely matched the weather. A bit wet and chilly for June, but there were some sunspots and hope is high that fairer weather will return. The hearty and well-prepared will survive and prosper regardless – so if you’re planning any investments in shipping, be sure to pack your umbrella.

Marine Money’s 11th annual Norway Ship & Offshore Forum, held with partners DnB NOR and Nordea and in conjunction with Nor Shipping, focused largely on the offshore markets and outlooks. Respected analysts reviewed outlooks for the oil market, drilling, FPSO and FSO and offshore support vessel markets. While there were concerns about oversupply and short-term mismatches in E&P budgets and industry capacity, the general consensus is that long-term fundamentals remain what they have been safely out of the reach of traders, speculators and gamblers and in the long-range budget planning and price targets of well established oil companies. The world population and economy will continue to grow over the long-term, and until a suitable alternative for oil is found so will oil demand growth. Gavin Strachan of ODS Petrodata pointed out that the oil price drop came as 2009 E&P budgets were being set, making oil price irrelevant for the offshore market in the short-term, over the longer term supply depletion on the order of 9% pa without further investment will ultimately drive demand for the offshore industry.
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Written by: nhuvane | Categories: Freshly Minted, The Week in Review | June 11th, 2009 | Add a Comment

Secondary Opportunity

The German Ship Finance Forum followed last years’ pattern of commencing with a half-day seminar. This year’s topic was focused on opportunities in secondary markets. Chairman Michel Bourgery of DVB started things off with a brief overview of the markets. Based upon his successful prognostications in the past, we listened carefully as he suggested that listed companies would be taken private. He bases this upon the fact that there is no re-cycling of equity and they are locked-in loss making position. Moreover, limited visibility and overall pessimism are also factors. For those who have no fear, he suggested taking a position in the tanker market was too early as the one-year t/c rate is greater than the three year. For bulkers, the time to go shopping will be this summer.

Dr. Albrecht Gundermann of Salomon Invest took the audience through the secondary market in KG funds, which is relatively new. Historically, once you joined the party you could not leave it. Trading remains limited but there is a real market with real prices. Right now it is a buyers’ market. With a total market of EUR 30 billion, only 4% has been traded.

Pareto’s Peter Wallace next gave his insights into the IS/SPC (formerly the K/S) market. The size of the market is approximately $15 billion and is split evenly between shipping and offshore. The basic structure is a limited partnership which has both paid-in and uncalled capital. No longer tax-driven, this product is extremely flexible and can be designed in any form that makes economic sense to the participants. It is an ideal alternative when public equity is difficult or expensive or when the asset is trading below NAV. Investors like it because:
•    There is no management risk
•    You can pick the asset you want
•    The structure is transparent
•    A trigger clause allows the holders of 15-25% to cause a sale
•    There is a liquid secondary market
•    The price to put the project in the market is relatively cheap at 3-4% of the cost of capital
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