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The Economy and the Markets
STAY HOPEFUL
Investor sentiment is very often unpredictable and moody, especially today when economic data continues to come in mixed and casts doubts on whether the economic stabilization will be able to materialise into a recovery. And against this uncertain backdrop, it was refreshing to listen to an optimistic voice among the crowd on where the global economy is heading. François Trahan, Senior Managing Director and Chief Investment Strategist, ISI Group started off the Wednesday’s session of Marine Money Week on a positive note by reminding the audience that even though consumer deleveraging has already begun and may well continue for the next decade, equities can rally even during such times if the government is able to offset the consumer contraction. He pointed out that the US stimulus package is still very much in its infancy stage considering the fact that the government has only spent 5% or USD 42 billion out of the USD 787 billion.
FSL Seeks Unit Buy Back Mandate
In an effort to enhance shareholders’ value, the Trustee-Manager of First Ship Lease (“FSL”) is seeking the approval of its unitholders this week to buy back up to 10% of the total number of issued units. FSL says the unit buy-back mandate is a flexible cost effective tool of capital management that can improve the net asset value and mitigate short term market volatility by offsetting the effects of short term speculative trading of the units. Continue Reading
Market Disruption?!
Just as we thought banks’ dollar funding costs have stablised, Rickmers Maritime announced last week that one of its lending banks had invoked the market disruption clause on its loan. The higher interest rate will result in an incremental increase in interest expense of approximately USD 47,000 for this fixing period. The shipping trust assured investors that none of the other nine banks with whom it had secured credit lines has invoked the market disruption clause. For the investors, the distribution per unit should not be immediately impacted considering that the trust has cash accumulated from its policy of retaining a portion of its distribution cash flow. Continue Reading
FSL Shareholder Increases Investment
Normally, we leave the reporting on Asian companies to our associates; however we were sufficiently perplexed by the report that American International Assurance Company, Limited, an AIG affiliate, had increased its shareholding in First Ship Lease by acquiring an additional 1.49 million shares. After all, as a WSJ headline highlighted the situation, “AIG Increases Borrowings While Racing to Sell Assets.” We suppose business must go on, despite the bailout, and at a yield of 26% it certainly is an attractive investment. But given the overall situation is this what AIA should be doing with excess liquidity albeit an insignificant amount in the scheme of
Don’t Throw the Baby Out with the Bath Water or How I Learned to Stop Worrying and Love the Fundamentals (with thanks to Stanley Kubrick)
With a full house, Simon Rose began Dahlman Rose’s 1st Annual Global Transportation Conference confessing that despite Wall Street’s having spent years educating investors as to the difference between period and spot business they have largely been ineffective. We disagree with this assessment believing the current market reflects a herd instinct and an avoidance of betting against the tape. The companies presenting at the conference are all clearly differentiated from spot players, with visibility of earnings and cash flows yet their shares have also been pummeled as the BDI continues its decline. Mr. Rose exhorted the crowd to take advantage of this anomaly, take a reality check and not to trade on fear.
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Yang Ming, FSL, Maersk & HCI in Half Billion of Lease Deals
The I.M. Skaugen deal was interesting, but not the only recent sale leaseback deal. First Ship Lease last week announced that it had purchased three 4250 TEU containership newbuildings from Yang Ming for $210 million en bloc with a 12 year bareboat back at a fixed rate market reports pin at $18,500 per day. The lease agreements contain purchase options for Yang Ming at undisclosed values at upon expiration of the leases.
MukemmelBirForum
Last Thursday, the 5th annual Marine Money Istanbul Ship Finance Forum took place within sight of the Bosporus at the Swissotel. In our mind, there could not be a more appropriate setting for this or any shipping conference.
After greetings from Marine Money’s Mia Jensen and Kevin Oates, Mr. Metin Kalkavan, as Chairman of the Turkish Chamber of Shipping gave brief introductory remarks which included interesting numbers on the Turkish shipbuilding industry. He was followed to the podium by Mr. Lucien Arkas, the Chairman of Arkas Holdings, who gave the keynote address. Mr. Arkas provided a concise history of his 44 years in shipping. But more importantly, he attributed the Turkish owners’ success in this industry to their high level of entrepreneurship, courage and self-esteem.
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