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A Vulture’s First Strike
In the first acquisition in 2009 by a German opportunity fund, Maritim Equity purchased two 1,700 TEU containerships built in 2008 from Asian owners. The vessels were purchased for $21.5 million each, which represents a reduction in price of over 50% from early 2008 when similar ships sold for $45 million. Both ships, the Ocean Emerald and Ocean Mermaid are time chartered to STX Pan Ocean at a rate of $16,400 per day, versus current market rates of $4,500 to $5,000 per day, until the summer of 2011.
The fund is premised on buying bargain vessels with reliable income from stable charter contracts.
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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