Shippers Turn to Equity Markets as Sector Eyes Recovery

MarineLink.com
Thursday, April 17, 2014
Photo courtesy OW Bunker

Shipping companies are turning to equity markets to fill a growing funding gap, betting that investors hungry for decent returns will provide capital to a sector recovering from its worst downturn since the 1980s.

Ship owners ordered large numbers of vessels between 2007 and 2009, just as the global economy sank into crisis. Prospects have brightened in recent months as world trade picks up and the ship glut is absorbed.

The industry still faces a multi-billion dollar financing hole after banks, its traditional source of funding, cut back lending to boost capital in the wake of the financial crisis.

Alternative investors such as private equity firms have been snapping up shipping assets including loan portfolios from the banks. Scenting an opportunity, shipping companies are now trying to take advantage of strong equity markets to seek out funds through initial public offerings (IPOs).

Avance Gas listed this week in Oslo. Germany's Hapag-Lloyd and Chilean peer Vapores agreed this week to a tie-up that will include a flotation in 2015. Principal Maritime Tankers Corp, backed by private equity group Apollo Global Management, last week filed with U.S. regulators to raise up to $100 million in an IPO.

Greece's Quintana Shipping and Bermuda-addressed Nordic American Offshore both filed in March to raise $100 million and $115 million respectively in New York IPOs.

Jesper Plenov, global head of equity capital markets at Danske Bank, said the bank placed A-shares in top shipping and energy group A.P. Moller-Maersk for 3.6 billion Danish crowns ($665.70 million) within just an hour and a half.

But the dash into shipping stocks comes with a health warning.

"Hopefully ... enthusiasm with offerings will not get out of control and encourage poor quality owners and projects on the roadshow circuit," said Basil Karatzas, a U.S. based ship finance adviser.

Steven Hollander of law firm Watson, Farley & Williams, said, "We see investor appetite, but the appetite is not going to buy shares at any price."

Not all shipping share sales have gone to plan.

Last week, Greece's Stalwart Tankers scrapped a listing, the same day that Britain's Quantum Shipping, backed by billionaire Idan Ofer, dropped a planned $200 million private placement. That came despite European secondary offerings of shares last week reaching their highest year-to-date levels since records began, according to Thomson Reuters data.

U.S.-based oil products tanker group Diamond S Shipping also backed out of an IPO in March despite the support of leading global investor Wilbur Ross.

"There's certainly been a wariness about overpaying, and watchfulness about company valuations against the underlying value of fleet," said John Ong, managing director of corporate finance and capital markets at ABN Amro. "Investors want to be thoughtful about who and what they're backing."

A source familiar with the Quantum deal said investors were quite demanding on price. "[Quantum] took the view that, given that they could fund their investment through their own resources, they didn't want to drop the price," the source said, adding they were keen to return to the market in 12-18 months.

Investor Sophistication
The more selective approach to shipping IPOs could be a sign that investors are growing more familiar with the industry.

Shippers carry a variety of goods from dry bulk commodities like coal and grains to oil, gas and containers full of consumer electronics, and demand for different products is volatile.

That can hit shipping firms hard as they often dash to order extra vessels when business starts to pick up, only to idle them when it wanes.

"Diamond S flopped partly because some people are getting a little nervous about the products tanker sector. The expected upturn might be strangled in its infancy because of over-ordering in the product tanker segment and also we haven't seen any real upturn as of yet," a ship finance source said.

As the wider IPO market revives, investors have a growing choice of companies and brands to invest in, allowing them to be more selective when it comes to shipping IPOs.

Stocks in shipping companies floated over the past year rose by an average of 4.4 percent on the first day of trade, against 27 percent for global IPOs, Thomson Reuters data showed.

After a month, shipping shares rose on average 5.4 percent, against 34 percent for recently-listed stocks as a whole.

Denmark's OW Bunker and Norway's Tanker Investments floated in March at the upper end of their price ranges but have since fallen 2.6 percent and 11 percent respectively.

"The shipping sector has been out of the IPO market for a long time and now it's coming back, and what's happening is the market is scrutinising each target more than previously," said Adam Kostyal, European head of listings for NASDAQ-OMX.

(By Jonathan Saul and Freya Berry; Additional reporting by Ole Mikkelsen in Copenhagen, Mia Shanley in Stockholm and Victoria Bryan in Frankfurt; editing by Carmel Crimmins and Tom Pfeiffer)

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Ingram to Build 20 Tank Barges in 2015

Ingram Barge Company announced that it will build 20 tank barges in 2015 to meet growing demand for chemical shipments. While most of the company’s recent tank

Webinar: 3D Laser Scanning in the Marine Industry

Maritime industry professionals have increasingly taken notice of 3D laser scanning in recent years as acceptance for the technology and its applications mounts throughout the sector.

Shuster Receives Champion of Maritime Award

Congressman honored for support of domestic maritime industry.   Rep. Bill Shuster (R-Pa.) this week received the 2014 Champion of Maritime Award from the American Maritime Partnership (AMP),

Shipbuilding

Damen Delivers ASD Tug in Italy

RimorchiatoriRiunitiS.p.A. of Genoa (Italy) has taken delivery of a Damen ASD Tug 2411. The 70-metric-ton bollard pull azimuth stern drive tug will be temporarily deployed by Tug Malta Ltd.

NRC Program Targets Vessel Operating Costs, Safety

Canada’s NRC creating solutions for the growing Canadian shipbuilding, military vessels, marine commercial transportation and offshore resource industries As

LQT Delivers Accommodation Facility and Helideck in Gulf of Mexico

LQT Industries , a full-service provider of accommodation facilities, design-build construction services, and support services to the oil and gas industry, has

Finance

NRC Program Targets Vessel Operating Costs, Safety

Canada’s NRC creating solutions for the growing Canadian shipbuilding, military vessels, marine commercial transportation and offshore resource industries As

Senator Says 2015 Could Be Time for US Oil Export Bill

The top supporter in the U.S. Congress for reversing the 40-year ban on crude oil exports, Senator Lisa Murkowski from Alaska, said next year could be the time for a bill on lifting the restriction.

Global Ship Lease to Acquire Containership

Global Ship Lease, Inc. has  announced  that it has agreed to acquire a 8,063 TEU containership from a leading container liner company for a purchase price of $55 million.

Container Ships

Global Ship Lease to Acquire Containership

Global Ship Lease, Inc. has  announced  that it has agreed to acquire a 8,063 TEU containership from a leading container liner company for a purchase price of $55 million.

Maersk Sees US Approval of Shipping Alliance as Formality

U.S. regulatory approval of a proposed shipping alliance involving AP Moeller Maersk should be a formality, the Danish company's chief executive said on Wednesday.

Cargo Container Security Alliance Formed

SC-integrity, Inc. (LoJack SCI) and Contguard Ltd. announced a strategic alliance designed to provide their customers with security and real-time visibility of

News

Second Sailing Added to Cleveland-Europe Express

The Port of Cleveland and Amsterdam-based Spliethoff Group announced today their mutual intent to add a second monthly vessel to the Cleveland-Europe Express (CEE),

Damen Delivers ASD Tug in Italy

RimorchiatoriRiunitiS.p.A. of Genoa (Italy) has taken delivery of a Damen ASD Tug 2411. The 70-metric-ton bollard pull azimuth stern drive tug will be temporarily deployed by Tug Malta Ltd.

Finland Grants Support to Three Small LNG Terminals

The Finnish government granted 65.2 million euros (84.22 million US dollar) in subsidies to build three small liquefied natural gas (LNG) terminals to cut on use

 
 
Maritime Security Offshore Oil Pipelines Pod Propulsion Salvage Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2683 sec (4 req/sec)