Shipping Turns From Banks to Equity Markets for Cash
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.
(Additional reporting by Ole Mikkelsen in Copenhagen, Mia Shanley in Stockholm and Victoria Bryan in Frankfurt; editing by Carmel Crimmins and Tom Pfeiffer)