2007

Let the Professionals Speak

Much has been written by journalists recently about the credit crunch that resulted from the subprime mess. Assumptions have been made; conclusions have been drawn and theses postulated. But we here at MarineMoney wanted to know what it means to our everyday livelihood. So, on Tuesday, we sent out a survey entitled, “Shipping Finance and the Credit Crunch of 2007″ to test the pulse of the market place. In this extremely short period, we received a highly representative sample of 82 responses. Many of the responses were as we expected but there were also a number of surprises. For convenience we have included the results later in this issue for you to peruse and summarize here the key takeaways.

Asked to characterize the credit crisis by choosing all the responses that apply, 45% of the responders felt that this is a real problem with 29% of the sample believing it will slow shipping’s fortunes. The bulk of the responders, 71%, confirmed that it will alter the way they look at transactions while 13% said it was a problem for others not them. Not unexpectedly when queried about future prospects in the deal market 54% felt it would be more challenging. Interestingly, 27% said they would be less busy whereas 14% felt they would be busier perhaps reflecting the focus of their business. Specifically when asked whether bilaterals or large syndicated loans were impacted more by the crisis, 91% responded syndicated loans.

We felt a disconnect on the issue of equity where 74% felt that credit tightening would have an impact on raising equity. Based on the issuances this past week by Diana, Eagle and Genco, it is not yet apparent to us. As an offshoot to the equity question, our respondents were consistent when asked what advice they are giving their clients at this moment. Only 25% suggested combining debt with equity products whereas 80% are telling their clients to be ready to pay more for debt. This became abundantly clear when 73% felt that banks were not being compensated for the risk.

This is only an excerpt of Market Commentary – 09/27/2007

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