US Listed Shipping Companies in a SubPrime Summer

As credit markets tighten, the ability of US listed shipping companies to borrow on favorable terms will say a great deal about the relative strength of public companies in the industry. Despite the surge of shipping company IPO activity in the last several years, it has never been hard to find pundits who are ready to remind investors of the historical cycles in the industry and to suggest that the current success of the public companies may not last forever.

But events in the credit markets this summer may shed additional light on the relative strengths of the listed company model. As aptly demonstrated by the widening interest rate spreads following the subprime meltdown began in June, financial markets are never static. Sooner or later, new structural developments, both foreseen and emergent, will challenge the market standing of the U.S. listed shipping companies. Perhaps it is early to know for sure, but changes in the credit markets this year could provide listed shipping companies with a new opportunity to distinguish themselves from their privately-held competition. If listed companies can continue to borrow on favorable terms, even in a down market, it will be all that much harder to argue that listed companies do no represent the long-term future in shipping.

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