An Increasing Cost of Capital

The question, of course, is how does a shipping company raise money when it needs more money than its market capitalization? The answer is: any way they can think of. But unlike the bank market, the equity market, especially in America, is never closed – so long as the terms are right and in today’s market  – that means more expensive than the business models of shipping companies had ever imagined.

In recent weeks, we have seen companies use some different strategies to generate liquidity and reduce capex. With equity embedded in its vessels, OSG used outright sales and sale/leasebacks to generate proceeds of about $200 million in 4Q08 – and the company said it plans to do the same in the first quarter of 2009.

DryShips, which

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