The Rustless Wonder

By Jens Alers, Atlantic Marine LP, Member of the Schulte Group, Hamilton, Bermuda

In January of this year I travelled to India. Together with two of my most senior shipmasters, on home leave from the fleet at that time, I visited the Qutab Minar Fortress in India’s capital Delhi. Moments after walking through the front gate of this ancient fortress, I saw the most fascinating metal object that I have ever seen – the Rustless Wonder of India.

This iron pillar has withstood corrosion for over 1,600 years. Because it simply does not rust, despite its full exposure to the elements since the 4th century, it is an object of perennial interest and curiosity. As such, it continues to attract the attention of archaeologists and scientists, as well as the odd visiting shipmanager, all of whom want to unfold the secret behind its strength.

The pillar is believed to have been a standard for supporting an image of Garuda, the bird carrier of Lord Vishnu. It is 23 ft and 8 inches high and weighs 6 tons – a great symbol of Indian metallurgical excellence.

The composition and microstructure of the Rustless Wonder is truly wonderful: Continue Reading

Greek Shipping Finance 2005 – Analysis and Trends, The Future of the Small Greek Owner And the Attitude of Banks

By Ted Petropoulos, MD, Petrofin S.A.

The Shipping Market and Banks

Both international and Greek shipping finance had over the 12 months from September 2004 to September 2005 to deal with an extremely turbulent shipping market. In the first six months up to April 2005, both newbuilding and secondhand vessel values as well as freight rates rose to unprecedented heights in shipping history across all sectors. Whereas banks welcomed the positive effects this boom brought to their customers and indirectly to their own shipping loan portfolios in terms of enhanced client liquidity, high asset values and cash flows, profitable vessel sales, and income security via period charters at high rates, they also became extremely wary of the market collapse that might follow.

As vessel values rose steeply, banks grew uncomfortable with lending a high percent age of finance that would result in historically very high loans per vessel. Where there were period charters with a high earnings stream, banks reduced the risk to a large extent by front-loading the loan repayment schedule so as to stay in reasonable touch with historical values and earnings at the end of such charters. Client pressure, and fierce competition between banks meant that high loan to asset financings had to be provided even in the absence of period charters. Banks in such cases tried to latch on to other client securities, but bank, however, competition also frustrated them from doing this in many cases.

Banks took comfort from their clients’ enhanced liquidity and fleet cash flows, but these often were not tied into the banks’ collateral packages, leaving banks to rely on their overall bankclient relationship to justify the enhanced levels of risk. Alternatively, banks had to assume that future earnings levels would be at higher average levels than before in order to justify the higher loans and loan residuals. Continue Reading

Is M&A the Right Approach to Growth in Container Shipping?

By Charles de Trenck, Head of Regional Transport, Citigroup Investment Research

I was asked to write on M&A in container shipping. However I unfortunately cannot comment on current specific M&A activities. But I can review the main issues in perspective. The following is a quick thought piece.

M&A in container shipping always has been a tough slog to be sure. Maersk took years to integrate SeaLand, both before and after the official acquisition. NOL also took several years to fully integrate APL, a company ultimately bigger than itself. Failure to properly integrate acquisitions for mid-sized carriers can also lead to the buyer becoming an acquisition target.

At the core of the problem for M&A deals is that often one plus one does not equal two, but something closer to 1.x, with the primary risk being revenues declining faster than costs during downturns. And if a downturn comes on the heels of an acquisition, the risk of going bust rises dramatically because of increased leverage at the wrong point in the cycle. Continue Reading

The Rustless Wonder

By Jens Alers, Atlantic Marine LP, Member of the Schulte Group, Hamilton, Bermuda

In January of this year I travelled to India. Together with two of my most senior shipmasters, on home leave from the fleet at that time, I visited the Qutab Minar Fortress in India’s capital Delhi. Moments after walking through the front gate of this ancient fortress, I saw the most fascinating metal object that I have ever seen – the Rustless Wonder of India.

This iron pillar has withstood corrosion for over 1,600 years. Because it simply does not rust, despite its full exposure to the elements since the 4th century, it is an object of perennial interest and curiosity. As such, it continues to attract the attention of archaeologists and scientists, as well as the odd visiting shipmanager, all of whom want to unfold the secret behind its strength.

The pillar is believed to have been a standard for supporting an image of Garuda, the bird carrier of Lord Vishnu. It is 23 ft and 8 inches high and weighs 6 tons – a great symbol of Indian metallurgical excellence. Continue Reading

Checking the Load Lines for Corporate Communications

By Carleen Lyden-Kluss, President, Morgan Marketing & Communications

Much as if the Titanic had managed a last-minute turn before the iceberg, the value of corporate communications is slowly being accepted by the maritime industry. While OPA 90 mandated the need for transparency following in the wake of the largest public relations fiasco yet known, the need to communicate openly and directly has been reinforced to publicly traded companies through their compliance with Sarbanes-Oxley and Reg. FD.

But what are the elements of corporate communications, and how can their effectiveness be measured? Both qualitative and quantitative information is now becoming available.

Corporate communications is the umbrella term for a myriad of disciplines and techniques used to transfer information to desired target audiences. Its reach extends from media relations to financial communications, employee and government relations, and crisis management. Used effectively, communications can be a highly leveragable tool in the C-suite’s tool belt. Continue Reading

Ten Questions with Simon Rose

By Matt McCleery

Every so often, we like to take a relative newcomer to the business and use this forum as an opportunity to introduce them to our readers. We try to pick a figure who has really impacted the ship finance landscape and revolutionized in some way how certain facets of it work. Simon Rose, having founded along with his partner his own shippingfocused investment bank, is just such a person. Add to that his inside view into several of the recent IPOs, and we are sure you will find him of interest.

1. Q: Dahlman Rose is a relatively new name to shipping. What is the background of the firm? What or who brought you into this industry and why? Continue Reading

THE FINAL FIVE YEARS: 1970-1974

MR YARDSTICK’S OPERATIONAL REVIEW

Welcome ladies & gentlemen to the Benchmarkco Ltd presentation to discuss the company’s 1970-1974 5-year results. Starting with the customary disclaimers, time travelers should be aware that in today’s presentation we will be making certain backward looking statements that discuss past events and performance. These statements are subject to risk and uncertainties that could cause results of real companies to deviate from the computations of our virtual operation.

With me today is our CFO Mr Fair Squareview. During today’s meeting I will firstly review our operating performance over the last five years as well as industry trends before I pass on the presentation to Mr Squareview, who shall take you through our financial figures.

I could be very brief and to the point. We are in bust phase, having just gone through some of the most profitable years in our history. Continue Reading

Bottom Line Conclusion

So was it worth it at the end?

Let us start with an analysis of the internal returns that Benchmarkco Ltd achieved on its investments. Given our strategy of distributing all of our cash flows to our fund providers, our internal results mirror the results of our capital providers apart from a single figure, this being the 20% goodwill you had to pay at the very beginning to join our investment process.

Figures 35, 36 and 37 summarise our internal investment cash flows (upfront goodwill excluded by definition) for our wet, dry and combined divisions all the way up to and including our bankruptcy settlement. We have amalgamated together the associated cash flows to equity and debt that we deploy on a 50/50 basis to buy ships in order to compute blended IRRs. Continue Reading

The First Five Years: 1950-1954

Mr Yardstick’s Operational Review

Welcome ladies & gentlemen to the Benchmarkco Ltd presentation to discuss the company 1950-1954 five-year results. Starting with the customary disclaimers, time travelers should be aware that in today’s presentation we will be making certain backward looking statements that discuss past events and performance. These statements are subject to risk and uncertainties that could cause results of real companies to deviate from the computations of our virtual operation.

With me today is our CFO Mr Fair Squareview. During today’s meeting I will firstly review our operating performance over the last five years as well as industry trends before I pass on the presentation to Mr Squareview, who shall take you through our financial figures.

Tanker Sector Operational Performance Continue Reading

MARINE MONEY N.Y. CONFERENCE 2005 – SPEECH GIVEN BY MR STANDARD YARDSTICK ON THE OCCASION OF BENCHMARKCO Inc IPO

Matt McCleery: Ladies & Gentlemen, it is an honour to re-introduce to you one of our great Captains of industry, Mr Standard Yardstick, who navigated Benchmarkco Ltd through the great era of fortunes and misfortunes of the roaring fifties, swinging sixties and their immediate aftermath. The occasion today is the long awaited IPO of Benchmarkco Inc on the New York Stock Exchange. Benchmarkco Inc controls 2% of the world tanker and dry bulk capacity with a combined fleet value of close to $6 billion, making it one of the largest listed companies in its immediate peer group. Standard?

Mr Standard Yardstick: Thank you Matt. It is an honour to meet again and to have the opportunity to co-operate together over the next 25 years. We are relaunching Benchmarkco as a public company. We look to our future with equal confidence as we did in December 1949 when we founded a similar enterprise on a private basis. Most industry observers believe that shipping growth and profitability over the next 25 years may well resemble the period 1950 to 1974, which has long been erased from memory, rather than the unprofitable years of 1975 to 1999 through which most industry participants have lived. This loss of memory has created certain biases in the valuation of public shipping companies that I will be addressing later.

The “new regime of low growth low profitability 1975 – 1999” has come to an end, and we may now be moving into a “back to the future old regime of high growth and high profitability 2005 onwards” ala 1950 – 1974 style. Figures 41 & 42 show the long term fluctuations in operating returns at live replacement cost illustrate the comment just made about the shift in long term cycles. Continue Reading