Publisher’s Note

This issue was given the working title of “The Survival Guide” and is the first and hopefully the last of its kind. It is the brainchild of our chairman who has a genius for blending the mercenary with the practical as well as an innate ability to see what our subscribers might find useful.

Together, we sought contributions from all of our friends who serve the industry knowing that the subject matter was sensitive and required specialized knowledge to create the product we sought. We were not specific in our request believing the experts would know what information their clients would need or find useful. The response was unprecedented. We received over 20 articles from different specialties covering a full gamut of issues.
Continue Reading

Christmas Sales – Everyone’s cutting everything

Overheard over a beer with Johnny K

“OPEC’s going to cut production by 2.2 million barrels a day starting next month, and what does the price of crude do, it falls again! This is just further proof that even if you own the soccer ball, if no one wants to play soccer you always end up playing with yourself. That OPEC President Chakib Khelil said “If you are not surprised, then we have to do something about it.” Given that this brings recent OPEC cuts to 4.2 million barrels a day which hasn’t surprised anyone except OPEC, quite what they intend to do is not clear, perhaps bailing out the U.S. auto industry might help. Now that would be a surprise! I see the Federal Reserve got into the holiday sale spirit as well by cutting their target for a key interest rate to the lowest level on record and pledging to use “all available tools” to combat this severe financial crisis and prolonged recession. Given the arrest last week of that pillar of the New York financial community Bernie Madoff and the slew of other recent arrests it would appear that most of the “available tools” are either indicted, sentenced or awaiting sentencing at the moment. I do hear that Macy’s and J.C. Penny will be cutting a further 20% of already discounted prices in House wares and women’s intimate apparel this weekend, which will be handy for the wife’s Christmas present. House wares does include vacuum cleaners doesn’t it?”

Dead Cat Bounce

A “dead cat bounce” is a figurative term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that “even a dead cat will bounce if it falls from a great height”. (Wikipedia)

This concept was brought to mind by the recent activity in dry bulk stocks where heavy volumes have been traded and prices have taken substantial leaps in percentage terms. Have the shares bottomed? Or as Urs Dür of Lazard suggests in more sophisticated terms: “…this most recent upturn in the names, with historically high trade volumes, may be based more on anticipation of an upturn than on clear evidence for a fundamental turn.”
Continue Reading

It’s All About Yield Or So We Think

At our esteemed President’s suggestion, we compiled data on a number of traded securities including publicly traded stocks in New York, high yield bond from Jefferies and Norwegian high yield and convertible bonds from NRP Securities ASA.  Below we have provided full descriptions of the bonds as well as more complete information on the stocks for greater insight. We then consolidated the data focusing simply on yield and sorted it from highest to lowest.

Matt’s frivolous suggestion was that we could create a holiday shopping list for you from this data. For this Grinch, all these numbers should mean something and so we provide you with some ideas/comments in no specific order:
Continue Reading

Downsized and Focused

In line with other financial institutions’ actions, HSH Nordbank’s Management and Supervisory Boards outlined a proposal this week for the restructuring of the bank. Specifically, they are calling for the reduction of portfolios, the spin-off of non-strategic activities and the structure of a regional core bank. The net effect will be a substantial reduction in the total assets of the core bank as well as a more parochial focus.

The proposed core business units include Corporate Clients, Private Banking, Savings Banks and Real Estate. It is intended that in the future they will have an even greater focus on North Germany and domestic clients. Bringing the focus home allows a better understanding of the client base and credit risk as well as a quid pro quo for government intervention.
Continue Reading

Conflict Resolution – The Wrong Way

About two weeks ago Fortescue Metals Group (“FMG”) announced “… that consistent with the continued prudent management of its business and in reflection of changed operating conditions, it has exercised suspension of all of its long-term CFR shipping Contracts of Affreightment and Consecutive Voyage Contracts on the basis of unforeseen circumstances.”

Continue Reading

Conflict Resolution – The Right Way

On Monday, Pacific Basin announced that over the last month it’s subsidiary (“Company”) which was engaged in chartering-in vessels had reached a compromise with the group of shipowners from whom it had chartered-in those vessels. The owners and the Company mutually agreed to the early termination of the charters and simultaneously entered into new charters at market rates in respect of those vessels. Currently, the existing charters have remaining charter periods ranging from 6 months to 3.5 years.
Continue Reading

GMR and ATB Become One

On Tuesday, the shareholders of both General Maritime Corporation (“Genmar”) and Arlington Tankers Ltd. (“Arlington”) approved the proposed combination of the companies with an ample majority. At the Genmar meeting, 21.9 million votes were cast in favor of the combination with 0.1 million against. The shares voting for adoption of the combination represented 99.25% of the shares voted at the meeting and approximately 69.97% of the shares outstanding. In the case of Arlington, 9.8 million shares were voted for the merger with 1.2 million voting against. In this instance the shares voted in favor represented approximately 89% of the shares voted at the meeting and 63.6% of the shares outstanding.

The new Genmar is now well-positioned with its diverse double hull fleet to provide quality service to its charterers as well as create near-term value for its shareholders through the $2 dividend target which is supported by the fleet’s contracted revenue stream.

We congratulate the parties on a well-structured transaction, which, being based upon an exchange of shares, was successfully concluded in these most turbulent of times.

Deal of the Year Nominations

It is with great pleasure we make this call for nominations for the best in ship finance transactions for 2008.  It is for us a fascinating way to celebrate your achievements.

To do the job properly we are sending this call for nominations to you so that you and your colleagues can send us Deals that you feel merit consideration for an Award.

This year we are considering Deals in the following categories:

Shipping Firm of the Year
Innovation
Export Credit
Debt Private Placement
Project Finance
Bank Debt
Restructurings
Public Equity – IPO and Secondaries
Private Equity
Leasing
M&A
Structured Finance
Dealmaker of the Year

There are two ways to respond:

1.     By visiting the following link:
http://www.shrinkmylink.com/gnehton and filling in the survey as prompted.  This is an anonymous way of submitting Deals for consideration. Or,

2.     By simply emailing, or sending us those Deals you feel merit consideration.

The more detail the better as our editors review the transactions and while you may have lived with a Deal for months and understand every nuance, we benefit from your input.

This is one exercise we undertake each year that gives us enormous pride in the achievements of our friends.  We salute you without having even seen a submission and look forward with anticipation hearing back from you. We are delighted to celebrate and acknowledge the contributions of you and your team to the industry.

The Deadline for submissions to be considered is December 31.  The Awards will be announced in Our February issue.

Thank you and congratulations in advance.

Now That the Bubble Has Burst

By Sydney P. Levine, President, SHIPPING INTELLIGENCE, INC.

Six months ago, in May 2008, I distributed a paper with the prophetic title “AFTER THE BUBBLE BURSTS, WHAT THEN?”  I can’t claim that the fall in the dry bulk market happened just as I predicted, but fall it did, and we are now faced
with the aftermath.

Because the dry bulk resale market is barely operational, one of the present great unknowns is the value of ships.  Fortunately, the charter market still functions, somewhat erratically, and present charter rates should correlate well with present ship values as they often have in the past.

Freight rates have long been acknowledged as the prime mover of ship values, although the correlation is sometimes obscured by differences in transaction timing – sometimes lagging, sometimes leading.  However, over time, for a ship of specified type, size and age, a given freight rate will have associated with it a relatively narrow range of actual resale values, with occasional extreme values.

Continue Reading