Who’s Lending?

According to various sources, Nordea and DnB, having escaped the subprime debacle, continue to build market share. Other European banks remain somewhat constrained lacking the support of their central banks. In Germany, we understand HSH Nordbank is very active and now taking a look at the offshore business.

Maybe it’s Who You Know?

Amidst all the talk of delivery delays from China’s shipyards, Seaspan announced on Monday that it had accepted delivery of the CSCL Montevideo, a 2,500 TEU containership, from Jiangsu Yangzijiang Shipbuilding Co., approximately five months ahead of schedule. Certainly, this is good news for Seaspan, which has the vessel on charter.

Debt Markets – Unchanged

The Norwegian Bond Market remains a microcosm of the debt markets and even in that small world, there is no good news to report according to Nordea’s August Monthly High Yield Report by Lars Kirkeby. Although ratings changes were generally positive, the average spread of high yield CDS as measured by the iTraxx 5-year crossover index increased 4% from last month. High yield spreads to Euribor have increased with the exception of BB rated debt.
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President Bush Unleashes WMD

In an article entitled, Main Bank of China Is in Need of Capital, New York Times reporter Keith Bradsher wrote the following:

“China’s central bank is in a bind.

It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.
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A Kinder, Gentler Deal

Scandinavia is different from New York and perhaps that is a good thing. Revisiting the Brostrom and Maersk transaction of last week, we also see differences in what the principals from that part of the world value in a transaction or at least see a different set of priorities. Don’t get us wrong, price was certainly at the top of the list and Brostrom felt they got good value from Maersk’s offer. But there is also a human element to a transaction and this was also critical to Brostrom’s management.
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Don’t Throw the Baby Out with the Bath Water or How I Learned to Stop Worrying and Love the Fundamentals (with thanks to Stanley Kubrick)

With a full house, Simon Rose began Dahlman Rose’s 1st Annual Global Transportation Conference confessing that despite Wall Street’s having spent years educating investors as to the difference between period and spot business they have largely been ineffective. We disagree with this assessment believing the current market reflects a herd instinct and an avoidance of betting against the tape. The companies presenting at the conference are all clearly differentiated from spot players, with visibility of earnings and cash flows yet their shares have also been pummeled as the BDI continues its decline. Mr. Rose exhorted the crowd to take advantage of this anomaly, take a reality check and not to trade on fear.
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Another SPAC Finds a Target

On August 27th, Tailwind Financial Inc. (“Tailwind”) announced that it had signed a letter of intent with GrandUnion Inc. (“GrandUnion”) to acquire 20 drybulk vessels, of approximately 2 million DWT, including 9 newbuildings to be delivered in 2010 and 2011. The 11 on the water vessels are valued in excess of $600 million and are expected to generate EBITDA in excess of $113 million for 2009.

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Newbuilding Crisis?

In a research note published last week, Morgan Stanley suggests that as many as $22.7bn of newbuilding dry bulk contracts could be deleted in the next three years, with delivery delays for up to 20% of the scheduled order book. “The US investment bank said around 28.9m DWT of the 407m DWT tonnage on order could eventually be cancelled, while a further 6.2m DWT of vessels due to be delivered in 2008 could be delayed, with a further 13.3m DWT for 2009 and 21.8m DWT for 2010.”

”The bank noted that in 2007, delivery delays affected 2.6m DWT, or 41 vessels, representing 10% of the scheduled dry bulk order book.”

Delays are attributed to equipment shortages as well as an inability to raise financing, particularly those orders which have been placed speculatively with smaller unlisted Chinese ship yards.
“Anecdotal evidence from shipping industry participants indicates that up to 75% of newbuild orders across all ship types may not have secured financing and 30% ($150bn) of the newbuild orders could face a shortage of debt financing. Assuming an order book period of three years, this implies a potential funding shortage of $50bn a year.”

China Syndrome

As the commodity markets crash around us, and everyone is trying to assess whether China is going to come back as the main engine of growth for the world’s economy, the following announcement by D/S Norden A/S provides an interesting perspective on the question:

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Offshore Consolidation

E.R. Schiffahrt announced on Monday that it taken over all the shares in OSM Schiffahrt GmbH, the former 50/50 joint venture it had with OSM Norway. With the takeover, OSM will be renamed E.R. Offshore GmbH and will manage a fleet of four platform supply vessels which will expand by an additional fifteen vessels which are currently on order in Norway and South Korea. The first delivery will occur this month as the E.R. Stavanger is delivered by the Aker Yards.

In place of the joint venture agreement both companies have signed a co-operation agreement under which the companies will continue to work closely together, especially in the areas of crewing, safety and quality. By retaining the OSM Schiffahrt staff, E. R. Offshore has ensured a smooth transition.