Debt Market Re-opens

By Alan Ginsberg

I am pleased to report that the Dark Period (June 1997-July 1999) is slowly drawing to a close as the Navigator Gas, Cenargo and American Commercial Lines defaults run their respective courses. By next January there may not be a single deal in default for the first time in four years. I have long posited that it would be easier to restart the game when investors were no longer focused on their defaulted positions.

Additional good news is that the high yield market is wide open for business for shipping companies, principally as a result of record inflows of funds and secondly because shipping bonds help portfolio managers fill the transportation basket of their portfolios. Given what is happening in the airline sector today, shipping bonds have never looked more attractive.

Further, there is a fair amount of turnover on the buy side. In the absence of a transportation analyst who was already covering aviation or defense, shipping often fell to the lowest (read: youngest) analyst on the totem pole. In many cases, that analyst has now either moved up or out. Depending on your point of view, institutional memory can either be a positive or a negative. To be sure, many accounts still remember the carnage and claim that they will not invest in anything less than a four “B’ credit. Others without such memory have no choice but to give the sector a fresh look.

This is only an excerpt of Debt Market Re-opens

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