Kicking the Can and Picking Pockets

After the dramatic fall in freight and time charter rates (in some sectors by 90%) and asset values (often by 50% to 67%) in late 2008 and early 2009, coupled with the freezing of the traditional banking market for ship mortgages and the need for finance for the industry’s large newbuilding orderbook, many private equity firms and hedge funds were salivating with the perceived opportunity to acquire maritime assets and debt at substantial discounts in a distressed situations. Hedge funds had visions of the major shipping banks needing to write-down billions of dollars in their maritime loan portfolios and shedding loans at pennies on the dollar. By the second quarter of 2009, there were frequent trade press headlines of dozens of maritime-focused funds being set up to raise billions of dollars and earn 25% plus IRRs.

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