SELLING CASH FLOW TO WALL STREET

By Matt McCleery

During the last 12 months, the relationship between shipping and the U.S. capital markets has seen a major evolution. The strong cash flows generated by shipping assets, combined with U.S. legislation that reduces taxes on dividends to 15%, low interest rates and low volatility in the equity markets, has created a market in which ships are suddenly worth more to investors for their free cash flow generation than they are to other shipowners in the sale and purchase market.

Beginning with the creation of Ship Finance International in December 2003 and continuing with Arlington Tankers in November and soon Teekay’s Master Limited Partnership, investment banks have been developing what are essentially lightly leveraged sale/leasebacks on tonnage in which the equity is sourced from the public markets.

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