Why 2000 May Be the Year of the Foreclosure

by Kevin Oates

Do banks want their money back or are they focusing on building relationships? That is the $1 billion question faced by owners who are trying to squeeze a few more months of amortization-deferral from their bankers.

In the January issue of Marine Money, we pointed out that although 1998 and 1999 were dreadful years for dry bulk shipping, most Greek shipowners came through and continue in business to this day. In fact, many gave into the temptation of historically low newbuilding prices and did the unthinkable, ordered new ships. We also pointed out in that article that our research had concluded that many shipowners had asked for relief from their banks and had got it during the period. Further, we suggested that one of the main reasons that foreclosures were few and far between was that most shipping banks, assessing that the state of the market was indeed perilous, realised that refusing assistance to the owner meant materialising large loan losses. As a result many banks restructured loans, and loan instalments for the year 1999 were substantially reduced or indeed waived completely and loan covenants, particularly the loan to asset cover, were conveniently forgotten. Banks weren’t eager to spend $500,000 to foreclose on a ship only to sell it into a soft market. That kind of behaviour is reserved for the amateur “tourist” banks.

This is only an excerpt of Why 2000 May Be the Year of the Foreclosure

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.