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Dawn’s Light in the Saronic Gulf by BarryParker December 22, 2008 12:00 PM I am not sure if the cliché “...it’s darkest just before the dawn....“ applies to shipping markets. As the nights grew to their longest duration, just prior to the Winter Solstice, drybulk markets appeared to find some footing. But, the picture was still bleak. There was no fresh word about a Chinese deal on iron ore prices, so the markets continued to languish. What should we make of the week’s recent drybulk news? Another time-charter operator, Atlas (based in Denmark) did the math and realized that cash would continue to hemorrhage with low spot rates. So, Atlas, which had dodged market vagaries since its formation a dozen years ago, put it itself into bankruptcy. Eagle Bulk, an owner long expected to cancel a series of Supramax vessels on order, rearranged its massive newbuild deal with a Chinese yard, effectively converting downpayments into progress payments (on eight fewer vessels in an order totaling thirty-something vessels). At the same time, Eagle Bulk reduced the size of a large bank credit facility, so as to remain on the compliant side of loan/ value ratios, and suspended its dividend. Another listed owner, Oceanfreight, re-negotiated a charter prior to its commencement, but at least, it will be commencing, albeit at a lower rate and for a shorter term. Oceanfreight (like Eagle) also eliminated its dividend. An enduring impact of the ongoing fiasco in the dry markets is that actual owners of vessels may gain at the expense of “operators“. Owners, such as Eagle and its peers, have been in the news with vessel cancellations, and/ or negotiations with banks. Operators such as Atlas (or ICI, which filed for bankruptcy several weeks earlier) have found themselves twisted in the middle of daisy chains, where vessels are chartered and re-chartered Owners have some measure of control, as the reactions to dire market circumstances have shown. Operators can just twist. And Eagle’s ability to arrive at an arrangement with its bankers at UK owned Royal Bank of Scotland provides a hint that banks would rather work with drybulk customers, instead of lamenting NAV’s bordering on $0, and otherwise reading the fine print in loan agreements and foreclosing. While investors were not thrilled to lose their $2.00/share, the move was applauded by analysts who maybe, just maybe, see the light of a fresh dawn. Going forward, owners may be reluctant to deal with operators, although charterers to Australian iron ore miner Fortescue and steel behemoth Acelor Mittal have seen that deals with “end user“ do not automatically provide performance. Fortescue has pulled back from long term charters with a number of prominent owners while Acelor Mittal has cancelled contract liftings of steel cargoes with a number of operators- several of which are now suing. Operators have invigorated the market when it was rising, but, enough already... Happily, for both issuers and investors alike, shipping’s mystique continues, this time courtesy of investment whiz Bernard Madoff and his Euro-facing offshoots. The New York Times anointed a Swiss entity, Saronic Shipping, as “...giant...“. To wit, in a description of one of the principals of “Fairfield Greenwich“, a major Madoff feeder fund, the NYT said: “...Mr. Toub’s family connections to the giant Saronic Shipping Company in Lausanne, Switzerland, also helped him lure wealthy Swiss investors...“ The best I could find for Saronic Shipping was a similarly named but smallish roro- passenger ferry company serving the waters near Athens. Could an IPO for the more mysterious but larger than life Saronic Shipping Company be far away? The due diligence should be a hoot- with laughter to warm up the cold winter nights. Happy Holidays to readers of this blog. Tags: Comments (1)
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