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AAnalyst l & Investor Day
Full Steam Ahead for Greek Shipping
By Barry Parker
Greek owners have played an integral role in international shipping.
An earlier generation of owners (some from the merchant mariner
ranks, others from trading backgrounds) made great private fortunes,
as world trade mushroomed from the 1950's through the early 1970s.
Now, a new generation of Greek owners has come to prominence.
Unlike their predecessors, this new crop of shipowners (more likely
to have a finance degree than sea-going experience) has used the
capital markets to build their fleets, while offering investors an
opportunity to share in their fortunes.
Shipping economists have pointed to China's entry into the World
Trade Organization (WTO) in 2003 as the catalyst for another
shipping boom- this one lasting until the sharp correction of late
2008. Shortly thereafter, starting in late 2004, shipping companies
began to tap the equity markets, through initial public offerings (or,
for those prescient companies already listed, follow-on offerings).
Many of these companies, launching IPOs (or secondaries) are
Athens-based Greeks, or offshoots with agency businesses in
London or New York.
Shipping suffered along with other businesses after the Credit Crisis
of unprecedented proportions- with its numbing effects on economic
activity. Clearly, "utilization" (the interaction of vessel supply with
cargo-driven demand for transport) is down from 2007- 2008 levels,
resulting from a vessel ordering binge across industry sectors, during
2007- 2008 boom. Yet, the drybulk and tanker sectors have
performed substantially above the dire expectations expressed by
forecasters a year ago, in mid 2009. The container business, through
better management of capacity, has moved closer to sustainable
earnings levels.
The pullback of shipping banks, primarily from Europe, is an impact
of the Credit Crisis that may linger way beyond the ongoing
recovery. Capital market money sources, such as high yield bonds,
debt or preference stock convertible into shares, and equity sold "At
the Market" (rather than through traditional underwritings) have
partially filled the banking vacuum. Yet reduced bank funding has,
paradoxically, constricted new ship orders (and stifled the birth of
inchoate "greenfield" shipyards) that would have contributed further
to oversupply.
The Greek owners have adapted to the new situation in a variety of
ways. Evangelos Marinakis (who studied International Relations
before going into the family-owned Capital Ship Management) has
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now launched Crude Carriers Corp, listed on the NYSE with symbol
"CRU", his second listed shipping company. CRU's financial
template (analogous to Peter Georgiopoulos's newly launched dry
side business- Baltic International Trading, also listed on the NYSE,
as "BALT") centers on minimal financial leverage and a full
dividend payout. Coupled with the acquisition of tonnage at or near
a cyclical bottom, this new model sidesteps potential banking
entrapments, while offering investors cash payouts fuelled by
increasingly prevalent freight market spikes. Buying ships at or near
"distress" prices offers equity holders the possibility to participate in
out-sized returns from vessel sales.
The Navios group of companies took advantage of the 2009
downturn to secure a half dozen attractively priced Capesize vessels
ordered by another owner, taking advantage of lengthy finance terms
offered by the original lender. Navios also used a novel form of
preferred stock, issued to the Asian yard, as part of its payment
package. In 2010, another company under the Navios umbrella is set
to purchase more than a dozen chemical and product tankers, with
Navios betting on cyclical rebound in this sector.
In 2010, both Safebulkers ("SBLK" on Nasdaq) and Globus
Maritime ("GLBS" on London AIM) announced acquisitions of
newbuild tonnage from Chinese yards. Paragon Shipping ("PRGN"
on NYSE) has announced an eight vessel building program (with
ships delivering in 2011-2012) and Diana Shipping ("DSX" on
NYSE) is building two ore carriers in China for 2012 delivery. Now,
as in previous cycles, purchasing attractively priced assets is a theme
running across the spectrum of Greek companies.
Barry Parker
Barry Parker is a financial writer and analyst. His articles appear in a
number of prominent maritime periodicals including Fairplay,
Seatrade, Lloyds Shipping Economist and Janes Transport Finance
and Capital Link Shipping.