Features: - Tanker Operator

Asset Price (USD mil)
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
16-Sep-03
Graph 1
16-Apr-04
INDUSTRY - MARKETS
Tanker Asset Prices (5yr-old Vessels)
16-Nov-04
16-Jun-05
16-Jan-06
VLCC - 5yr old
AFRAMAX - 5yr old
MR PRODUCTS TANKER - 5yr old
16-Aug-06
16-Mar-07
16-Oct-07
16-May-08
leaseback transaction, the purchase price and the daily rate are usually
the most contested points. The higher the purchase price the happier
the owner/seller, and the higher the daily rate the happier the lessee.
While most asset prices in shipping are quoted basis 'prompt, charterfree
delivery', in a sale & leaseback transaction the purchase price is
some sort of a function of the daily rate.
Usually, the higher the purchase price, the higher the required daily
rate, all else being equal. In other words, the transaction can take place
'at market levels', 'below market' or 'above market.'
An 'at market levels' transaction is when the purchase price of the
asset reflects the sale & purchase market on a 'prompt, charter-free
delivery' basis, and the daily rate is based on the purchase price. A
'below market' transaction is when the shipowner sells the vessel at
below market levels in exchange of a below market daily rate that will
allow generation of higher operating profit during the period of the
charter. An 'above market' transaction is when the shipowner sells the
vessel at above market levels while the daily rate will be higher than
otherwise (think of this type of transaction as the owner using the
vessel as an ATM machine, whereas the sale allows a few million
dollars above market, which of course have to replenished during the
period of the charter in the form of higher daily rate).
An early generation double-hull Aframax built in 1993-1994 of
about 95,000 dwt was contracted back then for about $40 mill. In
today's market, 14 years later, such a vessel has a fair market value on
a prompt, charter-free basis of about $43 mill. In a sale & leaseback
transaction for such vintage vessel based on such purchase price,
originated in 2007, the daily rental rate (bareboat charter to the
financial owner) was around $15,000 - $16,000 for a decent credit
(lowest investment credit) for a five-year term. Assuming the technical
management cost of $8,000 per day, the daily vessel operating expense
was around $23,000 - $24,000. In today's market, while the purchase
price of such vessel is still within the same range, the required daily
rate is in the region of $18,000 per day to reflect the tighter credit
criteria and higher lending costs in the current financial markets. The
daily vessel operating expense based on such a sale & leaseback net
quote adds up to about $26,000 - $27,000.
In Graph 2, we show the charter rates in the last eight years, on
bareboat basis, for an Aframax of such vintage. The data was obtained
from Clarkson Research Services on a timecharter basis, and adjusted
for the daily operating expense and the utilisation rate to 100%. We
have shown the one-year and the three-year firm contract daily rate and
the spot rate against the pre- and post-credit crunch average daily rate
that would have been secured for a typical transaction.
It is no surprise that in the strong freight markets of this period, with
the exception of an overall anemic 2002 and a couple more short-lived
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August/September 2008 � TANKEROperator 05