Features: - Tanker Operator

INDUSTRY - MARKETS
Daily Rate (Bareboat Basis, USD / d)
soft freight market windows, the
shipowner/lessee would had the opportunity to
trade the vessel profitably on the spot market
and on one and three year firm contracts and
would had made an operating profit. Of
course, the shipowner/lessee would have been
exposed to the market risk of either renewing
the short-term firm employment contract until
fully covering the leaseback term, or risk the
spot market. However, in such strong markets
06
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
2000-01
Graph 2
2001-01
2002-01
Historical Aframax Rates (on bareboat basis)
2003-01
2004-01
2005-01
2006-01
2007-01
2008-01
Post-Credit Crunch
1YR BBC Equivalent Daily
Rate
3YR BBC Equivalent Daily
Rate
BBC Equivalent Daily
Average Spot Rate
Pre-Credit Crunch
conducive to leasing transactions, there was
the case in early 2007 when an Aframax
tanker of such vintage could be sold to a
leasing company, bareboated back for five
years and immediately 'flipped' to a third party
also for five years (no market exposure) at a
small profit ($1,000 - $2,000 per day).
For this article, we have primarily focused
on early vintage double hull Aframaxes, since
they have been offering the best perspectives
for such transactions. A post-2000 built
Aframax with a purchase price materially in
excess of $60 mill would require a daily rental
rate of around $30,000 for five years, which
would have made the project unfeasible from
an economic/commercial point of view. Of
course, the period of the lease can be extended
to more than eight years, among other factors,
in order to become workable.
The term of the lease and the rest of the
parameters will be covered in future articles in
this series, examining the variables and terms
affecting a sale & leaseback transaction. TO
*Basil M Karatzas is managing director
for projects & finance with Compass
Maritime Services, based in New Jersey,
US. He has executed projects in the sale
& purchase (S&P) sector of the shipping
business and has acted extensively on
behalf of operating and financial owners
in originating shipping transactions
(sale & leaseback transactions, raising
equity and debt, advisory services on
shipping transactions and vessel
arrests). He can be contacted at
BKaratzas@CompassMar.com, +201-
585-9999, or www.CompassMar.com.
TANKEROperator � August/September 2008