Summary, Conclusions
and presentations

MARE FORUM SHIPFINANCE
2009

SHIPOWNERS VERSUS CAPITAL PROVIDERS
Restoring Trust

A lively debate between Shipowners and Capital Providers
 

Wednesday 28 October 2009
OKURA Hotel

AMSTERDAM - THE NETHERLANDS



Mare Forum Shipfinance 2009 - Restoring Trust

Summary – Conclusions


In the end the 9th annual Mare Forum Ship Finance Forum did not go a long way towards restoring trust in shipping. That can’t be done at one public forum. But what it did achieve was to thoroughly air the views of owners and bankers and clarify their positions. At the same time, courtesy of Clarksons’ Martin Stopford, one key area where trust is rapidly ebbing away was highlighted. That is trust between Asian yards and Western shipowners. The yards are beginning to worry that they will end up holding the baby as Western owners simply try to walk away from firm newbuilding contracts. And they don’t like it.

The main thread for the day was that the world economy is on the mend, although the post-recession world will be very different to the one shipping enjoyed through the bubble years. But while trade and demand picks up, in almost every sector shipping is suffering, and going to suffer more, because of a huge oversupply of tonnage.

Which was the platform for clarifying the difference between banks and owners. Broadly, owners see tough times ahead and want more support from banks, including freezes on repayments and possible co –investment in new projects. The banks see it differently. To them tough times ahead mean shipping risk has to be repriced to reflect the new more risky market scenarios. They are also paying a lot more for money than they did. So they have to charge more, and be more picky about to whom and how they lend.

Tineke Netlenbos set the scene in her welcome speech on behalf of the Dutch shipowners, asking why Dutch banks could not copy the Italian model and freeze all loans and payments for a year, to give shipping a breathing space. She was vigorously supported by Chiara de Poli, an Italian chemical tanker owner operating out of Holland and using Dutch banks a lot. There was no support from Dutch banks for this idea, as they pointed out it made more sense to analyse each case on its merits and price everything correctly, not apply a one size fits all solution or patch.

Dominique Moisi, from the French Institut de Relations Internationales, put the new world into context. A relatively stable world with strong states where America can no longer go it alone, and in which the torch of history has accelerated its passage to the East. His message of multi-polar asymmetry was supported by Wim Boonstra, ING Bank, who pointed out that the dollar may lose its status as the reserve currency, and others assume a greater role. Guy Verberne, Fortis, simply showed how the world was coming out of recession, and likely to keep improving economically.

Against that background three gloomy forecasts from brokers Martin Stopford, Clarksons, John D’Ancona, Howe Robinson and Nick Hubbard, Galbraiths, all poured cold water on the prospects for tanker, dry bulk and container shipping. Yes demand is there, but there will be too many ships. Something has to go, and there are expectations of much more lay-up, much more scrapping and much more walking away from newbuilding contracts. Hence the worries that yards have. Bankers said they would only finance newbuildings already promised support to the level appropriate to the value of the ship. As that value is likely to be a lot less than the contracted value, owners will have to find more equity or mezzanine finance.

Looking at opportunities, Chris Williams of Graig highlighted the need for all parties to strive to maintain value and seek good solutions to the problems to come, and not destroy value by falling out when working out is better. Phrixos Papachristidis showed how pools can offer advantages to owners and bankers in troubled times, and Guido Cassella of RINA showed how going green also made good business sense. There was a lively discussion on how banks and others could evaluate green initiatives by owners.

The final part of the day was a free ranging discussion on trust and where money would come from. Coco Vroon, Breskens-based shipowner, said in his mind the gap of trust was within banks. He felt close to the bankers he knows, and they have his trust and vice versa. But above them is a gap and the boards of banks perhaps no longer trust the coal face lenders, and don’t want to hear special pleading for any one sector. Bankers present did not deny this dilemma, but did reiterate that if owners face more risky markets, banks must price in that risk. In response to claims that banks should give more support, Taco Van der Mast, NIBC Bank, simply asserted that first of all it was wrong to try and sort out problems caused by lack of equity by using senior debt. And secondly, owners had made an awful lot of money in the boom years. He enquired, quite reasonably, where that cash was now that owners needed it with thin times coming. Answer came there none.

George Tsaviliris, shipowner, said banks should be willing to look at co-investing in new projects with owners as part of a restructuring. The bankers said that in general they would look at co-investment in a good project, but that project had to make sense on its own, not as part of saving another company.

There as a discussion of ship valuations, and fears were aired that if the true market values of ships today are recorded in year end accounts, that will pull the whole shipping house down. Banks did not want to say it out loud, but there was a definite feeling that many banks are turning a blind eye to ship valuations to the extent they can, to help owners, and to help prevent a domino effect crash.

The issue of overregulation of banks also came up, and Ugo Modderman of DVB Bank said German banks cannot do business at present, because the regulator is taking up so much of their time with constant demands. George Gordomichailis, shipowner, said he had experienced that. The German banks courted him for ages, he accepted their offers and did good business with them, yet now because of state intervention all they can say is NO.

The day ended with agreement that there is trust between shipping professionals and shipping bankers, but that tough times were coming and trust is going to be strained for some time to come. Especially for shipyards. Only recently Chinese yards were accused of not respecting contracts when they tried to renegotiate prices as conditions changed and steel prices soared. Korean yards took the hit then. Now both Korean and Chinese yards are scratching their heads and wondering why Western owners feel able to try and renegotiate or cancel because their conditions have changed. What price trust?

Find out next year, when the 10th Mare Forum Ship Finance conference will address the key finance issues of the day.

 

 

PRESENTATIONS

 

Tineke Netelenbos
President, Royal Association of Netherlands Shipowners


Dr. Wim Boonstra
Executive Vice-President and Chief Economist
Rabobank Nederland

Guy Verberne
Head of Economics and Investment Strategy
Fortis Bank Nederland (Holding) N.V. / Merchant Banking / Global Markets


Martin Stopford
Member of the board, Clarksons

John D'Ancona
Howe Robinson & Co. Ltd

Nick Hubbard
Managing Director, Galbraiths

Chris Williams
Commercial Director, Graig Shipping plc

Phrixos Papachristidis
CEO, Hellespont Tankers

Guido Casella
Manager of the Business Development, RINA

 

We look forward to welcoming you again in Amsterdam in October 2010,

MARE FORUM, ING, FORTIS BANK  NEDERLAND, ABN-AMRO, NIBC, RABOBANK SHIPPING,
kvnr, hanzevast shipping, rina, energy tribune, ABS, namepa, Ship Equip, Lloyd's List

 


 

 

 

 

 

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