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BasilMichael
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Having been active in shipping finance advisory, shipping market advisory, shipbrokerage, restrcuturings for more than ten years. Having experience in shipping operations and logistics, and following shipping-related industries such as energy, industrials, commodities, financials. No exposure to... More
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Full Steam Ahead! A Maritime Blog
  • Maritime Sale & Purchase Update - Nov 10th, 2013 0 comments
    Nov 10, 2013 4:58 PM | about stocks: EGLE, FRO, SF, RBS, TWTR, CRZBF, PSGFF, PCFBF

    It has been a week dominated by the news of Twitter's IPO (Ticker: TWTR) when the stock leaped 73% on its first day of trading on an approximate $18 billion pre-opening valuation; such an eye-popping valuation for a company that lost $130 million so far this year makes anything in shipping imaginable. In Europe, the ECB lowered interest rates by 25 basis points to 0.25% to further stimulate the European economies, while Friday's job market report showed an unexpectedly stronger economic picture (despite the two-week government shutdown; rumors that there is a direct inverse relationship and should be done more often could not be substantiated), raising the prospects that the Fed may have to start tapering off the QE by probably early next year. Late last week, the Royal Bank of Scotland (Ticker: RBS:LSE) announced that they were to split the bank in a 'good' and an 'internal bad' bank (NYSE:NCA); to the extent that the bank has about £28 billion shipping exposure, the news are material to shipping (and the bank). It has been reported this week that RBS has sold approximately $ 777 million of shipping debt with Eagle Bulk Shipping (Ticker: EGLE) (their total present outstanding exposure after last year's restructuring) to a buyer reported being a US-based bank (rumored Bank of America, ticker: BAC) at a rumored price of 85-89% of face value. In more shipping-related corporate news, Commerzbank AG (Ticker: CBKX:GER) reported earnings that pleased the market as the bank seems to handle risk better than expected by writing down NCAs ahead of target; however, the shipping portfolio has not showed much improvement in performance and the bank remained cautious for the year ahead.

    (click to enlarge)MT „FRONT CHAMPION" (Image Source: Ship Finance International)

    In the freight market, the BDI improved by about 3.5% despite the weakness in the panamax bulker market. In the crude tanker market, VLCC rates have showed good improvement for the week and surpassing the $40,000/d market for many MEG-East routes, mostly on lower tonnage availability at load ports. It's to be seen whether this is the tanker version of the cape-blip we saw two months ago, or a rather more fundamental improvement. Rates for Suez and Aframax tankers were utterly uninspiring for the week, and so were in the product tanker market as well.

    MT „GOLDEN VICTORY" (Image Source: Ship Finance International)

    On pure S&P matters, it has been an interesting, and rather busy week to report. It's definitely 'deal peaking' season, and even people in shipping know to make hay when the sun shines (actually, the proper saying should be to 'hoist your sail when the wind is fair'.) In the VLCC market, there has been reported the sale of MT „KUMANOGAWA" (300,000 dwt, Kawasaki, 2000) to undisclosed buyers at a price in excess of $30 million, which is relatively strong price in comparison to last week's sale of MT „ARDENNE VENTURE" (320,000 dwt, Hyundai HI, 2004) at $41.5 million. Still in the VLCC market, there has been the interesting 'in house' sale of two older VLCCs: specifically, Ship Finance International (Ticker: SFL) has agreed to sell two VLCC tankers to third parties for an en bloc cash consideration of $32 million, believed to be for demolition purposes. The vessels were MT „FRONT CHAMPION" (300,000 dwt, Hyundai Heavy I., 1998) and MT „GOLDEN VICTORY" (300,000 dwt, Hitachi Zosen, 1999) whose owner has been the affiliated company Frontline (Ticker: FRO) who has terminated the charter in exchange of $90 mil in total compensation ($11 mil in cash and the balance of the cost for terminating the charter $79 mil in 7.5% amortizing Frontline notes.) It's interesting noting that the vessels are sold for scrap at a relatively young age instead of the owner (FRO) undertaking the costly (and commercially) risky third Special Survey due shortly; also worth noting, the Fredriksen Group has for some time now advocated earlier-than-usual scrapping of vessels in order to partially alleviate tonnage oversupply. It's nice for once seeing an owner acting upon what they are preaching and showing self-discipline! Further to our reporting last week of the Suezmax tanker MT „OLIVER JACOB" (157,000 dwt, Daewoo, 1999) at reportedly $16.5 mil, this week the similar vessel from Teekay MT „TENERIFE SPIRIT" (150,000 dwt, Daewoo, 2000) was sold to also Greek buyers (Eurotankers) at $16.3 million. We now understand that MT „OLIVER JACOB" possibly has been misreported in reference to the price, as she's dry dock due by the end of the year and her sale price has to be adjusted downwards by a couple of million to reflect the survey cost (and would make the sale of MT „TENERFIFE SPIRIT" 'in line' with the market.)

    The dry bulk has had an exceptionally busy week with several transactions to report: Precious Shipping PCL of Thailand (PSL:Bangkok) has agreed to acquire two 2014-resales of ultramax bulkers built at Sainty S.B. Yangzhou at $27.5 million each (rather 'in line with the market' transaction at present, but definitely 10% higher over last year's pricing), while Greek buyers were busy in the hot ultramax market with the acquisition of sisterships MV „SUPRA CHALLENGER 1" and MV „SUPRA CHALLENGER 2" (61,500 dwt, Iwagi Zosen, 2012/2013-built, respectively) at en bloc pricing of $60 mil (rather strong pricing, but again, much desirable Japanese-built tonnage.) There has been the sale of a post-panamax bulker 2013-built vessel of 82,000 dwt at Guangzhou Longxue (Hull No L0027) at a competitive price of $26.5 million. Looking for smaller vessels, there has been the sale of the panamax bulker MV „OCEAN LION" (75,500 dwt, Sanoyas, 2005) at $20 million to Greek buyers (Hellenic Star), the sale of the gearless panamax bulker MV „VOLUMNIA" (76,000 dwt, Tsuneishi Zosen, 2002) to Greek buyers (Rainbow Shipmanagement) at $15.5 million, and the sale of the Italian-built (but no much enamored with when it comes to shipbuilding of commercial vessels) MV „PRIDE OF INDORE" (75,000 dwt, Fincantieri, 1996) at $7.4 million to Chinese buyers. Still, there was the sale of the supramax bulker MV „MEDI CHENNAI" (55,800 dwt, Kawasaki S.B., 2005) at $19 mil to client's of Hong-Kong traded Pacific Basin Shipping Ltd (2343:HK). Also, it has been rumored that Pacific Basin had been busy acquisring the similar supramax MV „MEDI SHANGHAI" (56,000 dwt, Mitsui, 2005) at also $19 million. Finally, MV „FRONTIER ANGEL" (52,500 dwt, Shin Kurushina, 2001) was sold to Greek buyers at a solid pricing of $14.8 million (similar tonnage MV „OCEAN MORNING" (52,000 dwt, Tsuneishi, 2001) was sold in September at $13.1 million, a definite market improvement over a short window of time.) This has been a busy week in the dry bulk, with a great deal of the modern, quality tonnage going to private, independent Greek buyers.

    The demolition market has been rather subdued due to local holidays in India (Diwali), but still the market has been relatively strong with five vessels having been beached in India so far this month (vs. 25 vessels for the month of October.) It's interesting that the Indian currency (NYSEARCA:INR) has softened again this week despite the recent interest rate increase by the Reserve Bank of India (RBI). Presuming that freight rates will remain seasonally strong, tonnage availability for crapping will decrease allowing for a chance for good performance for transactions that took earlier on speculator prospects.

    © 2013 Basil M Karatzas & Karatzas Marine Advisors & Co. All Rights Reserved.

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    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: EGLE, FRO, SF, RBS, TWTR, CRZBF, PSGFF, PCFBF
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