Privately owned “traditional” shipping companies with diversified fleets will be best placed to weather “tsunami”-like markets over the near term, the president and CEO of DNB Markets said today.
Publically listed shipping companies have had their valuations “crushed” in recent months, and many stocks are trading at less than $1 per share as investors shy away from energy-related companies. This will have a significant impact on the rest of the shipping industry over the course of the year, Ted Jadick told the Marine Money conference in London.
“Is it worth being public?” he asked, referencing CMB in Belgium, which has just completed a share buy-back scheme that took the company back into private ownership.
“You want to raise to raise cash? Call your friendly shipbroker, not your investment banker,” he said.
Sale and purchase (S&P) activity is the cheapest way to raise capital in the current market, he said, as exemplified by privately owned companies such as Thenamaris and Angelicoussis, which have picked up capesize vessels at rock-bottom prices in recent weeks.
S&P transactions appear to have ticked upwards in lieu of company consolidations, which many analysts predicted in 2015 but did not materialise in a big way last year. Nevertheless, Jadick said distressed dry bulk companies and assets will “compel combinations” in the near term.
Bank debt is set to get more and more expensive and scarce over this year and beyond. DNB Markets expects banks will focus increasingly on providing finance to existing “high-quality” clients.
Meanwhile, the high-yield bond market is “closed to shipping”, Jadick said, owing to the lack of investor confidence in energy-related sectors while oil prices remain low.
Even the strongest private players have availed themselves of third-party finance and will continue to do so, said Jadick.
That being said, private-equity firms that have already invested in shipping will increasingly look for ways to make their exit from now on, the CEO said.
Nevertheless, DNB Markets still expects more shipping companies will float on stock exchanges in the future and the pool of investors will only grow as new opportunities present themselves at different stages of the shipping market cycle.