Westport: There’s a fierce thunderstorm when the line clicks through to Bob Burke. It’s been just over a year since he founded Ridgebury Tankers and he’s been working long, long hours to get this new firm up and running, a rush of financing and a rapid fleet build up. Maritime CEO is interrupting Burke’s well-deserved holiday in the Caribbean with his family, his first break since the founding of the company on April 10 last year. For Burke, a well known American shipping wheeler dealer, Ridgebury represented a comeback into the industry after many years away following a mega deal concluded in 2008.
“My wife was pretty tired of having me constantly moping around the house for five years so it was a good time to get back into business,” he quips on the founding of Ridgebury.
Burke’s extensive executive shipping experience includes tanker operations, chartering activities for vessels, direct equity investments and financings, and the ownership and operational management of companies across several shipping sectors. He graduated from the US Merchant Marine Academy in 1981, serving as a ship’s officer for three years aboard US-flag tankers. He returned to shore in 1984 to earn his MBA from Columbia Business School, followed by stints in the commercial department at Marine Transport Lines and as a shipping banker at Bank of New York. He then joined GE Capital in the marine finance group, eventually leading the group as managing director until his departure in 1998.
In 2000 Burke co-founded Great Circle Capital, a private equity investment group backed by Overseas Private Investment Corporation and institutional investors to invest in ports, terminals, offshore oil support and other logistics and transportation businesses. Leaving Great Circle in 2005, Burke led attempts to acquire several shipping companies, culminating with the purchase of Chembulk, a 20-vessel fleet of stainless steel chemical tankers. Burke served as ceo of Chembulk from the date of acquisition until the brilliantly timed sale of the business in early 2008 to Berlian Laju Tankers of Indonesia.
In the space of a year, backed by private equity firm Riverstone Holdings, Ridgebury has built up a fleet of seven suezmaxes and six medium range product tankers.
The strategy is to invest in modern tonnage either currently on the water or on resales of vessels that will enter service shortly.
While product tankers are widely seen as a hot sector at the moment, eyebrows were raised at Burke’s dogged pursuit of the much maligned suezmax sector.
“The conventional wisdom in the US and much of Europe is that the two million barrels of crude from West Africa to the US Gulf is dying, largely because of shale gas,” says Burke, whose tanker experience dates back to seafaring days at the start of the 1980s.
Burke, however, says suezmaxes are like Boeing 737 planes – “bigger enough for long haul but can do regional too”. It is their flexibility that is allowing them to take work from VLCCs and aframaxes, he says.
Still, the real reason for the focus on suezmaxes was on the tiny orderbook for the segment plus noticeable increases in ton/miles.
“The biggest thing we look at is the orderbook,” he says, adding: “I’ve never seen an orderbook so low as suezmaxes today.”
As for product tankers, Burke says the outlook for the next couple of years looks good. “I can’t understand why people are ordering new product tankers,” he muses, “you want tonnage now.”
While 13 ships in the space of 12 months is impressive, Ridgebury is not on a blind charge to build up a giant fleet whatever the cost, Burke stresses.
“If prices go up too much we will stop buying,” he says, pointing out that the founders of the company have invested their own cash, more than $6m, which naturally makes for cautious investment decisions.
“Our only driver is ROE,” Burke says, while admitting honestly that the long term return on capital for shipping is “lousy”.
On private equity’s massive influence in shipping in the past two years Burke is forthright.
“Private equity is only there when they see returns that beat the mean in any industry,” he says, adding: “PE is there for an asset play, once that is gone, they will move on to something else. Any pullback will be done opportunistically.”
Burke says he has been impressed with level of knowledge of PE players in shipping.
With that final comment, the rain ceases, the sun returns to the Caribbean, and it’s time to make the most of the precious holiday before returning to the seesawing shipping markets in Connecticut. [17/04/14]
NEED TO KNOW: Ridgebury Tankers
Founded a year ago by tanker veteran Bob Burke in the US, backed by private equity firm Riverstone Holdings, the company has amassed 13 ships in its first 12 months, seven suezmaxes and six product tankers.