Business | Shipping
Shippers in dire straits as financiers get on board
Seizures expected to increase over the year as owners of new vessels struggle to make payments.
- By Robert Wright, Financial Times
- Published: 22:53 July 5, 2009
London: Financially troubled shipowners could be facing a wave of ship seizures after two high-profile foreclosures suggested financiers' and creditors' patience was wearing thin.
Seizures are expected to increase over the year as shipowners struggle to pay shipbuilders' instalments due on new vessels. However, the extent of seizures might depend on whether a recovery in the rates earned by dry bulk ships, one of the most troubled sectors, is sustained.
Sweden's Nordea Bank last week announced it had sold 13 ships seized from Eastwind, a refrigerated ship operator, to Monaco-based Sammy Ofer, one of the world's most powerful shipowners. The same day, New York-listed Navios Maritime Holdings said it had bought four new Capesize dry bulk ships - the largest kind - which had been seized to cover their original owners' debt while under construction at a South Korean shipyard.
Last week's transactions came after a long period when such drastic action by banks had been quite rare.
Tim Coffin, a senior manager at M2M Management, a shipping fund, said recent events had marked a watershed. "Last week was the first; public, transparent foreclosure of a fleet of ships," he said. "Banks are under increasing pressure and there's only one way it can go. Foreclosures are inevitable."
Observers have been waiting since most shipping markets collapsed last autumn for banks to start acting robustly with shipowners unable to keep up payments on their debts.
Large-scale ownership of vessels by banks was a feature of previous shipping downturns. The forced sale of ships by banks also tended to reduce values further, allowing the few owners with funds to build up fleets ready for the upturn.
However, Andi Case, chief executive of Clarksons, the world's largest shipbroker, said banks were typically arranging to sell ships on before seizing them, as in the Eastwind and Navios transactions.
Case expected more seizures as owners struggled to meet the payments due for expensive vessels ordered in 2007, towards the height of the shipping boom.
Harry Theochari, head of the shipping group at Norton Rose, the London law firm, said some owners had reached "the end of the line" in talks with banks. In some cases, banks were acting after smaller creditors, such as fuel suppliers, were seeking ships' arrest.
However, Michael Bodouroglou, chief executive of New York-listed Paragon Shipping, expected more foreclosures but said some owners had been saved by the recent unexpected rise in earnings for dry bulk ships.
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