Greek Shipping News Cuts
Week 21 - 2005
---Jose Manuel Barroso, the European Commission president, has survived an embarrassing no-confidence motion in the European Parliament as a row over his free holiday with a Greek shipping tycoon provoked deep ructions among Conservatives MEPs.
The vast majority of MEPs rallied behind Mr Barroso, who came under fire just four days before France votes on a crucial referendum on the European constitution.
Last night Mr Helmer's Conservative whip was suspended, and the threat of expulsion hangs over four other British Conservatives who defied their party line and signed the no-confidence motion tabled by the UK Independence Party MEP, Nigel Farage.
Despite his political escape, the debate symbolised the shaky start made by Mr Barroso since he took over as European Commission president after losing a power struggle with MEPs in October last year.
Asked to account for his holiday aboard Spiros Latsis's 51ft yacht last August, Mr Barroso described the motion as "unfair, unjustified, illegitimate and absurd". He added: "We never dealt with any commercial subjects at all. There was no link between the cruise and my work."
"As to the Commission's decision to authorise state aid in Greece, it was taken by the previous Commission at a time when I had no responsibility," Mr Barroso said.
All the parliament's big groups rallied round the Commission president, partly because the motion was seen as an attempt by British Eurosceptics to embarrass Mr Barroso on the eve of the French referendum. If a vote is called, Mr Barroso is certain to win.
Though the factual case against Mr Barroso appeared to be weak, his reaction has raised a series of questions and may have strengthened the case for a new committee to oversee issues such as conflict of interest.
Initially, the Commission president refused to answer a parliamentary question on his holiday arrangements from Mr Farage but he later confirmed a German newspaper story about the holiday.
Peter Mandelson, the European trade commissioner, had also refused to answer a similar question about a trip, though details of a Caribbean holiday over the new year later emerged.
Source: http://news.independent.co.uk, By Stephen Castle in Brussels, 26 May 2005
Gov't targets private capital for upgrade of ports
---The government is targeting trying to attract private capital for investment in Greek ports, with a view to improving their contribution to the country's overall transport infrastructure, Merchant Marine Minister Manolis Kefaloyiannis said yesterday.
Speaking at the Fourth International Forum on Shipping & Ports-City Development in Athens, Kefaloyiannis said his ministry has begun consultations with Hellenic Railways (OSE) on improving port connections with the rail system. He said the goal was to elevate Greek ports into "integrated centers for the provision of logistic services, incorporating new technologies and advanced organizational structures and processes that will make them important links in the overall transportation system."
Attracting private capital toward improving the competitiveness of ports is only one of several policy axes, Kefaloyiannis added, and is to be accompanied by a re-evaluation of the existing national port network and the modernization of infrastructure, using both national and European Union investment resources.
"The impending passage of the law on public-private partnerships (PPPs) is a substantial step that will significantly facilitate the participation of the private sector in the operation of ports and will attract considerable resources toward the implementation of projects," Kefaloyiannis said.
He added that the government has undertaken important legislative initiatives in order to remove administrative barriers to the realization of private investment in ports.
Giorgos Vlachos, general secretary of the ministry's port policy department, said the government is in favor of the deregulation of the port services industry being pursued by the European Union, under terms that will protect and boost jobs in the sector.
He said in order to improve the competitiveness of large ports, the ministry will issue licenses for the provision of services by private firms beyond those provided by the existing administrative bodies.
Furthermore, ports will acquire passenger terminal facilities similar to those at airports. The project, called "Nautilus," budgeted at 10 million euros and due to be tendered in September, will provide updated electronic information about ferry routes and will offer value-added services in the domain of combined transportation facilities.
Source: By Nikos Bardounias - Kathimerini, http://www.ekathimerini.com, 26 May 2005
Court targets Festival executives
---THE personal belongings of senior Festival Crociere managers have been seized by the Court of Genoa as part of the investigation into the collapse of the Italian cruise line. Festival sank a year ago with debts estimated to be euro300M ($377M). Among the managers targeted by Judge Renato Delucchi are maritime lawyer Umberto Ferraro (formerly president of Festival Crociere Italia), ship agent and owner Gianni Scerni (the current president of class society RINA and for a short time a Festival board member), Marina Acconci (former member of the Festival board and president of Festival Foundation, as well as George Poulides' trust lawyer), and former Festival managing directors Roberto Costaguta and Gianfranco Bozzini. It is believed that assets that might help in repaying debts have been hidden. Lawyers defending the 17 managers have 30 days to ask the Court to lift the seizure. Festival owner George Poulides has immunity because of his status as ambassador of Cyprus at the Vatican. In any case he has been declared bankrupt.
Source: Fairplay Daily News - Email Products, 24 May 2005
Greek cargo ships to take on materiel destined for Iraq
---ATHENS - Greek freighters will transport materiel destined for Iraq, foreign ministry spokesman George Koumoutsakos said here Wednesday, although Athens opposed the US-led invasion of the country.
"Greek commercial ships will assist in transporting materiel toward Iraq, and not to Iraq, within the framework of NATO," he said.
This aid will not be shipped from the northern port of Salonika, a transit point for allied materiel to the Balkans, and will "not necessarily involve (Greece's) Aegean Sea," he added without being more specific.
Greek Prime Minister Costas Karamanlis visited the United States last week and met with US President George W. Bush.
Greece did not send any troops to Iraq, but has contributed 300,000 euros (376,800 dollars) to a fund aimed at training Iraqi security forces.
Athens is also pressing a two-year-old proposal to set up a training center at a NATO base in Souda, northwest Crete.
Source: http://www.turkishpress.com, Published: 05/25/2005 13:27 GMT
Greece to help in NATO equipment transport for Iraq
---ATHENS, May 25 (Reuters) - NATO member Greece on Wednesday increased its involvement in the Iraq war saying it had agreed with the alliance to help transport equipment bound for Iraq on commercial cargo ships.
A strong opponent of the war, Greece has refused to send troops to Iraq, and as a NATO member has so far only agreed to train Iraqi officers in third countries.
"This (agreement) concerns the transport of equipment bound for Iraq," Foreign Ministry spokesman George Koumoutsakos told reporters during a briefing.
He did not say whether the Greek cargo vessels would dock and unload at Iraqi ports or whether they would berth at some other port in the Middle East.
"This is equipment bound for Iraq," he said after being pressed to say where the ship or ships would dock.
Koumoutsakos said the cargo of the ships would only contain "training equipment".
NATO's current involvement in Iraq includes alliance officers helping train Iraqi military personnel inside the fortified Green Zone in Baghdad and acting as a clearing house for weapons offers to the Iraqi government.
Diplomats in Greece said the agreement was the result of last week's meeting in Washington between U.S. President George W. Bush and Greek Prime Minister Costas Karamanalis.
"In a way the United States can now add another country to the list of those that are supporting their efforts in Iraq in some way ... without sending troops," a Greek diplomat said.
The Merchant Marine Ministry confirmed the deal but said the ministry would only be responsible for awarding the contract.
"Under the agreement we would be asked by our defence ministry to find one, two or more cargo ships to transport equipment," a ministry spokesman told Reuters.
"So we would then issue a tender for such a project which would then be awarded to one of those bidding for the contract. That is our only involvement in this."
Defence ministry officials could not be reached for a comment.
Source: http://www.alertnet.org, 25 May 2005 13:15:22 GMT, By Karolos Grohmann, Source: Reuters
Greece Seen as key cog in OSG's expansion plans
OSG Ship Management (Gr) Ltd, created following OSG's $1.3bn purchase of Stelmar Shipping at the turn of the year, is to play a major role in the US-listed company's future as is drive to become the major player in shipping.
"Stelmar is the first step in [OSG] becoming the major player in shipping. As we move towards this goal we plan to grow in Greece," said Arntzen. Speaking at the May 24 blessing of the company's 2,000sq mtrs Vouliagmenis Avenue offices, he continued: "We want to deliver quality to our customers and the team here is an element in achieving this."
He noted that in the past a prime aim of technical management was to keep the expenses down.
"We think this is old thinking and we want to invest in people and this team is a key."
Dienis told Newsfront: "The strategic plan is to grow the fleet managed out of Greece to about 80 ships over the next two to three years. Everything is already planned for this. The staff is divided into teams, each currently looking after 11 to 12 ships. The teams are structured in such a way that they can easily be expanded to meet requirements. The office layout can also be easily adjusted to meet expansion."
Currently the Glyfada staff runs to 67, about 90% of them former Stelmar people. Arntzen said that during due diligence, 50 people were looking at every aspect of the deal and the company.
"We knew we were getting a high quality fleet and high quality people," he said.
Just where Greece will fit should OSG go ahead with plans to raise $1bn for fleet expansion has excited all in Glyfada. Arntzen said the company will target alternative capital markets as it increases its products tanker and LNG operations.
Source: www.newsfront.gr, 25 May 2005
Top Finally Gives up on Convertible Offering
---After nearly a month in the market, a change of underwriters and several changes to pricing, Top Tankers officially withdrew its $300 million convertible preferred stock deal this week citing market conditions. Proceeds of the offering were to be used to acquire the 15-vessel bulk carrier fleet of Greek owner AM Nomikos, and the deal has since been called off as a result of the failed offering.
No matter what you think of the company or the deal, one thing is for sure - both Top and its advisors clearly worked tirelessly to make this deal happen.
So what happened? Like most unfortunate outcomes, the inability of Top to conclude its deal resulted from a combination of factors that are both specific to the deal and general to the markets. First off, there was the shipping market.
Although most investors and analysts we speak to agree that the drop in dry cargo freight rates is little more than a temporary blip, Top's plan to acquire a fleet of dry cargo ships was not ideally timed to say the least - especially as charter rates have declined while ship values have remained the same or even firmed for some vessel classes.
The second factor that went against the deal regarded the underlying market for convertible securities. As some readers may know, the convertible market has tipped in favor of issuers in recent years, with transactions for companies like OMI and Seacor pricing at thin yields of 2.75% and lofty conversion strike prices of about 45%. This imbalance of supply and demand for convertible products has resulted from the growing number of hedge funds that use the structure to create "riskless" returns. For those who aren't familiar with this form of black box investing, the way it works is that funds go long the convert and short an equal quantity of the stock so that they are effectively insulated from any change in the underlying stock price.
In this scenario, funds earn their return by collecting the coupon on the debt and often leveraging their capital to enhance that yield. Issuers like the market because it either very cheap debt (if the stock doesn't reach its conversion price) that is non-dilutive or fully priced equity (if the stock does convert).
Although Top had already been marketing the deal for a couple of weeks, the hedge fund community was stunned when GM and Ford's debt fell in value when it was downgraded to junk status at the same time the company's stock rose thanks to a Dutch auction bid from Kirk Kerkorian.
What this meant was that hedge funds that were long the bonds and short the stock, a logical hedge strategy for a deteriorating credit, were punished when the company's equity value rose as its debt sank. The losses incurred from the unusual scenario forced many funds onto the sidelines just as Top was trying to price.
The structure itself may have presented another challenge. When the deal was initially brought to market, we understand the yield was 5.75%. Although this is a relatively high yield, one challenge may have been that Top itself pays a dividend of about 5%. This means that the difference between what investors would have to pay on the stock they are short and what they would earn on the convertible was pretty small. In response to market push back, sources tell us that Top improved the economics to 6.75% with a conversion price up 20%, but perhaps by that time the market had gotten too choppy.
Another potentially problematic issue may have been the size. As we go to press, Top Tankers has a $450 million market cap, and it was in the market for a $300 million convertible in a market that generally sees convertibles that are around 25% of the issuing company's size.
Nothing Ventured, Nothing Gained
Although we imagine that the company, its advisors and AM Nomikos are disappointed with the outcome, shareholders are none the worse. According to a statement made by the company, Top will not forfeit any deposits that may have been lodged when the MOA was signed, and the so the only major cost here was that of opportunity.
President and CEO Evangelos Pistiolis stated, "We carefully considered the possible acquisition in light of various financing alternatives available in the market, but concluded that proceeding with the acquisition of this fleet would not be in the best interests of our shareholders at this time." Reading between the lines, Pistiolis probably feels that the net asset value of the company's stock is in excess of its current $16 share price - something that should give investors comfort at current levels.
Source: www.marinemoney.com, Freshly Minted online, VOLUME 1 - ISSUE 20, May 26, 2005
Tsakos Energy Navigation announces new stock repurchase program
---ATHENS, Greece, May 26 /PRNewswire-FirstCall/ -- Tsakos Energy Navigation Limited (TEN) (NYSE: TNP) advised that its previous share repurchase program has been successfully completed. The $8,250,000 repurchase authorization announced in late January, 2005 resulted in the purchase and retirement of 212,225 shares at an average cost of $38.91 per share. The additional repurchase authorization announced today is for $20,000,000.
Nikolas P. Tsakos, President and Chief Executive Officer, and D. John Stavropoulos, Chairman of the Board noted, "The Board of Directors authorized the additional share repurchase allocation as a vehicle to enhance shareholder value. We firmly believe current market prices do not accurately take into account underlying asset values and future prospects. This allocation of resources will support future earnings per share and complement a healthy cash dividend policy." Since the beginning of 2004 TEN has disposed of seven vessels totalling 486,000 dwt contributing $45.0 million in capital gains and has taken delivery of three vessels and placed a further 10 newbuilding orders with a 1.39 million dwt combined capacity. The 10 orders were placed in addition to the five newbuildings that were ordered in 2003.
ABOUT TSAKOS ENERGY NAVIGATION
TEN expects to operate a fleet of 38 vessels of 4.1 million dwt by mid-2007. Currently it operates a fleet of 25 vessels (including three chartered-in, one Aframax and two Suezmaxes vessels) of approximately 2.8 million dwt with an average age of 6.5 years compared to 12 years of the world average. Its newbuilding program today consists of 13 vessels (5 Suezmax, 2 Aframax, 5 Handysize, 1 LNG) of 1.3 million dwt.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those predicted by such forward-looking statements. TEN undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
Source: Tsakos Energy Navigation Limited http://www.tenn.gr
Top OSG billing for old Stelmar
---MORTEN Arntzen, Overseas Shipholding Group's president and chief executive, has emphasised the importance of the former Stelmar Ship-ping operation to the New York tanker giant.
Now restyled OSG Ship Management (GR) Ltd, the Athens operation has been awarded management of the group's international product tanker fleet, while OSG's established British management subsidiary in Newcastle is to focus on its crude oil tankers.
Mr Arntzen, visiting Athens with other OSG executives for this week's official opening of the company's offices in the city, said that "for the time being" the Greek company would concentrate on technical management, but this role could grow in the future.
"Other activities in Greece" could be considered in due course, although this will not include commercial tanker management, which was best located in Britain, he added.
Technical management, however, was "an increasingly important and difficult challenge that you have to get right", Mr Arntzen continued.
He said shipmanagement costs in Greece and Britain were similar, although both were less expensive as a location than the US. But it was easier to find personnel in the Greek market.
OSG acquired 40-vessel Stelmar in January for $844m in a deal worth a total of $1.35bn including assumption of Stelmar's debt.
The fleet has been fully absorbed into the OSG operation and the distribution of responsibilities will give the Greek office management of an initial fleet of 35 tankers, including handysizes, handymaxes, panamaxes and one aframax.
The majority of Stelmar staff have been retained and the Athens office, headed by George Dienis as chief operating officer, has moved to impressive new premises just outside the city centre.
Confirming that management of the fleet had been divided according to type of cargo rather than size of vessel, Capt Dienis said several vessels remained to be exchanged between the Greek and British offices. However, the handover is expected to be completed by late June.
Overall OSG controls a fleet of 98 tankers of about 13.2m dwt.
The company reported it had doubled net income in the first quarter of the year to $165m on fleet revenues of $275m.
Source: By Nigel Lowry in Athens- Thursday May 26 2005
Speech: Anthony Zolotas, Eurofin, at the LSE Greek Shipping Finance conference May 25 2005
---LADIES and gentlemen, it is always a relief to see some people come back on the second day of a conference. Especially when you have been able to enjoy so much good Greek hospitality and weather in our beautiful and transformed Olympic city.
Seriously, Athens has changed, although the heart of the city and the heart of its people remains the same. Greek ship finance is like that too, it has changed, modernised, but at its heart, we find some enduring traits.
The most enduring of those is that this is a tough market for banks. No, make that a VERY tough market. Since the end of the shipping crisis in the late 80s Greek owners have become over banked, and now that they have more money than ever, they are more over banked than ever.
It has not always been like this. I can still remember the times when you had to twist a bank's arms to convince it to consider a loan to a Greek shipowner. According to such banks the Greek market "lacked sophistication, transparency, corporate structure". The general consensus of opinion among some banks was that with only a handful of exceptions, notably shipowners based in London and New York, Greeks operated substandard ships.
Nowadays the same banks, which finally saw the light, are upset when new lenders want part of the action. There is nothing worse for a bank established in a market for many years, than an aggressive newcomer.
Now most of you may know that Eurofin is an intermediary. So you can believe what I'm going to tell you today, simply because, as we have found out to our great discomfort, there is really very little room for intermediaries in such a tough and over banked market. I'm a Greek, I've been a ship financier for such a long time I can remember when many of the bankers present here today were just fresh faced boys, and Eurofin is a successful and long standing business. But we hardly do any direct ship finance work in Greece. I make my living by working with banks and shipowners in the Middle East, Italy, Turkey and other places, much more than in Greece. Which is fortunate, because I can say what I like here to you today with hopefully very little negative impact on my bottom line.
I'm going to tackle this under the topics of new owners, new bankers, new ways to raise money, new ways to spend it, and finally, what you need to do if you want to enter this market. I'll start by telling you the punch line. Any bank that wants to succeed in penetrating this market today has to be prepared to drop its trousers, and drop them a long way further than it has before.
How have we got to this position? Well, I don't need to remind you about what is happening out there. Shipowners make so much money today that they can afford to attend conferences and even spare the extra bob to bring along a colleague or two. Better market, better earnings, more cash, stronger position, greater appeal to banks, etc, etc. But this is not the only thing that has changed in this market.
Well, let's start with the new generation of shipowners.
Greek shipowning, for all its veneer of corporatisation, is still very much a family business. Families own companies directly and through interlocking shareholdings, and even when they go to New York for an IPO, they ensure they still keep everything in the family. If in doubt about that, please read the small print of some of the recent IPO prospectuses.
However, the younger generation of those families has a different background to the founders and older generation. Generally, they tend to be business school educated, international, financially literate - which is another way of saying that unlike their fathers they know very little about how a ship really works. Now their fathers didn't get rich and successful by being stupid. So when their expensively educated sons and daughters enter the company (usually straight from University and invariably at a very high position in the organisation), they keep them away from the more complex operations' department , and let them work instead in something less prone to irreparable mistakes such as the financial area of the company. After all that is what they studied. The wily older generation know they can do little damage there with so much cheap money around, and it keeps the children happy, as they are doing things they think are important.
One result of that is that we have a generally happy Greek shipping community, with fathers and children living in harmony in the same companies. The people who are not happy are the established banks. The reasons for this are that the new generation of financial whiz kids have new contacts, new loyalties and new ideas on how to make their mark and of what loyalty means. In a market such as the one we are experiencing now, they are given the opportunity to negotiate with banks from a position of Power, quite an aphrodisiac at any time but particularly when you are trying to earn your stripes and potentially your Ferrari.
Essentially, the new generation young financial gurus now making the decisions on ship finance in Greece no longer owe a debt of loyalty to the few banks which supported their fathers through thin times. They are driven on a transactional basis to seek the best conditions (nowadays this translates to lowest margins and fees) for each and every transaction. With banks queuing up and climbing over each other to lend money to Greek shipowners there is no need to pay more than the minimum. So deals move on fractions of basis points where once they would have stayed as long as the bank was not too greedy.
If you were an investor in shipping, you could read what I have said so far in the positive light that ship finance in Greece is now more professional, more detail driven, more innovative, more structured, more like a normal business and less based on sentiment and gut feeling. If you come from a generation which has been through a crisis or two, you might take the opposite view, and say it is now more short-term focussed.
Well, one thing that hasn't changed much is the high relational content to Greek Ship Financing. Greek owners still like to do business with people they know, even if they are more ready to move between them than before. What's changed is the network of contacts. Have a look at the output of the business schools. A very large proportion of the output of the City of London Cass Business School ship finance course and other similar courses is made up of young Greeks. Not all of these are sons and daughters of rich Greek shipowners. Some of them, probably the majority, have to earn their living the hard way, and many choose ship finance, (either shipping company finance departments or banking as a career). So the young generation in the companies knows their class mates in the young generation in the banks, and like talks to like. I think it is fair to say that most banks actively engaged in ship financing in Greece today a have presence in Greece (either a full branch or a representative office) where they employ Greek account officers. These account officers, together with their compatriots in the shipping companies form a dense network which the older generation is excluded from.
So we have the traditional shipping banks, and newcomers to the market, all staffed by a new generation of financially literate Greeks who have friends in the shipping companies. The only difference from before is that having friends is a pre qualification for being considered for the business, not a clincher to get it. These new bankers are like their friends the owners, they are driven by detail, by deals, by structures, by rules and by an aggressive need to win business. This should be good news for shipping, which gets more cheap money, and bad news for banks, who have to lend money for less and have less certainty that one loan will lead to another.
But enough about poor banks. They are not after all totally impervious to turning a quick bob or two themselves when the opportunity arises. In the late 90s and as recently as in early 2003 such an opportunity arose which could help them relieve the pressure placed upon them by shipowners for lower margins. That something went by the obscure name of Basel II. As with with the infamous Millennium bug (which according to some is the biggest con ever played on the international business community), banks spent millions of dollars, euros, pounds and swiss francs, on trying to assess the implications of the new Capital Adequacy regulations on their business and of course on how to capitalise from them. Essentially Basel II was shrouded in mystery and a set of highly complex mathematical formulas gave the banks the opportunity to raise margins, claiming divine intervention from the Gods that control the fate of the international banking system. Conferences, speeches, papers, seminars, all pointed out to one thing. "Gentlemen, brace yourselves for margins which you have not seen even in your worst nightmares". The "bogeyman" had come..
Some banks made such a lot of fuss with Basel II, that many shipowners opted for "beat the Basel II loans" which would tie-in the prevailing margins (albeit with a small premium of course) for many years. More prudent banks took their time before sounding the alarm. More careful examination of the new regulations, which incidentally are still being updated, showed that nothing was as black and white as originally presented and that there could even be instances, (even in this B- industry called shipping), where the Capital Adequacy Requirements for some loans could in fact be relaxed, making it cheaper for a bank to fund them.
The surge in the shipping market put paid to this "higher margin" talk. The industry has performed so well over the past couple of years that the trend for higher margins reversed and now we are witnessing margins that shipowners had not seen in their wildest dreams.
Well, in such a booming market, with ships' values increasing by the day, you would have expected people to find new ways to fund shipping projects. Sorry, I have to tell you they have not. The overwhelming majority of Greek shipowners' acquisitions is simple non-rocket science lending of 70 or 80 per cent of the ship value against a first mortgage and, whenever possible some sort of guarantee. Simple, not rocket science, and not likely change.
However, at the margins there are other ways to raise money. Leasing is still around, but has not found much favour in Greece because it usually means having a presence in another country, such as in the UK, and it also puts constraints on asset play. Public markets and private equity funds are enjoying some popularity. Some of you here today have good experience of raising money in New York, and of course bonds and IPOs are what our new generation learn about on their courses. It can certainly bring in a lot of cash, and can also bring a lot of problems. But my essential point is that despite the publicity these ventures get, good and bad, they are still only a small part of what is very much a family controlled and family driven market working mostly with banks. And when the IPOs crash and the junk bonds default, the simpler deals will still be there.
As for shipping funds, they have a time and place. I have to declare an interest, as Eurofin is launching its own investment fund, specifically to invest in a niche market. It is specialised, but we believe funds that are focussed and specialised stand a better chance to weather the eventual storms.
But Greek shipping money is not readily invested in shipping ventures not directly controlled by the family. Compare that our competitors up north. In Norway, a shipping family might well hold shares in other shipping ventures, and have long term joint ventures with others, and also opportunistic investments in shipping not owned by their own family. That is simply not a characteristic here, where we all like to keep things in the family embrace. Here shipping makes sense to a shipowner only if it is hands-on and by hands-on we really mean family hands only. It is no wonder that shipmanagement companies have such a small Greek shipping clientele.
Having said that we have recently seen some moves in the general direction of joint ventures with an increasing number of Greek shipowners operating their ships within pools managed by non-Greeks. This is a trend that is likely to make further inroads into Greek shipping and, who knows, one day we may even see a commercial pool managed by Greeks.
And finally, on ways of raising money, a word on KGs. I spoke recently about Norway, and some of you will remember the KS fever of the eighties, when Norwegian investors snapped up Greek tonnage at huge prices. They thought it was a Norwegian shipping boom, the Greeks thought it was a good chance to recapitalise, and the Greeks were right. Now we have seen a number of Greek owners going to the German KG market, selling and leasing back ships and also tapping the KG market for funding for newbuildings. It is a great way to liberate capital, but I know a few owners who are kicking themselves for selling to KGs too early in the cycle. A year ago they made a fortune, had they waited a year they would have made two fortunes, so now they are unhappy. Some things haven't changed with the new generation.
Now, what about new ways to spend money. Well, it has been a sudden change, but today we are in a city where shipowners are focussing on newbuildings. Traditionally Greek owners bought and sold second hand tonnage, and left it to the Vikings in the north to buy from shipyards. Not anymore, Greek names dominate newbuilding order books and also newbuilding disputes, given that many went to China looking for a cheap ship and got their fingers burned.
Apart from spending on newbuildings, the biggest spend is on real estate. Greek shipowners believe the ultimate sanctuary for their cash is property. Land and property is where the cash is going. Which is a good thing for banks, because if it was going into ships, or funds, or the stock market, then owners wouldn't need to borrow money for their shipping deals.
Not too much new in that quick sketch of the Greek market, you might think. So have I got any secrets for success?
Well, any bank who wants success in Greece has to take a very long term view.
The Road to Success would become easier if:
You have a local presence (branch or representative office).
You employ young people who are the product of the business schools so you have people who have friends who talk the same language in the shipping companies.
You have to be ready to be very aggressive on price and to undercut the man next door.
And finally, another way of becoming successful more rapidly is to be prepared to go where others won't. The competition among banks is more fierce where new vessels are involved. So look elsewhere for opportunities. There are viable single hull ship projects, viable projects for older tonnage, viable projects for smaller vessels, which credit committees of many banks simply won't look at. I have heard very valid arguments about this approach. I am however a firm believer in the view that ship financing is not simply a loan against an asset. It is rather a loan to an owner to buy a vessel. If you have picked the right shipowner, the age or type of ships should have little or no bearing on the outcome of your loan.
Let me end where I began. This is a great city, a great shipping centre, and increasingly, a great ship finance centre. But it's a tough market, and it won't be getting any easier.
Anthony Zolotas is a director of Eurofin, which works with shipowners, shipyards, private investors and banks to create innovative solutions to shipping finance problems. With offices in London, Athens and Istanbul it focuses on private sector shipping credits, privatisations, capital markets transactions and the restructuring of problem loans. www.eurofingroup.com
Source: LSE Greek Shipping Finance conference May 25 2005