Greek Shipping News Cuts
Week 05 - 2009


New reality for Greece

---THE GREEK orderbook for 2008 fell to one-third of the record year 2007; cancellations are expected to reach 20% of overall orders and there is a reported rise in the number of vessels idling off Piraeus.
Many in Greece knew the boom could not last forever, but, as was often mentioned at shipping conferences in Athens in the early days of the downturn, nobody expected the fall to happen as soon as it did.
While many owners are responding to the crisis through scrapping, some have opted for lay-up. Banos admits that an increase in the numbers of owners awaiting permission to idle their ships in the Straits of Salamis has been observed.
Media reports suggest the number of ships idling off Piraeus has reached 100, but Banos could not confirm this.
According to a number of brokers at Piraeus, charter rates are expected to rise again this year and that is why many owners have opted for what they believe will be a short lay-up period.
Source: Fairplay International Shipping Weekly - Newswatch 29 Jan 2009

Performance under fire
---Member activism and strong opinions made for a 'potent cocktail' at the Piraeus Marine Club's P&I conference.
Cash calls and large general increases against a background of plunging investment portfolios and continuing worries about claims made for a potent cocktail as Piraeus Marine Club held its ninth protection-and-indemnity (P&I) conference.
The troubles of the clubs in a time of low freight earnings, defaulting charterers and a world economic recession were a recipe for controversy that was duly delivered.
Member activism was in the air with George Gourdomichalis of G Bros Maritime and Vassilis Bacolitsas of Pioneer Tankers taking the view that it is time to revive the idea of a shipowner forum ( see story, facing page ), so the people who pay the bills are better informed about the International Group activities of club managers.
The clubs came under fire for losing as much as $700m or 25% of their free reserves through the latter part of 2008 as the investment markets collapsed. But they were also criticised for their failure over many years to address underwriting losses and set viable premium rates, as well as not setting an equitable balance between the rates charged for old and new tonnage.
There was also a sense that fairness, which has to be at the heart of mutuality, is under threat with clubs taking advantage of the economic turmoil to not only seek the announced general increases but further push up premiums by re-rating fleets with good records.
But it was also equally clear that the overall concept of mutual P&I insurance continues to be supported and it is the perceived abuses that are the problem.
This year, the investment performance of the clubs was naturally the central issue but it was a topic that club managers refused to tackle, leaving it to an outsider, club finance guru Roger Ingles of Elysian Insurance, to address.
Although there was a record attendance of some 175, a number of clubs were conspicuous by their absence including Skuld, Standard, Steamship Mutual, the West of England and Britannia.
Ingles, whose original business was insuring the cash-call risk of the clubs, put the total assets of the International Group mutuals at some $7bn. As insurers of long-tail risks, they need to invest premiums until claims are paid, so it was inevitable that in the current economic crisis they would be hit.
The question Ingles examined is whether the investment crisis is a handy excuse to tackle issues like underwriting losses that have been around for years.
Ingles pointed out that the clubs lost $500m on underwriting in the most recent year for which figures are available to lift the 10-year underwriting deficit to over $3.4bn.
The International Group clubs had $1.9bn invested in equities, $3.4bn in bonds and $1.6bn in cash with the return on this portfolio not only masking their core weakness but allowing the free reserve to grow by $1bn over this period.
The root cause of the problem today has very little to do with the credit crunch. The disappearance of investment income has simply revealed the real cracks in the system, which is inadequate rating, particularly of new business.
"The reasons for the consistent failure to break-even in their primary business are legion but lie fundamentally in an inability to obtain premium levels commensurate with the growth in risk. This failure appears to be institutionalised.
"The high levels of investment income earned by the clubs - which have now almost become bankers with a sideline as insurers to generate cash flow to invest - continued to mask this fundamental weakness.
It is only when the supply of the drug was turned off that the issues have been brought into more sharp focus.
I don't think the position can be turned around in one year. It may well be that you are looking at a five-year exercise to straighten the position out. The $500m of excess calls in the past six months probably does no more than actually wipe out the 2008-09 deficit.
"In essence, this will mean massive increases for owners at a time they really don't want it and can't afford it. For too long, P&I insurance has been too cheap. In fairness, it's not only the clubs' fault. There are brokers and owners involved. Everyone involved in the negotiation of insurance kept the pricing down," Ingles added.
"The investment meltdown is not the reason for high premium increases being required for several years to come. It is more that when the investment 'tap' was turned off, the real underlying malaise in the industry has been revealed in all its glory."
Conference organiser Maria Prevezanou of insurance broker Evmar Marine Services said it was "upsetting" that the clubs had let a golden opportunity of strengthening their income by proper rating through the lucrative freight market of the past four or five years slip by only now to panic at a time when shipowners had to deal with the collapse of the freight market, not knowing if charterers will continue to honour their long-term contracts or whether mortgagee banks will impose draconian terms.
"One would have thought that the club managers would want their industry to survive. But it is well known that they are actually undermining it by offering premium levels to newbuildings that could not, at the wildest stretch of the imagination, be called fair." she added.
So one of the real reasons for these seemingly never-ending annual premium increases and additional supplementary calls is the churn effect that the P&I clubs have created themselves.
Prevezanou warned that clubs are no longer exercising discretion over the imposition of release calls but at the same time they are imposing general increases that not all members had to pay.
By Jim Mulrenan Piraeus, Published: 00:00 GMT, 30 Jan 2009 | last updated: 13:17 GMT, 30 Jan 2009

Key shipper eyes half-price Greek vessels
The company has made no public statement on purchase plans.
Many Greek ships have as much as halved in price since last year as a result of the global economic downturn, the insiders added.
In August, Bulgarian-German consortium KJ Maritime Shipping acquired 70% of Navigation Maritime Bulgare for 440.1 million leva (225 million euros).
Some 30% of stock in the consortium is held by Advance Properties of Bulgaria and the remainder is 99%-owned by Martrade Shipping + Transport GmbH of Germany (
Source: Metodi Gerasimov - 29.01.2009,

Goldenport Holdings: Rescheduling of Vessel Deliveries at No Additional Cost
---Athens, 26th January 2009, Goldenport Holdings Inc. ("Goldenport" or "the Company"), (LSE: GPRT) the international shipping company that owns and operates a fleet of container and dry bulk vessels announces that an agreement was reached with COSCO (Zhoushan) Shipyard Co., Ltd, to reschedule the delivery dates of the four new-build 57,000 DWT bulk carriers on order with the yard, at no additional cost.
Pursuant to the rescheduling, the delivery dates for those four vessels will now take place between four and eighteen months after their originally agreed delivery dates in late 2009. Two vessels are now expected to be delivered in the first half 2010 and the other two in the first half of 2011. The existing charter contracts remain valid and will commence upon delivery of the respective vessels.
The above rescheduling was agreed at no additional cost to the Company and the already secured bank financing remains in place. Taking delivery at a later time, when market conditions may have improved, enables Goldenport to optimise its cash flow utilisation during the current challenging market conditions.
Goldenport Holdings Inc.:
Christos Varsos, Chief Financial Officer +30 210 8910500
John Dragnis, Commercial Director +30 210 8910500

Genco moves to protect newbuilding programme
---Genco Shipping & Trading has displayed a strong commitment to its newbuilding programme. In a bullish move, the New York-listed operator has axed dividends and share repurchases and taken on a higher rate of interest to ensure its huge loan for capesize orders remains on track.
The 10-year, $1.4bn credit facility taken out in 2007 to fund a nine-ship purchase from Theodore Angelopoulos' Metrostar has been retained and while the Peter Georgiopoulos-led owner will not have to make repayments on the loan for some time, the re-worked facility comes with a considerably higher rate of interest. DnB Nor Bank and Bank of Scotland were the lead arrangers.
"The collateral maintenance requirement will be waived until such time that Genco is in a position to satisfy the covenant and certain other conditions," said a January 26 statement from Genco. It said that "Genco will be able to reinstate its dividend policy and share repurchase programme once the company can represent that it is in a position to again satisfy the collateral maintenance covenant".
From the end of March the monthly amount that Genco will be able to draw down will reduce to $12.5m.
When Genco sealed the loan in July 2007 the rate in addition to Libor was 0.80% for the first five years and 0.85% thereafter. It is now Libor plus 2%.
Genco, which has 32 bulkers in the water, said it will use the newly reworked loan and company cash to pay for the three outstanding capesize newbuildings left in its $1.1bn purchase of nine cape bulkers from Metrostar. The remaining 170,000-tonners are slated for delivery from Sungdong HI in South Korea this year.
Genco said: "We believe the favorable long-term fundamentals in the dry-bulk industry remain intact and the company is in a strong position to seek opportunities to take advantage of the current weakness in the dry-bulk industry for the benefit of shareholders."
The decision received a mixed reaction from analysts. Though describing Genco as one of the best run dry-bulk companies, Oppenheimer's Scott Burk cut his rating from "outperform" to "perform", and axed his price target. "We expect several weeks of underperformance as income-oriented investors exit the stock," he said in a note to clients. "News of a credit facility renegotiation and related dividend elimination is negative for [Genco] as it removes dividend support."
Cantor Fitzgerald's Natasha Boyden reduced her price target from $23 to $20, but held her "buy" rating. "We believe the cash saved from this move, along with the company's substantial free cash flow generation and reduced capital expenditure requirements for 2009, ... should leave Genco well positioned to either retire debt and/or continue to grow the company," she told clients.
Angeliki Frangou-led Navios Maritime Partners raised its dividend 3.9% to 40 cents a share, payable Feb 12 to those registered on Feb 9. The Piraeus-based New York listed bulk carrier operator made a slight share price recovery on news of the increase to around $7.37 a share, down over 50% over the past year.
Harry Vafias-led, StealthGas has announced it will pay no cash bonuses or stock-based compensation to directors or officers of the company for the fiscal year ending December 31, 2008. This will result in a write back to salaries and general and administrative costs of about $1.3m in the fourth quarter of 2008. In view of the prevailing uncertainty in the world economy, the Nasdaq-listed StealthGas said it decided to take this action despite its expectation 2008 will be its most profitable year since its formation and the continuing solid deployment of its vessels.
-- Filed: 2009-01-27

Navios Maritime Q4 net income rises
---(RTTNews) - Navios Maritime Partners L.P. (NMM: News ) posted fourth quarter net income of US$8.8 million, compared to US$4.03 mln in the prior year quarter.
Time charter and voyage revenue was US$21.55 mln, compared to US$14.07 million in the year-ago period.
Separately, Navios Partners said it would get approximately $30.5 million lump sum charter payment for Navios Aurora I in the first quarter of 2009. Navios Partners also has agreed to amend the terms of its existing credit facility. The company would prepay $40.0 million of its credit revolving facility in the first quarter of 2009. This would result in interest expense savings for 2009 of approximately $1.5 million and a reduction in the Company's leverage. The amendment would be effective until January 15, 2010.
Further, the Board of Directors of Navios Partners declared a cash distribution for the fourth quarter of 2008 of $0.40 per unit, payable on February 12, 2009 to holders of record as of February 9, 2009.
Source: 1/29/2009 9:50 AM ET,

Star Bulk Carriers Corp.: FFA Transactions, Private Placement, Employment Update
---ATHENS, GREECE, January 26, 2009 - Star Bulk Carriers Corp. (the "Company" or "Star Bulk") (Nasdaq: SBLK), a global shipping company focusing on the transportation of dry bulk cargoes announced today that :
FFA Contracts
The Company has sold contracts in the Freight Forward Agreement ("FFA") market on the Capesize index for Calendar 2009 for a total of 360 calendar days with an average rate of approximately $19,900 per day. The Capesize index refers to a modern Capesize dry bulk carrier. The contracts are intended to serve as an approximate hedge for one of the Company's Capesize vessels trading in the spot market for 2009, effectively locking-in the approximate amount of revenue that the company expects to receive from such vessel for the period.
Similarly, the Company announced that it has sold FFA contracts on the Capesize index for Calendar 2010 for a total of 60 days at an average rate of approximately $25,225 per day. All of the Company's FFA transactions are cleared trades and are intended as approximate hedges to its physical exposure in the spot market.
Universal Shelf Registration Statement
The Company recently filed a universal shelf registration statement, which has not yet been declared effective, to register an aggregate of $250 million of securities in order to provide flexibility to the Company to raise capital in the future as management and the board of directors may determine.
Private Placement
The Company also announced the completion of the previously announced private placement to insiders who had committed to reinvesting the cash portion of their dividend paid in respect of the third quarter 2008 into shares of Star Bulk. A total of 818,877 common shares were issued pursuant to the private placement. The Company included the resale registration of shares and warrants held by insiders and a former officer of Star Maritime Acquisition Corp. who had "piggy back" registration rights under various agreements, as well as shares issued to insiders and employees pursuant to the Company's equity incentive plan.
Update on Star Sigma Employment
The Company also announced that the vessel Star Sigma, which was on time charter to a Japanese charterer at a gross daily charter rate of $100,000/day until March 1, 2009 (earliest redelivery), was redelivered earlier to the Company pursuant to an agreement whereby the charterer agreed to pay the contracted rate less $8,000 per day, which is the approximate operating cost for the vessel, from the date of the actual redelivery in November 2008 through March 1, 2009. The Company has received payment in full and the vessel is currently trading in the spot market on a voyage charter to BHP Billiton at a gross time charter equivalent rate of approximately $14,100 per day, resulting in a revenue for the vessel that is effectively higher than it would have been under the original charter at the rate of $100,000 per day. The vessel is still committed to a 3-year time charter at a gross daily average charter rate of $63,000/day commencing in March 2009.
Akis Tsirigakis, CEO of Star Bulk commented: "We are happy to announce our entry into FFA contracts aiming to enhance our fleet coverage and cash flow visibility for 2009 and 2010. Moreover, the pre-payment of the charter hire for the Star Sigma enhanced our cash position and liquidity, adding strength to our balance sheet. We continue to explore constructive ways to enhance and secure the Company's revenues in response to this period of uncertainty in the shipping markets. In this context we are pursuing various employment options for our vessels that include physical charters, contracts of affreightment (COA), charter extensions, FFA contracts and pool employment. We are also pleased to have completed the private placement to insiders who re-invested their cash dividend proceeds, clearly demonstrating their confidence in the Company's prospects. "
About Star Bulk
Star Bulk is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. Star Bulk's vessels transport major bulks, which include iron ore, coal and grain and minor bulks such as bauxite, fertilizers and steel products. Star Bulk was incorporated in the Marshall Islands on December 13, 2006 and is headquartered in Athens, Greece. Its common stock and warrants trade on the Nasdaq Global Market under the symbols "SBLK" and "SBLKW" respectively. Currently, Star Bulk has an operating fleet of twelve dry bulk carriers. The total fleet consists of four Capesize, and eight Supramax dry bulk vessels with an average age of approximately 9.5 years and a combined cargo carrying capacity of 1,106,250 deadweight tons.

What Do DryShips And The U.S. Government Have In Common?
---The answer is they both seem to be issuing lots of paper. Last week, DryShips announced two transactions designed to reduce their future financial commitments. In the first instance, it transferred its interest in three Capesize newbuildings to an unaffiliated entity generating savings of $364 million in exchange for total consideration of $116.4 million. The latter consists of $36.4 million in previously paid deposits, $30 million paid to the purchaser and two additional tranches of $25 million payable to the purchaser within 30 and 60 days respectively. The last two tranches are payable either in cash or, at the option of the company, by issuing 2.6 million shares of common stock for each tranche.
Perhaps it is time to hire an unaffiliated CFO?
Source: Blackberry Version: Freshly Minted - January 29, 2009, by Editors <>

Managing liquidity & financial challenges in a downturn
---By Socrates Leptos-Bourgi, Partner, PricewaterhouseCoopers
There is little doubt that over the last few months our world has changed. As the US credit crisis has spread through the global banking system to the rest of the world, many years of relatively strong economic growth and booming world trade driven by the emerging economies have, rather abruptly, been replaced by an environment of poor liquidity, stagnant trading conditions and damaged consumer and investor confidence.
The impact on the shipping industry has been dramatic.
While many anticipated that the buoyant shipping markets would not last forever, few expected the downturn to be as dramatic as it has been. Within weeks, daily hire rates barely meet daily operating costs, market values have dropped sharply, some charterers fail to meet their obligations, new orders at yards are being cancelled, yards are failing to deliver as planned, raising new finance is more difficult and more expensive and scrap valueshave decreased significantly. This caught most shipping companies and the other participants in the market unprepared for the new challenges ahead.
In order to survive the current crisis and prepare for a possibly extended downturn, companies will need to address their short and longer-term issues in a way that can achieve greater visibility into their cash needs, enhanced decision-making efficiency, better understanding and ability to manage performance variables, increased access to sources of liquidity, disciplined capital investment and effective risk management procedures.
Inevitably, a significant part of the responsibility to implement appropriate steps to address these challenges falls onto the finance function and will put most CFOs and other finance executives to the test. A talented and well-qualified finance team can make all the difference. Some of the steps that can help navigate a company through these rough waters are presented below.
Development and maintenance of robust financial forecasts
Sound financial management depends on availability of timely and accurate cash forecast information. With spot rates falling, the possibility of time charter agreements in place expiring in the short-term and loan obligations and other capital commitments falling due, it is imperative that companies gain a clear picture of their immediate, short- and medium- term cash requirements.
Developing robust financial forecasts in the current environment can be treacherous. Income from time-charter agreements can be predictable, but once these expire, future projections need to be based on reasonable estimates and assumptions.Whatever method is used to project future income (e.g. historical averages, future rates etc.), a sensitivity analysis can add insight into the vulnerability of the forecasts. Identifying the level of income where cash break even is achieved is a key threshold to be measured.
Forecasts for operating expenses, costs of dry docking and special surveys require the input from departments outside the finance function. The reliability of such forecasts is a question of company discipline and how the other departments are challenged by the finance function to ensure such forecasts are accurate.
Finally, the financial forecasts need to be aligned with the business strategy. This can be achieved by implementation of a regular periodic forecast process where actual results are compared to the forecasts and adjustments are made to update them and maintain them accurate and reliable.
Integration of risk management to the financial forecasts development process
An integral part of the development of financial forecasts is the identification of key forecast risks and the development of appropriate responses. To do so, a company needs to have a formalized risk assessment process to identify those risks impacting on financial performance, update the financial forecasts for their effect and address them.
Such risks may include exposures to interest rate fluctuations, foreign exchange rates, changes in energy prices, volatility in hire rates etc. Additionally, in the current environment, other probable factors need to be considered, such as the ability of counterparties to meet obligations, possible renegotiation of time charter terms etc.
The development of a dynamic forecast model whereby different scenarios can be assessed based on a different set of variables can be a powerful tool for management to understand the impact of these risks on the business and the areas requiring immediate attention.
There are various tools to manage such risks and develop an appropriate response. These need to be considered in the context of the current economic environment. For instance, financial instruments on fuel prices may not be as attractive an option as entering into specific fixed-price procurement arrangements with a bunker supplier. Companies will need to obtain a detailed understanding of their own risk profile and its impact on business decisions.
Maintenanceof adequate available sources of liquidity
Companies generally have a number of different sources of liquidity they may choose to tap, depending on cost, flexibility and required security.
While some of these may not be readily available in the current environment, companies will need to secure that adequate funds are available to address their liquidity requirements.
By far the most flexible source of liquidity is cash and, in the current environment, companies need to adopt their policies in order to preserve any cash that remains available within the business. This suggests careful consideration of dividend policies and any share repurchase programs, monitoring of capital expenditure that can be deferred or avoided and cost control.
As most shipping companies are highly leveraged and the current crisis is likely to lead to breaches of loan to value covenants, raising new finance through debt is likely to be extremely difficult. However, the possibility that repayment schedules can be changed to suit the current cash flows of the business should be explored as this can be of benefit to both the banks and the companies involved.
Deciding which financing and liquidity sources to access and when, should be an integrated part of overall business strategy that considers optimal capital structure, financing costs and interest rate and liquidity risk.
Aggressively managing cash flows
Careful management of cash flows involves among others, cost containment and discipline over capital investments and capital expenditure.
Even after years of restructuring and process improvement, companies continue to find ways to reduce costs. In recent years, improvements in centralized procurement and better use of technology and business process outsourcing have all helped companies reduce costs. These options would need to be considered by shipping companies in the overall effort to reduce daily running costs.
The last few years shipping companies have invested heavily in fleet renewals and vessel maintenance and sought ways to improve fleet efficiency through use of new and better technology. In the current environment, such programs would need to be reviewed and possibly scaled back. To do so, companies need to develop a more rigorous process to assess such programs and projects and formulate a more formalized basis on which to base capital expenditure and investment decisions. For instance, investments that may no longer be capable of achieving financial objectives should be identified and consideration given on whether these should be delayed or abandoned altogether as a means of increasing liquidity and maximizing return on investment. As an example, some companies have already cancelled new building orders at shipyards even if that has meant the loss of advances paid and some are considering canceling plans to convert tankers to bulk carriers.
Assessment and monitoring of credit exposures
While the focus of the previous steps is largely focused on how companies can manage risks associated with reduced access to liquidity, the credit crisis has also created credit exposures related to both normal commercial transactions and exposures to financial counterparties.
The quality of charterers to which vessels are being chartered is of prime importance in the current market. In the current environment, some shipping companies are willing to accept lower hire rates with reputable first class charterers rather than higher rates with charterers of more questionable liquidity, reputation or financial transparency in order to ensure that revenue is both collectible and secure over the charterparty term. Shipping companies with time charters in place agreed at well above current hire rates would need to assess the ability and willingness of the charterer to continue to service the current agreement. In certain occasions it may be to the benefit of both the charterer and the vessel owner to renegotiate terms.
Additionally, counterparty risk needs to be assessed for key suppliers (e.g. insurers, bunkering companies etc.). Any agreements made with such companies and contracts signed could be compromised in the event such suppliers become themselves victims of the current financial crisis.
A key element to managing credit risk is a robust credit analysis to be undertaken that considers the financial profile of these counterparties. Possible sources of information to support this analysis include credit ratings from rating companies, latest available financial information for those counterparties that are publicly listed and press releases.
Building public trust
Shipping companies are themselves being assessed as counterparties in their relationships with financiers, investors, suppliers and charterers. Companies that have worked towards building public trust are more likely to survive and negotiate better terms in the current environment than others that have not.
To be transparent, companies need to consider willingly and openly providing information to their stakeholders to facilitate their decision-making. For instance, for shipping companies that are aware that loan covenants may be breached, this implies openly discussing the situation with the banks at an early stage in order to find means to mitigate the breach.
Withholding provision of such information would delay the resolution of the situation and in some instances would render directors open to litigation since companies that are either publicly listed or registered in certain jurisdictions have obligations to make such information publicly available and take remedial action.
Financial reporting is a key element of corporate information that is produced on a periodic basis. It is also usually the main source of information for stakeholders to assess the financial performance of the entity.
Basic financial reporting tends to be based on regulatory requirements and needs to be compliant to a set of acceptable accounting standards. Organisations that wish to be transparent can go beyond the minimum requirements of the standards to provide information more relevant to the stakeholders.
Concluding remarks
Clearly, the current market conditions are threatening the financing capabilities of shipping companies and their overall business performance.
For those companies that are already in crisis or expect to face difficult times ahead, this is no time for complacency. Action needs to be taken immediately to secure liquidity and the continuance of operations. This is an opportunity for stakeholders to unite to confront the difficult challenges ahead. These companies should be encouraged to be proactive and open about the challenges they face and how they are planning to address them.
However, this financial crisis need not only be seen in a negative light. Companies that are well positioned financially are expected to be on the lookout for potential opportunities. Any proposals to such companies need to be carefully structured, be based on strong fundamentals and have a clear strategy on how potential risks can be addressed. The right investment made at the right time at the right price can boost stakeholder returns and form the basis for long-term growth and prosperity.
Socrates Leptos-Bourgi is a Partner with PricewaterhouseCoopers in Greece and the Global Shipping & Ports Industry leader of the firm. He can be reached at: Tel: +30 210 4284000 E-mail: The information contained in this article is for general guidance on matters of interest only. Before making any decision or taking action, you should consult a competent professional adviser.
Source: Marine Money - Issue, January 2009.