Will private equity pounce?

PRIVATE equity’s future role in shipping faces inherent complications, but this investor segment is expected to enter the fray if and when the timing is right. “Private equity will have the opportunities and the guts to invest, but opportunities will be more prevalent when the market is more distressed than it is now,” asserted Octavian Advisors director Igor Kuzniar. “The marriage between shipping and private equity will not be simple,” noted Goldman Sachs VP Sunder Reddy.

He explained that shipping boasts the criteria that attract private equity: depressed asset prices, market dislocations and scarcity of capital. He noted two different avenues for private equity stakes in shipping: investments in operating companies and asset plays via strategic partnerships with experienced shipping professionals.

“The asset play is a little bit tougher because private equity likes to look at specific opportunities,” explained Reddy. “With the shipping asset play, it’s different because we’re talking about private equity partnering with someone with a track record and providing a commitment to go buy assets. “That’s tricky because private equity doesn’t know what they’re actually valuing.” Reddy concluded: “If private equity is looking at an operating business, that’s a little bit easier because it’s a known quantity.".