Consolidation is seen by some as the silver bullet to carry financially stretched shipping companies through tough markets.
Tougher times are creating fresh impetus for a shake-up in the chemicals sector.
The tanker sector is viewed by some as in most distress with Frontline, General Maritime Corp (Genmar) and Torm grabbing the headlines.
But consolidation is also now being widely talked about as the most likely panacea for container shipping and other markets.
Collaboration between CMA CGM and Mediterranean Shipping Co (MSC), the creation of Germany’s largest fleet capacity-wise with the pending Erck Rickmers-Komrowski merger and Peter Dohle taking a sizeable stake in Ernst Russ are all symptomatic of the fragile state of shipping.
Some, like Dohle and Rickmers, see their relative stability as an opportunity to grow, while others believe strength in numbers is the key to safeguarding their future.
One sector where consolidation began some time ago but has not received the same exposure is the chemical-tanker market. Being very much a barometer of the world economy, its fortunes are as much as any other shipping sector closely tied to gross domestic product (GDP).
For example, Germany’s John T Essberger has already taken over Heinrich Schoeller’s United Chemical Transport (UCT) and Denmark’s Erria has merged with compatriot Uni-Tankers.
UK-based private-equity group Triton has swallowed Jutland-based HerningShipping and is open about its ambitions to further consolidate the sector if the right opportunities arise.
The gravity of the situation in the chemical market has been driven home by Eitzen Chemical withdrawing from its pool activities to preserve cash and Japanese parcel-tanker owner and operator Dorval Kaiun recently filing for court protection.
Last month, Copenhagen-based Nordic Tankers — which says it wants to act as a market consolidator — left no doubt that much of 2011 has not been a good yearfor chemical tankers.
Chief executive Tommy Thomsen stated in the company’s third-quarter report that the segment was no different from that of products tankers and large tankers (where Nordic Tankers is not a player) in being unprofitable, with very littleactivity and consequently historically low freight rates.
Since then things have improved but for how long? Fears that leading economies are heading into recession again is a shadow hanging over the industry.
Certainly, long-haul voyages from Houston to the Far East have been rising due totight tonnage supply and firm Asian demand. Shipbroker Clarksons reported recently that rates for a 10,000-tonne parcel on the route were, at $118 pertonne, a 38% improvement on the November average.
This has had a knock-on effect, with a 5,000-tonne parcel from Rotterdam to the Far East ahead $28 in just a week to $115 per tonne.“With many owners now involved in long-haul voyages, the tonnage-supply situation could mean a very merry Christmas for owners still looking to fix cargoesin the Atlantic,” said the broker.
But to put in perspective a report by Bloomberg that chemical tankers may earn more in 2012 than for several years, the fact is earnings have hardly been anything to shout about in recent times, even for big players like Stolt-Nielsen whose chief executive Niels Stolt-Nielsen as recently as October was talking about no significant improvement in the parcel-tanker market before 2013.
Asked about the more recently improved market to the Far East, initially from Houston and subsequently drawing in Rotterdam, one analyst cautioned against getting carried away.“Longer term, chemical trades are dependent on world industrial production,” he said, adding that the sector’s fortunes hinge on whether the world falls back into recession.
One owner/operator describes conditions as still “very difficult” and this has been reflected in the collapse of Dorval.“I don’t think I have seen a market as tough as this before and that comes from 30 years of experience,” he said. “That is why it is a good time to consolidate."
“In general, you will find all industrial players are open to discussion about consolidation but that is typical in times of tough markets.
“You only have to look to other shipping segments to see that happening. Take the Maersk VLCC pool, which is one way of consolidating.”
He describes chemicals as a “complicated” sector where a strong industrial player “can make a difference.”
Certainly, there are close relationships between owners and chemical companies, with the market dominated by contracts of affreightment (COAs). A lot of cargoes are arranged on a long-term basis and owners tell TradeWinds that it isencouraging customers are recognising that as COA renewals for 2012 come upfor renewal they must reflect the increase in spot-market activity.
One challenge facing the industry is the number of tankers able to swing between chemicals and products. Many medium-range (MR) tankers have been built in the last few years that are also able to take IMO II cargoes because the yards were willing to do so for just a couple of million dollars more.
According to Clarksons, there are still 277 IMO II tankers to be delivered out of a total chemical-tanker orderbook of 365 vessels.
Early 2007 saw regulatory chemical-classification changes trigger the ordering of many IMO II vessels as owners anticipated steady and strong demand from Asia.
Many newbuildings, however, were delivered ahead of chemical production capacity coming on stream, as well as coinciding with weak demand, which depressed the market through 2010.
On the plus side, owners have been more conservative than some of their peers, particularly bulker owners who, despite already having a massive orderbook, wenton another orders spree to “celebrate” a temporary pick-up in the market a year or so ago, comments one cycnical broker.
He says the chemical sector is currently better positioned in terms of tonnage overhang but another recession in 2012 could easily create another oversupply situation.
Thursday, 22 December 2011
Friday, 18 November 2011
Oil & Product Tankers Show Signs of Strain
Lately there has been news about bamkrupties because it has been at least 4 years since the crisis as worse as the great depression has collapsed the economy. since then there has been no sign of recovery for tanker market. Oil tanker market has been the worst hit as we have seen the big boys succumb to market pressures and stain in the industry.
Oil tanker company General Maritime Corp filed for bankruptcy protection and Denmark's Torm said it was in talks with creditors on Thursday as both fell victim to a glut of ships in the world fleet and gathering global economic gloom. Torm's biggest problem is a huge debt, piled up from paying out quite high dividends in the years when things went well -- 2004 to 2007," Sydbank equity analyst Jacob Pedersen said. In June, the company said it had agreed an amendment of its $900 million revolving credit facility with Danske Bank , BNP Paribas, HSH Nordbank AG and SEB. That deal postponed most of a repayment of $630 million due in 2013 to 2015 on condition that it raise $100 million in new capital from shareholders by mid-December. If the debt extension is not carried out as agreed in June, payments of $510 million due in 2015 and $60 million due in 2014 would fall due in 2013 instead.
Bankers expect more bankruptcies and restructuring in the sector as companies struggle with a worsening world economic crisis and lower earnings driven by a build-up of ships ordered when times were good. In a related sign of sector stress, a second major Chinese shipping firm has halted payments to foreign ship owners because of the downturn in the freight market. General Maritime, a leading crude oil tanker company, elected to file for Chapter 11 bankruptcy with a New York court as part of a restructuring agreement that includes a $175 million equity investment from Oaktree Capital management and extensions on debt repayments.
Despite such a gloom, we have seen the results of chemical tanker players (a niche market in the tanker industry) continue to be resilient as the market expect a recovery next year and there has been sign of recovery. Take for example the results of Stolt Nielsen, Odfjell and to some extent Berlian Laju Tanker have seen the strength of chemical business by showing relatively strong results. market has predicted the recovery in chemical tanker business within 3-12 months down the road given the level of supply being subdued given the limited orders in 2009 and the cancellations coupled with scrapping of chemical tankers.
Hope this gives a sign of hope for chemical business.
SS
Oil tanker company General Maritime Corp filed for bankruptcy protection and Denmark's Torm said it was in talks with creditors on Thursday as both fell victim to a glut of ships in the world fleet and gathering global economic gloom. Torm's biggest problem is a huge debt, piled up from paying out quite high dividends in the years when things went well -- 2004 to 2007," Sydbank equity analyst Jacob Pedersen said. In June, the company said it had agreed an amendment of its $900 million revolving credit facility with Danske Bank , BNP Paribas, HSH Nordbank AG and SEB. That deal postponed most of a repayment of $630 million due in 2013 to 2015 on condition that it raise $100 million in new capital from shareholders by mid-December. If the debt extension is not carried out as agreed in June, payments of $510 million due in 2015 and $60 million due in 2014 would fall due in 2013 instead.
Bankers expect more bankruptcies and restructuring in the sector as companies struggle with a worsening world economic crisis and lower earnings driven by a build-up of ships ordered when times were good. In a related sign of sector stress, a second major Chinese shipping firm has halted payments to foreign ship owners because of the downturn in the freight market. General Maritime, a leading crude oil tanker company, elected to file for Chapter 11 bankruptcy with a New York court as part of a restructuring agreement that includes a $175 million equity investment from Oaktree Capital management and extensions on debt repayments.
Despite such a gloom, we have seen the results of chemical tanker players (a niche market in the tanker industry) continue to be resilient as the market expect a recovery next year and there has been sign of recovery. Take for example the results of Stolt Nielsen, Odfjell and to some extent Berlian Laju Tanker have seen the strength of chemical business by showing relatively strong results. market has predicted the recovery in chemical tanker business within 3-12 months down the road given the level of supply being subdued given the limited orders in 2009 and the cancellations coupled with scrapping of chemical tankers.
Hope this gives a sign of hope for chemical business.
SS
Tuesday, 1 November 2011
Change on Law Regarding Material Transaction
1 Nov 2011
am back again folks! Just to report that I have just noticed from the Capital market supervisory agency portal and learned that there is a new draft law being processed right now. The draft regulation will superseed the existing rule IX.E.2 on material transaction. Took a quick look at the new draft rule and it seems an improvement from the existing one - although i think the wording of the draft rule must need to be refined as some of the sections especially on the para 4 (e) and (f) regarding the details of the disclosure was not very clear.
Some of the improvement that can be reported here is taht existing rule on material transaction requires listed companies intending to issue securities to conduct EGM with detailed disclosures including the name of the underwriters, selling price, size, the object and parties involved in the deal. The problem with this is that in many cases, at the point of the EGM many corporates may not know exactly some of this information including the name of the underwriters and the terms of the transaction yet. This renders some difficulties to the corporate that intend to issue such securities.
This draft regulation if published as it is will allow the corporates to conduct the EGM without first knowing all the specifics or details of the transaction including the name of the standby buyer(s) or the size of the deal. New information can be added or revised after the EGM is conducted.
The draft regulation also allows for non-disclosure of certain information if the issuance of the securities is related to debt securities offered to the QIBs via public offering in the international market. The non-disclosure items include the parties involved in the securities, the size of the deal, coupon rate and the requirement to have third party appraiser of the transaction.
Another thing that is made clear on this new piece of rule is that direct lending to corporates from local or foreign banks or financial institutions will be exempted from being considered as material transaction. Exemption from the rule is also given to those companies conducting material transaction under a restructuring process so long as those company suffers from negative working capital or negative equity. Banks which are currently being assisted or under a lending program by central bank or other government owned financial institutions which lending amount exceeds 100% of the equity of the corresponding bank or in any event that such a bank is currently under certain restructuring process will also be exempted from this rule.
there are some other changes include the definition of sale of shares that can be classified as material transaction. The type of sale of shares that falls under this category is the sale of shares due to a divestment process and not other type of sale of shares. The definition of main busiiness activity of a company has also been subject to many interpretation and corporates tries to link whatever businesses they have as their main business activity and thus avoid the rule. In this new regulation, the authority tries to define it further by stating that the MAIN businesses are only those businesses that are DIRECTLY operated by the company. Am not sure whether it makes things clearer on this one. Anyway, at least we have some clarity on other matters.
So, thats all for now. hope the above makes sense. Anyway, lets discuss if there is any concern.
Always
SS
Friday, 28 October 2011
Veson signs up Odfjell
(Oct 28 2011)
Bergen-based parcel tanker owner and operator Odfjell is to manage its entire fleet using Veson Nautical’s IMOS (Integrated Maritime Operations System).
I*n addition, the company will be installing Veslink, Veson's automated system for ship-to-shore communications.
Odfjell’s shipping division - Odfjell Tankers - operates a fleet of about 100 chemical tankers, ranging in size from 4,000 dwt to almost 50,000 dwt.
When Odfjell’s management decided to replace the company’s in-house software system with a fully integrated solution, they short listed companies that could address Odfjell’s biggest ‘pain points.’
The management sought to automate routine tasks, streamline communications between departments, increase productivity and to use real-time voyage data to make the most profitable decisions.
Einar Øye, Odfjell’s senior project manager, explained; “From our first meeting, the Veson team demonstrated an in-depth understanding of our business processes and a holistic and advanced approach to voyage management and software design. That combination was an important factor when we chose Veson.”
John Veson, president of Veson Nautical said; “We are excited that the combination of IMOS and Veslink will bring unprecedented connectivity to the company’s entire operations, from vessels and crew on board, to onshore staff and external service providers.
"The Odfjell team has a sophisticated understanding of how advanced software can help control costs and create profit, and we look forward to a long and productive partnership,” he said.
Odfjell has begun the implementation phase and expects to go live with IMOS by the end of 2012 for the shore based organisation, including about 15 global sites, while Veslink is scheduled to be deployed on board 100 vessels. The company is also integrating IMOS into its corporate accounting package.
Øye concluded; “IMOS and Veslink give us the ability to capture voyage related information at the source and automatically utilise that information throughout our work processes. It’s our goal to provide Odfjell employees with tools which enable them to easily access information relevant to their work. We believe the Veson solution supports this goal and this will be incredibly beneficial for us.”
Bergen-based parcel tanker owner and operator Odfjell is to manage its entire fleet using Veson Nautical’s IMOS (Integrated Maritime Operations System).
I*n addition, the company will be installing Veslink, Veson's automated system for ship-to-shore communications.
Odfjell’s shipping division - Odfjell Tankers - operates a fleet of about 100 chemical tankers, ranging in size from 4,000 dwt to almost 50,000 dwt.
When Odfjell’s management decided to replace the company’s in-house software system with a fully integrated solution, they short listed companies that could address Odfjell’s biggest ‘pain points.’
The management sought to automate routine tasks, streamline communications between departments, increase productivity and to use real-time voyage data to make the most profitable decisions.
Einar Øye, Odfjell’s senior project manager, explained; “From our first meeting, the Veson team demonstrated an in-depth understanding of our business processes and a holistic and advanced approach to voyage management and software design. That combination was an important factor when we chose Veson.”
John Veson, president of Veson Nautical said; “We are excited that the combination of IMOS and Veslink will bring unprecedented connectivity to the company’s entire operations, from vessels and crew on board, to onshore staff and external service providers.
"The Odfjell team has a sophisticated understanding of how advanced software can help control costs and create profit, and we look forward to a long and productive partnership,” he said.
Odfjell has begun the implementation phase and expects to go live with IMOS by the end of 2012 for the shore based organisation, including about 15 global sites, while Veslink is scheduled to be deployed on board 100 vessels. The company is also integrating IMOS into its corporate accounting package.
Øye concluded; “IMOS and Veslink give us the ability to capture voyage related information at the source and automatically utilise that information throughout our work processes. It’s our goal to provide Odfjell employees with tools which enable them to easily access information relevant to their work. We believe the Veson solution supports this goal and this will be incredibly beneficial for us.”
Wednesday, 26 October 2011
Why do institutional investors stay away from small cap companies?
This is always a question when someone is doing an IPO or other fund raising exercise. This is especially so when they have a very good story to tell but small number of investors turn up. This is always a problem for smaller cap companies. Why?
The reasons is probably as follows:
1. Every investor's appetite is different. An investor with US$200mio of funds on hand would want at least US$5mil of investment to call it sizeable. they do not want to invest in a small company with say market cap of $10mil. Their position will be too significant where they can not get out so easily. That's why certain investor wants to invest in a company with a certain minimum amount of market cap. In the case for smaller company, it should find investor with relatively smaller size and appetite of investment amount and works its way from small cap to mid cap to get the attention of the investors. Some really small cap must concentrate on retail investors only.
2. Every investor has his/her own compliance office. He needs to consult with his/her compliance office and if he fails to do so then the investment will be scrapped no matter how good and potential the project is.
3. Some investors avoid investing in small cap because of their perceived lack of quality of small cap companies. Some of the belief are as follows:
a. lack of transparency of management
b. lack of adequate research by fund houses and brokers
c. lack of financial muscle
d. low liquidity
e. high volatility
The management must work hard to deliver values and continue to comply with the good governance to avoid the above perception. One thing to remember is that many of the larger cap companies nowadays are small cap 10 or 15 years ago.
4. The Company' share is not liquid enough to buy. Investors sometime require that the company would have certain minimum average trading volume so that their entering and exiting strategy would not be so difficult. The company management should continue to deliver liquidity in the market and performing frequent corporate actions which give value to investors.
5. In many cases for small cap, management is too busy concentrating on operation and they can not look after investor relations and proper communication of plans.
just some of my thought today....
Cheers,
SS
The reasons is probably as follows:
1. Every investor's appetite is different. An investor with US$200mio of funds on hand would want at least US$5mil of investment to call it sizeable. they do not want to invest in a small company with say market cap of $10mil. Their position will be too significant where they can not get out so easily. That's why certain investor wants to invest in a company with a certain minimum amount of market cap. In the case for smaller company, it should find investor with relatively smaller size and appetite of investment amount and works its way from small cap to mid cap to get the attention of the investors. Some really small cap must concentrate on retail investors only.
2. Every investor has his/her own compliance office. He needs to consult with his/her compliance office and if he fails to do so then the investment will be scrapped no matter how good and potential the project is.
3. Some investors avoid investing in small cap because of their perceived lack of quality of small cap companies. Some of the belief are as follows:
a. lack of transparency of management
b. lack of adequate research by fund houses and brokers
c. lack of financial muscle
d. low liquidity
e. high volatility
The management must work hard to deliver values and continue to comply with the good governance to avoid the above perception. One thing to remember is that many of the larger cap companies nowadays are small cap 10 or 15 years ago.
4. The Company' share is not liquid enough to buy. Investors sometime require that the company would have certain minimum average trading volume so that their entering and exiting strategy would not be so difficult. The company management should continue to deliver liquidity in the market and performing frequent corporate actions which give value to investors.
5. In many cases for small cap, management is too busy concentrating on operation and they can not look after investor relations and proper communication of plans.
just some of my thought today....
Cheers,
SS
Tuesday, 25 October 2011
Capital Increase Without Pre-emptive Rights IV
Hello All,
We have come to the final discussion on the above topic which will be on the requirement for shareholders approval with regard to the debt to equity conversion and part of the Capital Increase Without Pre-emptive Rights.
Well, as requested under the capital market authority, this kind of transaction is subject to shareholders' approval. The procedure for the EGM is basically the same as in any corporate actions in which EGM Announcement should be done 14 days prior to the EGM Notice and the EGM Notice must be done 14 days prior to the EGM.
One thing to note for the creditor about the debt to equity conversion is about the lock up period. Those creditors that receives the shares in consideration of the debt converted must be subject to a lock up period of 1 (one) year from the moment the shares are listed on the exchange. This is regulated under the Exchange and intended to mitigate sudden significant decline in the share price of such company following the provision of the shares to creditors especially considering the size of the shares issued which at times can be substantial and more than the existing shares. For example: the debt to equity conversion conducted by Langgeng Makmur Industry and Sekar Laut in 2005 where the shares outstanding in the market suddenly increase by 91% and 814% due to such undertaking. On the debt to equity conversion by Surabaya Agung in 2007 the outstanding shares increased by close to 1,100% from the existing outstanding shares.
Okay now. Seems we have covered some issues on the debt to equity conversion. lets see if we can discuss other more interesting matters in the coming weeks.
Chao....
SS
We have come to the final discussion on the above topic which will be on the requirement for shareholders approval with regard to the debt to equity conversion and part of the Capital Increase Without Pre-emptive Rights.
Well, as requested under the capital market authority, this kind of transaction is subject to shareholders' approval. The procedure for the EGM is basically the same as in any corporate actions in which EGM Announcement should be done 14 days prior to the EGM Notice and the EGM Notice must be done 14 days prior to the EGM.
One thing to note for the creditor about the debt to equity conversion is about the lock up period. Those creditors that receives the shares in consideration of the debt converted must be subject to a lock up period of 1 (one) year from the moment the shares are listed on the exchange. This is regulated under the Exchange and intended to mitigate sudden significant decline in the share price of such company following the provision of the shares to creditors especially considering the size of the shares issued which at times can be substantial and more than the existing shares. For example: the debt to equity conversion conducted by Langgeng Makmur Industry and Sekar Laut in 2005 where the shares outstanding in the market suddenly increase by 91% and 814% due to such undertaking. On the debt to equity conversion by Surabaya Agung in 2007 the outstanding shares increased by close to 1,100% from the existing outstanding shares.
Okay now. Seems we have covered some issues on the debt to equity conversion. lets see if we can discuss other more interesting matters in the coming weeks.
Chao....
SS
Friday, 21 October 2011
Ocean Tankers' in Difficulty
Ocean Tankers' assets go under the hammer(Oct 21 2011)
Another vessel operated by Cyprus-based Ocean Tankers and managed by Admibros is to be auctioned.
According to Lloyd’s List, the 1998-built 15,558 dwt chemical tanker ‘Anefani’ is to go under the hammer before the Rotterdam district court on November 22, on an ‘as is, where is’ basis, at the request of Royal Bank of Scotland, Dutch law firm AKD Prinsen van Wijmen confirmed to the daily shipping newspaper.
It was thought that the crew claimed nearly $200,000 on back wages, leading to a judgement to sell the vessel.
Earlier this week, the UK Admiralty Marshall opened bidding on the 1997-built, 15,885 dwt sister vessel ‘Frachtis’, currently lying off Falmouth, which had also been arrested.
Towards the end of last month, Lloyd’s List established that 1999-built, 14,441 dwt ‘Skledros’ and her sistership ‘Hartzi’ were being held off Skagen. The 2007 -built, 4,285 dwt ‘Marim’ was also being held in Rotterdam, while the 1999-built, 19,831 dwt ‘Eleousa Trikoukiotisa’ was lying in Ghent.
In addition, the 2001-built, 19,831 dwt, ‘Berengaria’ was alongside Gibraltar’s detached mole awaiting her fate, during Tanker Operator’s visit to the Rock last week.
Taken from Tanker Operator
www.chemicaltankers.blogspot.com
Another vessel operated by Cyprus-based Ocean Tankers and managed by Admibros is to be auctioned.
According to Lloyd’s List, the 1998-built 15,558 dwt chemical tanker ‘Anefani’ is to go under the hammer before the Rotterdam district court on November 22, on an ‘as is, where is’ basis, at the request of Royal Bank of Scotland, Dutch law firm AKD Prinsen van Wijmen confirmed to the daily shipping newspaper.
It was thought that the crew claimed nearly $200,000 on back wages, leading to a judgement to sell the vessel.
Earlier this week, the UK Admiralty Marshall opened bidding on the 1997-built, 15,885 dwt sister vessel ‘Frachtis’, currently lying off Falmouth, which had also been arrested.
Towards the end of last month, Lloyd’s List established that 1999-built, 14,441 dwt ‘Skledros’ and her sistership ‘Hartzi’ were being held off Skagen. The 2007 -built, 4,285 dwt ‘Marim’ was also being held in Rotterdam, while the 1999-built, 19,831 dwt ‘Eleousa Trikoukiotisa’ was lying in Ghent.
In addition, the 2001-built, 19,831 dwt, ‘Berengaria’ was alongside Gibraltar’s detached mole awaiting her fate, during Tanker Operator’s visit to the Rock last week.
Taken from Tanker Operator
www.chemicaltankers.blogspot.com
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