Media Monitoring Report: NYC Ship Finance Forum

Transcription

1 Media Monitoring Report: NYC Ship Finance Forum Report generated 15 November 2015 Summary of Mentions Traditional Press: Moderate Trade Press: Moderate Social Media: Moderate Other Online: Moderate Coverage Overview Coverage on the 16 th Annual Ship Finance Forum in New York City was moderate as many articles discussed specific and noteworthy speakers views on different aspects of the market, like Robert Bugbee and Jeffrey Pribor. The Lloyd s List article was circulated on social media more so than other articles and coverage was especially heavy throughout the conference by Kevin Richards of Bermuda (as shown in the social media section).

2 Sample of Trade Press Coverage Liberian Corporate Registry Marine Money s 16th Annual Ship Finance Forum Marine Money s 16th Annual Ship Finance Forum is being held today at the Plaza Hotel in New York City. Pictured are Mrs. Hara Gisholt and Mrs. Hilary Spilkin at the Registry s sponsored networking luncheon. Please visit Marine Money s site for details on today s forum (Link). Ship & Bunker Dry Bulk to "Stay Worse Than We Expected" as BDI Slumps to 8 Month Low The Baltic Dry Index (BDI) Friday slumped to its lowest level since March, leaving the sector's key index standing at 560 after falling every day over the previous three weeks, and losing 226 points in that time. It was last lower on March 4, at 559, and Friday's value is equal to the 560 set on March 12. The development will undoubtedly leave market watchers wondering where the bottom might be, and will be especially worrying as November is generally a better part of the sector's season. As some analysts have noted, when the BDI hit 631 on November 6, this was already the lowest ever November level. Robert Bugbee, President, Scoprio Bulkers last week likened the dire market to a "50 to 200 car pileup." The BDI's lowest ever overall level of 509 was reached on February 18, 2015, which is now just51 points away - an amount that is less than the index shed in the three days leading to Friday's560.

3 And based on the comments from some shipowners, the worst is indeed yet to come for the beleaguered segment. Robert Bugbee, President, Scoprio Bulkerslast week likened the dire market to a "50 to 200 car pile-up." "[The dry bulk market is] much worse than we expected and will stay worse than we expected," he said at last Tuesday's Marine Money conference. Last month JPMorgan Chase & Co. (J.P. Morgan) predicted that 2016 will be even worse for the sector than TradeWinds BDI back below 600 UPDATE: Pressure mounting on bulker owners as key index falls to lowest level since June. Pressure was mounting on bulker owners on Wednesday as the key Baltic Exchange Dry Index (BDI) dropped to its lowest level since June. The index stood down 23 to 599 points, while the capesize figure was down 72 at 946. And the Baltic s average of four capesize time-charter routes was showing a daily rate of $5,781, down $480 from Tuesday. However, the market has not yet reached its recent BDI nadir of 511 recorded in February, the lowest level for at least five years. It last dipped below 600 at the start of June. Shipowners acknowledge the difficult market, and have little view as to when conditions will turn. Speaking at Tuesday s Marine Money conference in New York, Robert Bugbee said his own firm, Scoprio Bulkers, has gone through a 50 to 200 car pile-up due to current market conditions. Bulkers need a lot of work, Bugbee told attendees. It s much worse than we expected and will stay worse than we expected. Lloyd s List High-dividend payouts criticised at Marine Money forum Clean corporate structure hailed as key ingredient for a public company, but high-dividend payouts criticised for lack of balance sheet flexibility CORPORATE governance and dividend policy emerged as two hot button issues at the Marine Money Forum in New York on Tuesday. But while there was a broad consensus about the need for best corporate practices, views on what constitutes an optimal dividend policy differed.

4 Jeffrey Pribor, of Jefferies, identified clean, transparent organisational structure as a key attribute for a shipping company seeking to launch a successful initial public offering. Other key attributes identified by Mr Pribor included a strong management team, differentiation from competitors, dividend policy and market capitalisation, which he described in his own terms as size matters. Nevertheless Mr Pribor was very pessimistic about the prospect of a shipping IPO before the end of the year, citing adverse market conditions and a downward trend in share prices of recent IPOs. The need for proper corporate governance was echoed by Peter Georgiopoulos, chief executive of Gener8, the last shipping company to go public in New York in He was particularly critical of companies appointing pseudo-independent directors or goons to represent the interests of shareholders, and took pride in his companies having independent boards despite not being expressly required to do so. Responding to a question by the audience, Mr Georgiopoulos named Teekay as a role model among shipping companies for a truly independent board of directors. On the other hand, Mark Friedman of Evercore chastised companies engaging in a dividend 'arm s race' during his presentation, aptly named It s the dividend, stupid, a play on former US President Bill Clinton s campaign slogan It s the economy, stupid. Mr Friedman referred to tanker companies like Euronav, DHT or Ardmore, which have adopted a highvariable dividend policy targeting dividend payout ratios between 60% and 80% of net income, and Teekay Corporation, which recently raised its quarterly dividend payment to $0.55 per share, an increase of 74% from its previous fixed level of $ per share. Mr Friedman recognised that large dividend payouts may be the result of demand by shareholders for greater return of capital, or a general lack of trust to profitably redeploy earnings. But he argued that large dividend payouts do not create enough balance sheet flexibility. In his view, they reduce a company s ability to make large acquisitions, having to rely on capital markets to raise the necessary equity funds. In addition, consecutive capital raises are highly inefficient, albeit lucrative to an investment bank, and lead to volatile stock prices. Mr Friedman also presented evidence that there is a lack of correlation between dividend payout and the premium of a stock price vis-à-vis its net asset value. However he recognised Nordic American Tankers as trading at two times above its net asset value. Nordic American Tankers has for the longest time paid high dividends to its shareholders irrespective of freight market conditions.

5 IHS Fairplay Debate Intensifies on private equity tanker sales Is private equity jumping ship on tankers and will this exit strategy accelerate to the detriment of asset pricing? This increasingly pressing question was debated at the Marine Money forum in New York on 10 November and explored in interviews with IHS Fairplay. Connecticut-based crude and product player Ridgebury Tankers, sponsored by private equity (PE) group Riverstone, is now in the final stages of being sold. PE group Greenbriar just sold off half its stake in product tanker owner Ardmore Shipping, the company it founded and sponsored. Shipping magnate Peter Livanos recently divested most of his remaining stake in NYSE-listed crude tanker owner Euronav. PE giant Apollo, after selling its Principal Maritime crude fleet to Teekay Tankers in return for cash and shares, just sold off the Teekay Tankers shares it acquired in the deal. All of these moves follow sales of modern tankers in the second-hand market by York Capital, Wayzata Investment Partners, and Carval Investors. In aggregate, it seems a peculiar amount of activity during a short period of time to be considered coincidental, particularly given that crude and product tanker sectors are the only shipping markets that are actually performing very well. In other sectors where PE is heavily invested, such as container shipping and dry bulk, the freight market is so bad that a PE exit is virtually impossible. The obvious question raised by the PE tanker sales is why now? Is it smart money calling the top of the tanker cycle? If so, will tanker sales accelerate, creating a self-fulfilling prophecy that impacts second-hand prices due to an overabundance of sellers versus buyers? IHS Fairplay interviewed Bob Burke, CEO of PE-sponsored Ridgebury Tankers, which is currently near the end of its sale process. Asked about the unusually high volume of PE-linked tanker sales despite very strong fundamentals, he responded, All the private equity groups have different reasons for selling. Sometimes, they re wrapping up funds. Sometimes they are out fundraising and want to book a gain. He drew an analogy to American investor views on Greek shipping, noting that such market-watchers often take note of what the Greeks do. There are a lot of different Greeks, each with a different reason for selling, said Burke. He also pointed out that public shipping companies never sell out completely and Greeks generally sell a few ships here or there, so when PE firms sell entire shipping stakes, they are the only bellwether. Asked whether the PE sales imply negative sentiment on tanker cycle longevity or are just coincidental, he said, I have given it a lot of thought. I don t have an answer. I m not trying to be evasive. I just don t know. However, on the argument that PE is the smart money leaving the sector, he responded, A lot of people would say private equity is the stupid money. When Burke was on the conference panel, he was specifically asked why now? regarding the Ridgebury sale by the moderator. Although he said he could not offer a specific answer, his subsequent comments were telling. He said that as a private owner at a certain price, you transact, whether to buy or sell. He also said, I don t have to be the last guy at the party, implying he does not need to sell at the cycle top.

6 According to Neil Lyng-Olsen of the corporate finance department of Pareto Securities, the confluence of tanker equity sales by PE does not necessarily reflect a negative view on the tanker cycle. If you look at the tanker sector fundamentals, they are very strong. Every PE seller has a different story. Some clearly bought at the right time and they re in the money. As the saying goes, It s never wrong to take a profit, said Lyng-Olsen in an interview with IHS Fairplay. There are probably also some funds where there has been some frustration [with shipping], where it has taken longer than expected and with things now in positive territory on the tanker side, maybe even in single-digit territory, which is not great, it s a situation where they said we had our fun, let s move on, he said. IHS Fairplay also interviewed industry veteran Randee Day on the subject on the tanker sales by private equity. Day is the founder of Day & Partners, a company that has strong relations with the PE community. It is unfortunate that they all happened at the same time, she told IHS Fairplay of the recent PE sales of tanker stakes. Day, who herself has interests in a joint venture with PE involving crude carriers, noted that returns have been very high and it s tempting now to offload and not be greedy. As for future market indicators, she said, If I see an uptick of VLCCs for sale in the next couple of weeks, and I see more Greek sellers than Greek buyers, well, that could be something to watch. Others speaking to IHS Fairplay off the record at the Marine Money event did indeed link the recent PE tanker sales to negative sentiment on the longevity of the tanker freight cycle. One fund manager said that the attempt by various parties to describe such sales as a confluence of unrelated events was an example of thou protesteth too much. He believes sales activity is an attempt to call the top, because as sales accelerate in a market with limited buyers, second-hand asset prices will be further pressured and the earliest sellers will garner the best price. IHS Fairplay Shipping veteran sees fundamental investor shift The US public market for shipping companies has experienced a profound shift in its investor mix, which partially accounts for this year s very poor stock performance, according to Gener8 Maritime CEO Peter Georgiopoulos. Georgiopoulos has taken five NYSE-listed companies public: crude tanker owner General Maritime (2001), dry bulk company Genco (2005), bunker supplier Aegean Marine Petroleum Network (2006), dry bulk company Baltic Trading (2010), and crude tanker company Gener8 Maritime (2015). Consequently, Georgiopoulos is an ideal position to comment on the differences in investment environments for public shipping companies over the past decade-and-a-half. There has been a huge change, he told attendees at the Marine Money forum in New York on 10 November. In 2001, Wall Street really didn t understand shipping. At that time, shipping was dominated by private companies and as shipping came to the public market, it was a big education. It

7 was an exciting time, he recalled. Today, you go out [on an IPO roadshow] and meet a 30-year-old fund manager who knows the business better than you and he s telling you how you should run your company. It s a very different atmosphere. Another issue is that back in 2001, you had the really big long-only funds [investing] and they show no interest in coming back to the market. Today, the market is dominated by hedge funds. But these hedge funds have already gotten into the shipping companies when they were private, so now, when you re on the roadshow, the hedge funds are not buyers of the stock, because they are already in the stock on the private side. Regarding the ultra-large US institutional investors such as Fidelity and Wellington, he said, We just haven t seen them interested in shipping during the last cycle. I don t know if it s because they got hammered in [on their shipping investments], but they have not come back. Those investors have also become so big and the amount of money they need to put to work is so large that even a shipping company with a USD500 million to USD1 billion market cap is too small for them to pay attention to. It s too hard for them to make an investment and try to get out [of their position, due to lack of liquidity]. I don t know if I can even count that high, said Georgiopoulos, commenting on how much money is under management by funds in the Fidelity category. In other words, America s largest institutional investors have grown so much more rapidly than public shipping companies over the past decade that it is now dramatically more difficult for such investors to buy into the sector. Shipping, which has remained a micro- to small-cap sector in the US public market, is being left behind. Even in the relatively smaller hedge fund investor category, you ve got all these hedge funds I ve never heard of with USD25 30 billion under management, said Georgiopoulos. These people can t buy a million dollars of shipping stock. It s not worth their time. Asked by the moderator about who does remain an active buyer of shipping stocks, Georgiopoulos responded, There are no buyers. Look at the volumes and the share prices. Look at [tanker owner] Euronav, which is a great company with a big dividend and will have another big dividend after the next quarter. No one cares about the stock. We re in a USD100,000/day VLCC [very large crude carrier] market and the stocks are languishing. Look at our stock, he said, referring to performance of Gener8 shares. It stinks. In addition to a lack of buyers, he also pointed to a heightened cynicism toward the rate cycle among remaining investors. There is no conviction. In 2013, I came out ahead of everybody and said there was a fundamental shift in the VLCC market. People thought I was crazy, but then they started jumping on the bandwagon. Now everything we laid out has happened and the market has really taken off more than we imagined. But people still believe this is some kind of temporary aberration. Either that or they ve gotten so hammered in dry bulk that they just lump all of shipping together and avoid tankers as well, he said. Georgiopoulos believes the solution lies in much larger public shipping companies. I think shipping needs to be in the USD5 billion market cap category. If that happens, it changes the entire dynamic. If

8 you have a couple of companies in the tanker and dry bulk sector that have USD5 billion market caps and are well capitalised and well run, then during the next down cycle, the hedge funds and private equity groups that would otherwise go out and order 10 ships for themselves would instead buy USD200 million of that big company s stock. So the money coming into the market wouldn t flow into newbuildings, it would flow into one of the big bellwether public companies. That would be my hope.

9 Sample of Social Media Coverage We have included a sample of the most influential and most significant social media mentions: please note that reach refers to the number of social media users able to see the post. Search Results Reach Date

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12 MTI Network Media Monitoring incorporates results from a combination of premium automated search tools, online search engines and manual monitoring of major formats to ensure that we get the best results for our clients, in a timely manner. We work in partnership with Meltwater News and Meltwater Buzz, using their premium monitoring software to monitor over 190 thousand news publications and more than 300 million social media conversations daily. Our experienced media monitors also scour the web using tools including, but not limited to, Google, Tweetdeck, Ice Rocket, Mention and Bing. Our monitors will have developed knowledge of your company and any potential issues so they can sift through all the online noise to find any relevant mentions. The final step is a physical monitor of major trade publications and social media formats which our media monitors perform on a weekly basis.