Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
SHIPPING FINANCE PRESENTATION TO: NATIONAL TECHNICAL UNIVERSITY OF ATHENS NIKOS VERAROS DATE: 12/5/2003 INDUSTRY FINANCIAL OUTLOOK Highly cyclical industry Highly leveraged asset Timing critical for investment success Active second hand market for the assets Average Return on Asset of 10% Average Return on Equity can be significantly improved through financial leverage & good timing VESSEL VALUES vs FREIGHT RATES Vessel values follow freight rates fluctuations with a time lag Panamax freight rates vs. vessel prices Freight rates Vessel price Mar 2002 Oct 2001 May 200 Dec 200 Jul 2000 Feb 2000 Sep 199 Apr 1999 Nov 1998 Jun 1998 Jan 1998 Aug 199 Mar 1997 Oct 1996 May 199 Dec 199 Jul 1995 Feb 1995 Sep 199 Apr 1994 Nov 1993 160 140 120 100 80 60 40 20 0 DEMAND IN PRINCIPLE … Shipping trade demand growth Long-run: related to World Economy Short-run: fluctuations trigger shipping cycle surges & dips DEMAND GROWTH long-run growth Qty surge dip short-run fluctuations time Relatively inelastic to changes in freight prices because: 1. Transportation cost is only a small portion of overall product cost 2. Transportation comes at the very end of the production process SUPPLY IN PRINCIPLE … EXPECTED FLEET GROWTH (measured in deadweight tons) Current fleet size Plus: Vessels under construction Minus: Vessels to be scrapped Change in avg fleet age Relatively elastic to freight price changes Usually operators overreact to changes in demand SHIPPING CYCLES IN PRINCIPLE … A Flat B Upturn C Decline A Flat … SHIPPING CYCLES IN FIGURES TIMING IS WHAT COUNTS When to enter? When market is flat When to exit? Quickly, when market conditions improve When investment timing proves wrong, we should hold until the storm passes FINANCING OF SHIPPING Bank mortgage loans is by far the main method of financing Capital markets (equity & bond issues) have only marginal contributions Bank Financing to Greek Shipping (USD mn) 19500 18,912 19000 Ferries, 9% 18500 18000 17500 17000 16,715 16500 16000 15500 2000 Source: XRTC 2001 Ocean going, 91% Bank Financing to Greek Shipping (USD mn) Country Participation Greece 21% Germany 29% France 9% US 7% UK 19% Netherlands 8% Switzerland 4% Norway 3% Other 1% Source: XRTC Economics of Shipping Loan Total Firm Value = Debt + Equity Time Firm Debt Equity Leverage RoA 0 100 80 20 80% 1a 130 80 50 62% 30% 150% 1b 90 80 10 89% -10% -50% 1c 75 80 ? ? -25% - RoE - ? Process of Granting a Shipping Loan 1. Submit proposal to the Bank 2. The Bank offers Indication Letter 3. Negotiate terms 4. The Bank obtains Credit Approval and issues Commitment Letter 5. Sign Commitment Letter 6. Lawyers take charge and draft Loan Document 7. Sign Loan Document 8. Money Drawdown VESSEL PARTICULARS RELEVANT TO FINANCING Vessel Type Dwt Built Lwt Flag SS Due Niki MT 60,000 1982 8,500 MALT Dec 03 Newbuilding Financing Instalment payments to the yard Signing Keel laying Launching Delivery Refund Guarantee Bank pre-delivery financing Lease transactions Concept of Depreciation Structures to benefit from depreciation charges Stock Exchange Only Ferry companies so far in the Athens Stock Exchange Attica Enterprises, Minoan, Anek, Strintzis, Nel, Dane Legal framework under review for ocean going companies Major listings in New York include: Tankers: Stelmar, TEN Bulkers: Angelikousis