Basil M Karatzas Has Been Appointed Liquidation Trustee for the Sale of Two Pelagic Tuna Purse Seiner Vessels

Basil M. Karatzas                                                          FOR IMMEDIATE RELEASE  One World Financial Center, 30th Floor                                                                         200 Liberty Street                                                                                                              New York, NY 10281 USA                                                                                              Liquidation Trustee

Basil M Karatzas Has Been Appointed Liquidation Trustee for the Sale of Two Pelagic Tuna Purse Seiner Vessels

Majuro, Republic of Marshall Islands, April 28th, 2018Basil M Karatzas has been appointed Liquidation Trustee by the High Court of the Republic of Marshall Islands for the sale of two pelagic tuna purse seiner vessels F/V ‘Fong Seong 668’ and F/V “Fong Seong 696’ (the “Vessels”). The Vessels have been under arrest since November 2017 in the Majuro Lagoon. Under the High Court’s order, the Vessels are to be sold in the immediate future under the direction of the Liquidation Trustee.

On the announcement of the court appointment, Basil M Karatzas stated: “We are delighted to be designated the Liquidation Trustee for the sale of these two well-regarded and good performers of pelagic purse seiner tuna fishing vessels. We are looking forward to exercising diligently our duties as Liquidation Trustee and maximizing value for all parties involved. We are honored that our known expertise as shipbrokers with exceptional track-record of maximizing value and having consummated impeccably difficult transactions in several segments of the maritime industry have been acknowledged via this appointment by the honorable High Court of the Republic of the Marshall Islands.”

About the Liquidation Trustee: Basil M Karatzas is the Founder and CEO of Karatzas Marine Advisors & Co, a NY-based shipping finance and shipbrokerage firm. Mr Karatzas has worked extensively with financial institutions and shipowners in the fields of shipping and shipping finance, and has executed complicated transactions including vessel sales under duress, vessel auctions, sales via insolvency administrator, etc, and also arranging for debtor-in-possession financing, etc Mr Karatzas is an alumnus of Harvard Business School and the Jones Graduate School of Management at Rice University, a member of the Baltic Exchange in the UK, a Senior Accredited Appraiser (ASA) with the American Society of Appraisers, Chapter of New York, and a Fellow of the Institute of Chartered Shipbrokers in the UK.

About the Liquidation Process: The fishing vessels will be prepared and offered for sale under the direction of the Liquidation Trustee. To learn more about the Vessels and the terms of the sale, one may contact the Liquidation Trustee via email at < info@bmkaratzas.com >. Additional information on the vessels and the liquidation process are provided at www.karatzas.auction

About the Vessels: Fishing vessels F/V “Fong Seong 668” and F/V “Fong Seong 696” are pelagic purse seiner fishing vessels of appr. 90 m in length, registered in Vanuatu, and engaged in the purse seiner method of fishing of tuna, and registered under the Western and Central Pacific Fisheries Commission (WCPFC).

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Press release was originally posted on the judicial sale website.

To download the press release, please click here!

Image of pelagic tuna purse seiner fishing vessel FV ‘Fong Seong 696’ in the Majuro Lagoon, the Republic of Marshall Islands. Image credit: Karatzas Auctions

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website.Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

PR – Basil M Karatzas Appointed Liquidation Trustee

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Thoughts from Posidonia 2018

It’s an even-numbered year and it’s June, which – for those in shipping – can only mean one thing: it’s Posidonia time! And, Posidonia it was, the 50th occasion of the international shipping community convening to Athens for the industry’s flagship event.

The cold facts: it has been reported that more than 100 countries have been represented, more than 1,800 exhibitors showcased their trades and more than 22,000 visitors attended the event with an estimate of half of those visitors originating outside Greece. No one could doubt, based on such enormous numbers, the significance of the event to the maritime industry, and, by association, the importance of Greece and the Greek shipping community to the maritime industry. Posidonia has been a truly “must attend” shipping event for its size, the wealth of market info available, and, this being Greece, for its fun, party scene and the great weather!

Having attended Posidonia for numerous times now, one can get a “feel” of the market and observe a lot by just watching, in the immortal words of Yogi Berra. Here have been a few of our observations:

In June 2008, when the shipping markets were white hot and the BDI was topping 12000 points, the Posidonia attendance was standing at just 16,000 visitors; now, ten years later and the BDI at a tenth of its former glory (presently appr 1300 points), the Posidonia attendance was higher by almost 36%. It does seem that Posidonia 2018 was marginally better attended than Posidonia 2016 which was better attended than 2014, which was … Posidonia once again proves that it’s an exhibition with eternal appeal, in good and bad times, where participants congregate to seek market intelligence.

Given the state of the freight market in the last decade, there has been no exuberance this time around with the by-now famous “Posidonia party scene”, since long are the times when company parties were esteemed by the number of Russian models in attendance. However, we have noticed that there have been many more corporate events and receptions than in previous times, quite often discreet and with less noise; mostly dinner receptions where guests could discuss market developments under the full moon in the Greek summer breeze with a drink in their hands. Seeing greater social activity but of less noise and of higher caliber has been an encouraging observation, in our opinion, as it’s a sign that the market gets back to fundamentals and away from the pretense of the past times.

Although freight markets are weak, and frankly the crude tanker freight rates downright painful, we noticed an air of solid perseverance and mild enthusiasm. Posidonia traditionally has been one of the most optimistic conferences in shipping, in our opinion; however, this time we did not notice vainglorious enthusiasm of “bring it on” but rather guarded optimism that since we have survived these terrible markets so far, there is little else that can shock us. Things are getting better, or at least they will get better. Probably this weird mix of sarcasm, resilience and enthusiasm is another sign that the market is reverting back to the fundamentals and logic and away from unfounded enthusiasm and speculation.

And, what a better sign of speculation than newbuilding orders? While in the good times Posidonia was a time of announcing of massive newbuilding orders – just to keep up with the Joneses – this time around, there barely have been any newbuilding announcement; for sure, there have been a couple of them, mostly from well established shipowners and with an LNG focus, but the majority of the market has been keeping clear of new orders. Probably another encouraging observation that the market is slowly shifting back to fundamentals.

Newbuilding orders cannot take place without plentiful and cheap financing, and speaking of the devil, there barely were any financiers in the whole greater Athens region! In the past, shipping banks hosting Posidonia parties used to be a parallel event of its own; this time around, just a handful of banks held discreet dinner parties for their clients and closed advisors with little outward attention. And, even more importantly, a complete dearth of equity fund, hedge funds, mezz funds, credit funds, alternative capital funds and other representatives of “master of the universe” species… Most of the financiers we saw were traditional long-term shipping market players who have been through the ups and downs of the industry a couple of times. Gone were the opportunistic or speculative investors who were de rigueur in previous Posidonia, another sign of the market’s efforts to revert to the mean. On the funny side of things, shipping financiers seem to be getting special attention as shipping finance is very hard to come by these days, and shipping financiers are as precious as the apple in one’s eye these days.

Shipping finance has been a hot topic of the exhibition, as one would expect. Despite selective activity, most shipping banks keep exiting the industry and dumping shipping loans, while the cost of capital keeps going up for most, not to mention the increasing interest rates that pose an additional risk to the industry at a time of soft freight rates. Chinese leasing has been a strengthening trend as well as preference by shipping banks for corporate loans (instead of asset-based ship mortgages), while institutional investors kept bearing the deriding scorn of “dumb money” in shipping and the sinners of a tonnage oversupplied market.

But the critical topic of Posidonia 2018 has been the upcoming regulations for fuels and emissions; and, here, we left the exhibition as uncertain as we were when landing in Athens at the beginning of Posidonia. Multiple panels and presentations and opinionated discussions on emissions, but we drew the conclusion that no-one really has a crystal ball on the subject; the possible outcomes ranged from this being a non-event (postponement into the future) to being a catastrophic event (too costly and not enough volumes clean fuels) that would reset the industry to this being the greatest thing in shipping in the last decade (accelerated scrapping and disappearance of less-capitalized shipowners.) A wide range of opinions indeed that render decision-making in such a challenging environment not dear for the meek in the heart; but again, that’s how money is made.

The Greek shipping community still stands strong, and, in general, in the news in the last few years, especially when it comes to opportunistic vessel acquisitions in the secondary market. Despite market challenges, Greek shipowners keep buying ships (occasionally even at high financing costs), and this purchasing activity contrasts them to other shipping nations that have been less active, or even net sellers of vessels. Thus, a few self-congratulatory remarks were to be expected here and there.

Posidonia is for sure the shipping event to attend; so much info to be learned as the as the vastness of the big ocean itself!

Posidonia 2018. Image credit: Karatzas Images

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website.Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

Can money still be made in shipping by flipping ships?

Unlike other capital assets whose value depreciates over the economic life of the asset, ships are known to appreciate in value if markets are strong. When freight markets are exuberant, the value (price) of ships can appreciate as investors expect stronger cash slow streams and higher earnings. It’s not unheard of ships having doubled or trebled in value in a matter of years, generating exceptional windfalls for their owners.

It is said that much more money in shipping has been made by timing the purchase and sale of ships by an owner and benefiting from the asset appreciation rather than by generating operating profits. And, conceptually, this is true: over the long term of a business cycle, as markets are efficient, the operating profit cannot be much higher than the risk undertaken from investing in a ship. On the other hand, as shipping is subject to a myriad variables – a few of them beyond the realm of logical projection such as geo-political events or natural disasters – volatility in the shipping spot freight markets is notoriously gigantic (both VLCCs and capesize vessels in the last decade experienced spot rates ranging from $1,000 pd to $200,000 pd), ships prices can vary accordingly. There have been cases of ships that have doubled or trebled in value in a matter of a few short months, even – and, inversely there have been cases where ships have collapsed in value in a matter of weeks (actually, there has been a well-published Harvard Business School case study – to which we have contributed, whereby two sistership capesize vessels were sold a few months apart in 2008 at a price differential of more than $90 million. By timing the market decently, many a shipowner have made a fortune in the last decades by just buying and selling vessels at the right time.

The 2008 market correction saw a precipitous drop in asset prices. Many buyers hoped for vessel acquisitions at distressed prices – mostly from fire sales from shipping banks, but really only a small portion of vessels mortgaged with bad loans ever got to be sold cheaply. There was no doubt in the minds of many people that 2010 asset price levels were strong buying opportunities.

Once the markets normalized, 2012-2015 saw a tremendous interest in newbuilding vessels, which, by boom-year standards, were at competitive prices; and, of course, shipbuilders did their best to encourage more newbuilding activity by actually sharing the subsidy windfalls from their governments with international buyers of newbuilding ships.

Let’s say that a market recovery did not play out as expected and 2016, for the dry bulk market, saw one of the worst times on record; freight rates and asset prices just collapsed. As a matter of proportion, ten-year-old drybulk vessels were selling in early 2016 at twice their scrap value, while historically ships of that age would be expected to sell at approximately 5x their scrap value. Once again, 2016 was a screaming buying opportunity in the mind of many people, of buying “cheap ships”.

Fast forward two years later, drybulk asset prices are higher than the lows of 2010 and 2016; but, really, not exuberantly higher; and, definitely, no higher than the highs of 2013-2014. Yes, there have been cases of ships getting flipped at double their purchase price between the low and the high, but such evidence is limited to one-off deals, older tonnage, or transactions where the seller had to sell at any price.

The tanker market, the other main commodity shipping market that it’s prone to asset flipping, has experienced similar trends, only in a different sync cycle than dry bulk. Tankers actually are at a cycle low at present with the trade of crude oil being dislocated by OPEC’s production cuts and the boost of shale oil in the US. Tanker asset prices are low – so much so that an institutional investor recently sold a vintage VLCC for scrap – which was bought three years ago; sale was at a loss by our calculations, and much pre-maturely than the expectations of the tanker’s economic life. Making money on this cheap but vintage supertanker did not work out.

What has happened to the asset play game in commodity shipping? Is the game over? Freight rates still are fair and drybulk vessels generate positive cash flows; what would take to pull prices up from the depths of the 2016 crisis?

We wish we had a crystal ball on this, but we think that making money by flipping ships these days is not the “game” it was. The market is getting more complicated, more efficient and transparent, and more demanding; higher demands by all: bankers, charterers, operators, regulators, etc And, ships have been evolving, and they have to catch up with new regulations; it was ballast water treatment management last year, it’s emissions this year, likely it will be IoT and bunkering fuel in the next few years. And, likely many more factors to worry about.

And, cheap and plentiful financing leverage to lubricate the market to make purchasing of ships easier is only getting costlier and more complicated. And, lack of cheap leverage, among other things, has kept a lid on asset prices.

Not saying that asset play is dead; ships seem reasonably priced in today’s markets. But, asset players have to have access to capital and buy opportunistically fleets (not just a ship) when the timing is right (i.e. Angelicoussis and Ofer Groups in the past), and also have the flexibility for financial structuring (while Star Bulk sold have their capesize fleet (at a major loss) in 2016, now they are consolidating the market by paying in paper (shares) to acquire the Songa drybulk fleet and the Augustea Atlantica / York Capital tanker fleet). By buying and operating fleets, they give themselves the benefit of finding employment with established charterers, accessing the banks and capital, having an operating platform – if the asset play does not work out, they will have the capacity to sustain the cycle and go for operating profits.

Borrowing from a credit fund at 10% interest to play the asset game for one or two ships is like playing with the fire. Even worse if the asset player has to put 100% of the purchase money themselves.

Several shipowners tried to raise capital since the 2016 crisis based on the investment thesis that buying cheap ships pays off. We are aware of no institutional investor who actually paid much attention to the theme or even funded the project, since 2016, tempting the theme as it may have been. At least, some lessons have been learned on this matter from the past.

Still shipping is an exciting industry and there is money to be made. But for now, the asset play game is not the way to make money in shipping. At least not by playing the same game with the old rules…

Flipping is hard to do! Image credit: Karatzas Images

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website.Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

 

Dry Bulk Ships: To Buy or Not To Buy

The dry bulk market had a great run from the fall of the last year until March this year when the BDI reached 1,338 points on March 29th.  While freight rates still have been hovering at just above break-even levels, the improvement of the market has been impressive in relative terms; freight rates have quadrupled in the last year, admittedly from abysmally low levels.

While still the freight improvement has not been strong enough to justify popping champagne bottles, it has worked miracles in terms of improving the mood and bringing soaring enthusiasm back in a market that was relentlessly bleeding cash for the last few years. The enthusiasm has been so strong that recent sale & purchase activity (s&p) has been the strongest in the last two years, while there are a couple of cases of shipowners doubling their money on ‘asset play’ transactions within the last year.

The market has given up some of its recent earnings as the BDI is now back to approximately 900 points, but the improved mood is still abundantly present. And, given that we are heading into the summer, a seasonally weak season for shipping, there have been some concerns on the direction of the market. And, now that the market seems to be taking a breather and there is some time for introspection, there is some head-scratching on the real reasons for the market bouncing back so strongly in the last year as fundamentals did not seem to justify such a strong (fourfold) freight improvement.  All in all, while the market is still decent and the mood is buoyant, one has to be more cautious at present.

Shipping asset prices have improved since last year when ships, especially when non-modern dry bulk ships were selling at a multiple of their scrap value, irrespective of quality and pedigree. Probably the “easy money” has been behind for those looking for an easy “asset play”, but shipping asset prices are still low by historical standards.  And, there has been serious interest for acquisitions of dry bulk shipping assets whether in the secondary or the newbuilding market.

But again, it’s hard for a buyer or investor to enter aggressively the market. Prices have doubled for a great deal of assets while the freight market barely covers their daily operating expenses. And, there are risks looking forward to justify an aggressive approach. Trade volumes are still anemic to imply a strong market recovery. And, shipbuilders are getting more desperate by the day at building up their orderbook. Lack of competitive shipping finance keeps a dumper on the market, but any export credit incentive or other catalyst would have a tremendous (even catastrophic) impact on the market.

While asset prices look tempting by historical standards, whether for tankers or dry bulk vessels, it’s hard making the argument that the market is in a full recovery swing and buying ships, whether for operating profits or for asset flipping in the future, can b a great strategy. The risks still lurking in the market cannot be ignored. And, in our opinion, the “irrational exuberance” we have seen earlier in the year make us believe that there is still lots of froth in the market.


The article was first published in Seatrade Maritime on June 6th, 2017 under the title “Dry Bulk Ships: To Buy or not to Buy“.


Great looking dry bulk vessel MV ‘Genco Pyrenees’ not making making (sailing in ballast). Recently photographed sailing upstream in Elbe in Hamburg. Image credit: Karatzas Images

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website.Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

‘Shipshape 10’ News for Week Ending May 28th, 2017

‘Shipshape 10 List’, a list of news and articles published in the current week that a senior executive in shipping, shipping finance, commodities, energy, supply chain and infrastructure should had noticed; news and articles that are shaping the agenda and the course of the maritime industry.

Sometimes seemingly tangential, periodically humorous, occasionally sarcastic, sporadically artistic, inferentially erotic, but always insightful and topical.

And, this week’s ‘Shipshape 10’:

While lots of shipping hope has been laid at the feet of a Chinese recovery, China’s sovereign debt has been downgraded mostly on concerns of slowing growth:
1. China’s sovereign debt downgraded by Moody’s (Financial Times)

2. China Moves to Stabilize Currency, Despite Promise to Loosen Control (The New York Times)

A seemingly major investor for shipping, but not clear whether there are string attached; in any event, the funding gap in shipping could suck up Dubai’s billion fund in seconds:
2. Dubai looking into forming $1 billion shipping investment fund (Reuters)

Shipping is a commodity b2b business. Od, isn’t it?
Quoting Basil M Karatzas, at Splash 24/7
3. Has Shipping Become Commoditised? (Splash 24/4)

In a weak overall market, mergers in the commodities trading world, and other news:
4a. Sowing Glencore’s Waves of Grain (Bloomberg)

4b. Huntsman and Clariant unveil $20bn tie-up (Financial Times)

4c. Noble Group, a big Asian commodities trader, is teetering

4d. War on Sugar Turns Years of Growth Into Market Tipping Point (Bloomberg)

OPEC had once promised to do ‘whatever it takes’ to drive oil prices higher. This week’s developments from Vienna show that OPEC may not be in charge of the oil markets as it used to be:                                                                                         5a. OPEC Should Watch Glencore’s Bunge Jump (Bloomberg)

5b. OPEC’s Weakest Link Is Not Who You Think It Is (Bloomberg)

5c. Opec: more of the same (Petroleum Economist)

5d. BP and Glencore warned over bullish fossil fuel forecasts (Financial Times)

5e. Oil market awaits ‘whatever it takes’ details as Opec gathers (Financial Times)

And the reason for OPEC’s dwindling chances controlling the oil markets:
6. New era beckons as Euronav VLCC is first to load US oil (Lloyd’s List)

Soft tanker asset prices have been conducive for M&A activity, with Scorpio Tankers acquiring the Navig8 Products Tankers fleet, creating the biggest player in the sector:                                                                                                                     7a. Scorpio Tankers fleet worth $3 bn after Navig8 Product Tankers takeover (Seatrade Maritime)

7b. Scorpio Announces Merger With Navig8 Product Tankers (The Maritime Executive)

While the world of ‘commodity shipping’ is struggling to recover, the cruiseship market has been strong, and China’s prospects in the sector cannot be ignored: 8a. China Tops Two Million Cruise Passengers (The Maritime Executive)

8b. Princess Tells “Chinese Story” Along Silk Road Route (The Maritime Executive)

8c. Greece To Bolster Cruise Capabilities (The Maritime Executive)

The current issue of the Economist is running a series of articles the oceans:
9a. How to improve the health of the ocean (The Economist)

9b. Getting serious about overfishing (The Economist)

9c. Megaprojects threaten Hong Kong’s iconic dolphins (The Economist)

“I will greatly bless you, and I will greatly multiply your seed as the stars of the heavens and as the sand which is on the seashore.” Genesis 22:15-18, and “like the sand of the sea, which cannot be counted” Genesis 32:12. Apparently, sand is not as plentiful these days:

10a. The World is Running Out of Sand (The New Yorker)

10b. An improbable global shortage: sand (The Economist)

Majestic sunset: Piraeus. Image credit: Karatzas Images

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website.Whilst every effort has been made to ensure that information herewithin has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.