karatzas marine assessing interest final oct2014
TRANSCRIPT
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Karatzas Marine Advisors & Co. International Maritime Advisory
„Assessing Investor Interest in Shipping Opportunities”
Turkish Shipping, Investment and Finance Conference Tuesday 21 October, Intercontinental Hotel, Istanbul
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‘Safe Harbor’ Statements
! ‘And seas but join the regions they divide’
Alexander Pope
! ‘In Sea affairs, nothing is impossible, and nothing is improbable’
Admiral Lord Nelson, writing from HMS Victory in 1804
! ‘If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea’
Antoine de Saint-Exupéry
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Company Introduction
! Karatzas Marine Advisors & Co. is New York-based firm with worldwide footprint & strong, well-qualified management team
! Active in shipping finance advisory, restructurings, maritime strategy, private placements, vessel valuations, ship brokerage and vessel management
! Clients include: ! Financial institutions seeking shipping market expertise and advisory on shipping matters ! Financial institutions in need of origination of transactions in shipping ! Banks seeking to dispose of shipping assets and/or shipping loans ! Shipowners seeking advise to access the financial markets ! Shipowners seeking advisory and investors with existing ‘legacy’ concerns ! Shipowners seeking financial partners to benefit from present market trough
! Dry bulk, tankers, containerships and offshore ! International flag business primarily, but also Jones Act expertise ! Proven track record of market outperformance and delivering value to clients
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Professional Memberships ! American Bureau of Shipping (ABS), Member
! BIMCO, Member
! Propeller Club, New York / New Jersey Chapter,
Board Member (past)
! Society of Naval Architects & Marine Engineers (SNAME), Associate Member
! Royal Institution of Naval Architects (RINA), The
Associate Member
! Piraeus Marine Club (Greece), Member
! Connecticut Maritime Association (CMA), Member
! Singapore Chamber of Maritime Arbitration (SCMA)
! BALTIC EXCHANGE (Application pending) KARATZAS MARINE ADVISORS & Co. October 2014 Page 5
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Shipping Funding Sources
Equity
‘Private Equity’
‘Sweat Equity’
– Traditio
nal Shipow
ner
Co-investm
ents
Public Markets
Initial Public Offerin
gs (IPOs)
Secondary
Offerings /
Follow-ons
Debt
Shipping Banks
Syndications
First Preferred Ship Mortga
ges
Club deals
Capital Markets (Bonds)
Alternative Finance
Sale & Leaseb
ack Transac
tions
Mezzanine
Working
Capital
Preferred
Equity
Convertible
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Equity Investments
! Equity Investments bear full market exposure, both upside potential and downside risk ! Depending on business model, timing is crucial ! Traditionally, independent shipowners had been providing ‘sweat equity’ (to be levered with debt
provided by shipping banks)
! Independent shipowners cannot always commit required equity
! Institutional Investors playing a great part in shipping ! Institutional Investors can have a more aggressive scenario due to their own unique investment parameters ! Can co-invest or sponsor management teams and companies ! Investment horizon of 5 – 7 years, usually ! According to Financial Times (December 8th, 2013), US-based PE funds command $789 BILLION unspent investor
pledges (‘dry powder’), PE funds globally command in excess of $1 TRILLION dry powder (for comparison: German GDP (2012) ≈$3.5 Billion, Greek GDP (2012): ≈$250 billion); tremendous liquidity does not translate to ‘free money’
LATEST DEVELOPMENTS: ! Institutional Equity Investors getting ‘deal fatigue’ ! Look for value-added opportunities as serious-with-shipping investors have already invested in
‘plain vanilla’ shipping projects
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Shipping on the Radar!
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PE and Shipping
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$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2008 2009 2010 2011 2012 2013
Equ
ity
Inve
stm
ents
in U
S$ b
illio
n
Equity Investments in Shipping by PE funds
Data source: Karatzas Marine Advisors & Co
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Debt Financing
! Banks have to live with with more intense regulation (Basel III, etc) ! Shipping not the most attractive industry for lenders, especially traditional ship
mortgages ! Brand-new landscape that likely will remain for the foreseeable future
! Challenging environment, especially for traditional shipowners ! Traditional shipowners will have to adapt to new reality ! Operate larger fleets more efficiently ! Consolidated financial statements and documentation ! Corporate lending ! Focus on public markets / bonds
LATEST DEVELOPMENTS:
! No news really in the traditional shipping lending markets ! Low interest rates make issuing of bonds attractive, but not all can qualify ! Low expectations for positive drastic developments in near future ! Independent, traditional shipowners will have to ‘think outside the box’
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Shipping Loans
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$0
$20
$40
$60
$80
$100
$120
$140
SHIPPING LOANS (US$ bil)
SHIPPING LOANS (US$ bil)
Linear (SHIPPING LOANS (US$ bil))
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Alternative Financing ! More flexibility in structuring than ‘pure equity’ investments ! Suitable for ‘legacy transactions’ (restructurings) but also for financing new projects ! There are many more Institutional Investors for Alternative Financing rather than pure
equity investments ! Typical transactions:
! Sale & Leaseback transactions to monetize on existing assets ! Provide new loans with junior position but upside potential (convertible) ! Provide new financing with lower security than a bank’s loan (ship mortgage) but with minimum return
(preferred) ! Restructurings of existing shipping loans, access working capital to run vessels, acquisition of new assets
LATEST DEVELOPMENTS: ! Funds providing Alternative Finance have been more active than usual ! Likely to be meaningful source of capital for shipping until shipping finance markets
normalize ! Low interest rate environment allows such funds to be more aggressive and flexible on
their structuring KARATZAS MARINE ADVISORS & Co. October 2014 Page 16
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Agenda
! Company Introduction
! Shipping Funding Sources
! Equity
! Debt
! Alternative Finance
! Parting Thoughts
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Shipping Funding Sources
Equity
‘Private Equity’
‘Sweat Equity
’ – Traditi
onal Shipowner
Co-investments
Public Markets
Initial Public Offerings
(IPOs)
Secondary
Offerings /
Follow-ons
Debt
Shipping Banks
Syndications
First Preferr
ed Ship
Mortgages
Club deals
Capital
Markets
(Bonds)
Alternative Finance
Sale & Leaseback
Transactions
Mezzanine
Working
Capital
Preferred
Equity
Convertible
KARATZAS MARINE ADVISORS & Co. October 2014 Page 18
LEG
EN
D
POSITIVE
NEUTRAL
NEGATIVE
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Parting Thoughts ! Changing seascape in the shipping industry forces a new reality ! Shipowners will have to have critical mass and ‘proper’ corporate structures ! Status quo of traditional debt financing will remain elusive ! Shipowners will have to be experts in obtaining financing in this capital-intense industry when financing
conditions are getting tighter
! More flexibility will be required from shipowners as partnerships, join-ventures and participations may be the new ways of growing the business
THE GOOD NEWS: ! The Shipping Industry is never going to be phased-out or become obsolete, even in our technology
dominated world; just the opposite!
AND, THE GREAT NEWS: ! There are still institutional investors looking to invest in shipping! They are a
diverse group and they are looking for diverse opportunities both for existing vessels / projects but also to finance growing business!
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Thank you for your
Attention!
Karatzas Marine Advisors & Co. International Maritime Advisory
One World Financial Center, 30th Fl 200 Liberty Street New York, NY 10821 USA ! Switchboard: +1 212 380 3700 ! Mobile (US): +1 713 545 5990 ! Mobile (D): +49 0 1523 7361 205 ! Email: [email protected] ! Web: www.Karatzas.com
Contact Details
KARATZAS MARINE ADVISORS & Co. May 2014