The fictional Robert Fairchild is one of the hottest names on Wall Street. He’s the hero of the 2011 novel “The Shipping Man,” a New York hedge fund manager who becomes so captivated by wild swings in freight rates that he buys a dry-cargo carrier and sets off on an adventure leading to run-ins with Somali pirates and Greek tycoons.
In recent months, references to the book have turned up in hedge funds’ mailings to clients, billionaire Wilbur Ross’s speeches, conference calls with traders, investment-bank research reports and syllabuses for university courses in London, Hamburg and New York.
Investors are devouring the book amid a surge of interest in shipping, which is still recovering from the worst global recession since the Great Depression. Private-equity firms pumped more than $7.2 billion into the industry in 2013, according to Marine Money, a newsletter whose president wrote the novel. They entered partnerships, ordered new vessels or bought ship debt at the fastest pace since 2008 as a fifth year of about zero interest rates saw more money chasing fewer deals.
“Now is a great time to be buying these loans because there’s an oversupply,” Marc Lasry, co-founder and chief executive officer of Avenue Capital Group LLC, a New York-based firm which oversees $13.6 billion including shipping debt, said by phone April 24. “We’re at or close to the bottom.”
More Investments
Solus Alternative Asset Management LP, which oversees $4.4 billion, has made more than a dozen shipping investments after evaluating hundreds of deals over the past 18 months, CJ Lanktree, a money manager at the New York-based firm, said in a phone interview April 24.
Funds are betting ship prices will rebound from historical lows that followed owners ordering too many ships before the global recession. The ClarkSea Index, a measure of industry-wide rates, rose 6.7 percent in the past year to $9,664 a day. The 2012 average of $9,586 was the lowest since at least 1990.
A five-year-old supertanker now sells for $70.6 million, compared with $53.6 million a year ago, still less than half the $162 million high in 2008, according to the Baltic Exchange in London. The price of a Capesize, the largest type of dry-bulk carrier the exchange tracks, rose 63 percent in the past year to $50 million, 33 percent of the 2008 peak of $153.8 million.
Europe Sells
Private-equity and hedge funds are making their moves just as European banks are offering to sell more secondhand debt. Lenders such as HSH Nordbank AG, of Hamburg, are under regulatory pressure to hold safe assets, and ship values have recovered enough for the banks to sell their loans without recording huge losses, according to Stuart McAlpine, a London- based partner at Mayer Brown LLP.