Investors “see that the shipping industry is at a pretty depressed point in the capital cycle,” he said in an April 16 phone interview. “They’re looking for any entry point.”
KKR & Co., the New York-based investment company that oversees more than $102 billion, spent about $260 million last year to form Maritime Finance Co., a lender to the shipping industry designed to help fill the void left by the withdrawal of European banks. KKR is both financing new ships and taking control of vessels through distressed loans, according to Nat Zilkha, co-head of credit and special situations.
‘Value Traps’
“In both cases though, it’s about the right vessels at the right point in the cycle and having the right partners,” Zilkha said in an e-mailed statement April 22. “There are opportunities in shipping but there are also some dangerous value traps.”
The influx of new money has industry stalwarts concerned that investors will flood the market with new ships, take their winnings and go, leaving shippers mired in another glut. Orders for new ships almost tripled last year to the highest since 2010, according to data from London-based Clarkson Plc, the world’s largest shipbroker.
“What people fail to understand is they’re not giving the market sufficient time to recover,” Giuseppe Rosano, the director of London-based shipbroker Alibra Shipping Ltd. who’s worked in the industry for 23 years, said in an April 9 phone interview. “By then, these people will have made their money and everyone else is trash when the market collapses.”
Book List
U.S. investors who used to ignore shipping are becoming sophisticated students of the industry. As an investment banker taking shipping companies public 15 years ago, Stamatis Tsantanis, now chairman and chief executive officer of Seanergy Maritime Holdings Corp., an Athens-based owner of dry-bulk carriers, used to draw pictures to show people what a tanker was. Now, investors ask specific, technical questions about fuel consumption, he said in an April 14 phone interview.
For many bankers and investors, part of their education has been “The Shipping Man.” The book appeared for the first time this year on an annual list called “What Wall Street Is Reading This Spring Break,” distributed to more than 7,000 traders and money managers, compiled by Dave Lutz, the Baltimore-based head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co., a brokerage and investment bank.
The book’s hero, Robert Fairchild, sums it up: “What was it about the international shipping business that was so appealing? Robert wondered as he listened to his former investor bemoan the fact that there weren’t enough shares for Eurkea! Capital to buy. Was it the age-old romance of ships and the sea that had been attracting and exciting men throughout history?....Or maybe it was the nobility of the thing: that without ships, half the world would starve and the other half would freeze.”