At a New York shipping conference late last year, Mark Friedman, a senior managing director at Evercore Partners Inc., regaled attendees with an analogy to the Eagles’ “Hotel California.”
Investors, as his reference to the song went, can get into the industry but can never leave.
WL Ross & Co., Oaktree Capital Group LLC and other private- equity firms bought vessels at near record-low prices since 2010, planning to ride the global recovery. Instead, they found that what goes down sometimes stays down. And now, stuck running fleets that few others want to buy, they’re left to contend with declining freight rates.
“Funds went in with a lot of excitement but the markets haven’t played out like they expected,” Paul Leand, chief executive officer of AMA Capital Partners LLC, a fund manager and adviser in New York, said by phone March 30. “Now, they’re ship owners.”
Private-equity investments in shipping plunged 55 percent last year from a record $7.5 billion in 2013, and there have been no new deals reported in 2015, according to Marine Money, an industry newsletter.
$2 Billion
Oaktree invested more than $2 billion in tankers, bulkers and container ships through debt and equity since 2010, according to data compiled by Marine Money. Oaktree, based in Los Angeles and managing $90.8 billion, declined to comment via Alyssa Linn, an external spokeswoman at Sard Verbinnen & Co.
“They realize they’re not going to make those returns in the time frame they’re used to,” Harry Theochari, the global head of transport for law firm Norton Rose Fulbright in London, said generally of private-equity investors in shipping. “You may find private-equity guys dumping and moving on if they see any kind of upturn.”
Billionaire Wilbur Ross scrapped a public offering for Diamond S Shipping Group Inc., the tanker company in which his firm is the largest shareholder, last year because he said the price was too low. Nordcap Offshore Inc. canceled its share sale in Oslo in June, citing insufficient demand. Euronav NV pulled its U.S. IPO in October, and a month later Exmar NV postponed the spinoff of a master limited partnership.
Prices Drop