Hanjin Shipping in Receivership

On August 31st, 2016, Hanjin Shipping filed a receivership petition with Seoul’s Central District Court, and on September 6th, for Chapter 15 protection at US Federal Bankruptcy Court in Newark, NJ. Filings in approximately 45 jurisdictions worldwide, where Hanjin vessels trade, are expected to be filed in the very near term.

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Containership MV ‘Hanjin Monaco’ against the downtown Manhattan skyline in better days. Image credit: Karatzas Images.

With approximately 140 vessels under management, only 40 of which are self-owned and 100 chartered-in or leased, there have been serious implications for the market, at least in the short term. With only US$ 700 mil in equity, US$ 1.7 billion value of its fleet and $5.4 billion in outstanding obligations, the capital structure resembles a house of cards. The value of the cargo on-board of Hanjin’s vessels at the time of filing for receivership was estimated at $14.5 billion. The ensuing result has been a logistical nightmare, given all such cargo had contractual obligations to be delivered on time, but Hanjin’s vendors would not render any services unless they were getting paid in advance. Receivership and Chapter 15 can stop creditors from knocking on the door, but vendors would now perform only on cash basis payments. Hanjin’s financial nightmare has been compounded by the legal complexity of the business which is further compounded by the logistical complexity of the containership liner business. Only the fact that the containership market has appr. 25% capacity (which has caused Hanjin’s financial troubles in the first place) can alleviate concerns that Hanjin’s potential demise will no be a threat to the supply chain and international trade.

Hanjin’s filing has been front page news for the whole last week. Here’s a list of articles in the print, TV and radio coverage where Basil M Karatzas and Karatzas Marine Advisors & Co were quoted:

Moral Hazard Case Study: Hanjin Shipping                                                          Maritime Executive, September 6th 2016

Containers Stranded at Sea After South Korean Company Goes Bankrupt         NPR, All Things Considered, September 8th, 2016                                                    To Listen to the Audio Clip, Please Click here!  

Retailers Seek U.S Help With Shipping Crisis                                                            The Wall Street Journal, September 1st, 2016

Hanjin Shipping Bankruptcy Unlikely to Ease Gluts of Vessels                                    The Wall Street Journal, September 2nd, 2016

Shipping Chaos                                                                                                              The Exchange CBC News Canadian Broadcasting Corporation                                TV Interview, September 2nd, 2016

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Basil Karatzas on CBC News – The Exchange about Hanjin Shipping’s Receivership. Image credit: CBC

© 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 here within 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.

 

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‘Maritime CEO’ interviews Basil Karatzas, again

We have had the pleasure recently to have an exchange of ideas on market developments with the editors of Singapore-based ‘Maritime CEO’, an esteemed publication on international maritime matters with strong focus on the market developments in Asia, and specifically in China. Here are excerpts of our interview:

Karatzas Marine Advisors: ‘Many more ships are begging to be built’

New York: Shipping’s fragile recovery risks being rocked by a wave of new orders, while traditional shipowners are facing a severe funding gap, warns a leading New York-based ship wheeler dealer.

Basil Karatzas is the ceo of eponymous New York ship finance advisory Karatzas Marine Advisors, a regular voice in social media and across a broad range of shipping titles.

It’s not only tonnage demand concerns, but also tonnage supply issues that can limit upside potential for shipowners, Karatzas notes.

“With the forward orderbook getting thin for many yards,” he says, “a shipbuilding industry with effectively unlimited capacity to expand – at least for commoditised vessels like small dry bulk, with commodity prices falling like a rock – and thus lower steel plate and material cost, and newbuilding contract prices, combined with the appreciating value of the US dollar, many more ships are begging to be built; in a low interest rate environment and with many investors desperate for projects to invest, it will not take much to have another major wave of newbuildings.”

Karatzas feels the tanker market at present has gotten ahead of itself – the current rally unlikely to last more than a few months more.

Containerships, meanwhile, do not seem to have much to expect in terms of what Karatzas terms as “pure alpha” from a weak macro environment. “However,” he quickly adds, “absence of alpha does not necessarily mean lack activity in the market, whether consolidation, fleet expansion with bigger ships, etc, as the players in this market are preparing for the next battle.”

For dry bulk Karatzas reckons it is hard to see how the sector could get any worse. “By elimination, the market has to improve, but again, improvement is not always associated with strength,” he says.

Avoid newbuilds and buy secondhand, especially in dry bulk is Karatzas’s advice.

“Given our concerns on both tonnage supply and demand, ordering more vessels likely will not make for a profitable strategy,” he says. “Not only because shipping can ill afford more vessels to be ordered, but also newbuildings still cost too much and do not offer the best value proposition. However, we do think that there are business opportunities to start, grow and expand fleets with vessels in the secondary market.”

Such investment opportunities are all very well for those with ready access to capital, but this is something that is not so easy for the industry’s traditional owners these days.

“Banks implicitly discriminate against the smaller, traditional shipowners,” Karatzas says, “and they tip their hand towards the bigger owners with economies of scale and consolidated financials, critical mass and modern fleets, and encourage the prospect to be meaningful players in the industry for the decade to come, hopefully with prospects to grow and get bigger, and hopefully to access the capital markets and become public companies, if they are not already so.”

The traditional example of the shipowner borrowing from a bank with which they have done business in the past and have established a strong record or debt financing based relationship banking is getting to be a thing of the past, Karatzas reckons.

It’s not that banks have moved to the other extreme of the spectrum only and suddenly became too conservative, but that the new world of banking has changed; shipowners will be forced to change with it, there is little way around it, Karatzas thinks.

Nations such as Greece with some 1,000 owners will likely see a contraction in numbers.

Options for smaller owners are to put their own equity on the table, scale up, get financially sophisticated and look for new sources of capital through corporate finance, institutional investors, private equity and the capital markets. “This is not a turn of events that many smaller shipowners can afford, are willing or prepared to deal with,” Karatzas concludes.

Original text of the interview of the Maritime CEO can be found by clicking on following link: Karatzas Marine Advisors: ‘Many more ships are begging to be built’ 

The Maritime CEO had made us the honor to interview us in the past, in January 2014: Karatzas Marine Advisors: Owners must become more transparent and corporate 

Karatzas, Basil - Maritime CEO 2015

Basil M Karatzas, CEO of Karatzas Marine Advisors & Co.


© 2013-2015 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 here within 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.

Media Mentions for Basil Karatzas

We are taking pride to always be up-to-date in our field of business , and, if possible, a little ahead, as once a successful executive at a well-respected company presciently said. At the shipping finance advisory and ship-broking firm Karatzas Marine Advisors & Co., we measure our success not only by the number and size of the transactions we work on and successfully conclude, the ships we finance and sell, the caliber of the shipowners and clients we work with, but also by the times we were honored to provide current market information, insight, opinion and counsel to maritime, finance and trade topics to highly respected publications.

A few articles of recent where Basil M. Karatzas and Karatzas Marine Advisors & Co. were in the press:

Quoting Basil M. Karatzas in the Logistics Report of The Wall Street Journal in ‘Today’s Top Supply Chain and Logistics News from WSJ’, for August 26th, 2015.

Quoting Basil M. Karatzas in The Wall Street Journal in ‘Europe-to-Asia Freight Rates Fall as Volume Forecasts Cut’, on August 25th, 2015. pdf version of article accessible by clicking on this link!

Quoting Basil M. Karatzas in Die Zeit Online (in German) in ‘Griechenland: Wenigstens den Reedern geht es gut’ on August 18th, 2015. In short, while Greece is doing badly recently, Greek shipowners seem to keep being world competitive in their field. Article title liberally translates ‘Greece: At least the Shipowners are doing well’.

Quoting Basil M. Karatzas in The Wall Street Journal in ‘Greek Shipping Industry Extends its Dominance’ on August 7th, 2015. pdf version of article accessible by clicking on this link!

Quoting Basil M. Karatzas in the Wall Street Journal in ‘Tide Turns for Greece’s Shipping Industry’ on July 22nd, 2015. pdf version of article (including chart on shipping tax regimes produced by Karatzas Marine Advisors & Co.) accessible by clicking on this link!


© 2013-2015 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 here within 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.

2015 08AUG25 WSJ Europe-to-Asia Freight Rates Fall as Volume Forecasts Cut_HL

2015 08AUG07 WSJ Greek Shipping Industry Extends Its Dominance – WSJ_HL

2015 07JUL22 WSJ Tide Turns for Greece’s Shipping Industry_HL