TradeWinds Shipowners Forum, Posidonia 2016
Top shipping players tell it like it really is about the capital markets

The pros and cons of going public were argued at TradeWinds Shipowners’ Forum as ‘Greek hospitality’ encouraged some to not hold back

Philippe Louis-Dreyfus had second thoughts before sharing his explosive views on the merits of shipping companies using the capital markets.

Standing between Evangelos Marinakis and Paddy Rodgers at the TradeWinds Shipowners’ Forum, the diminutive owner said he would be kicked off the panel if he voiced his opinion.

Encouraged by Nikolas Tsakos that Greeks were hospitable, Louis-Dreyfus, an investment banker before “he became insane and joined shipping”, did not hold back.

“Now I’m on the other side I would never, ever, ever, ever go public with a shipping company,” he told an audience containing both public and private owners in addition to the three listed and two private company representatives on the podium.

“Not in today’s market, not in 10 years ago market, not in 10 years to come market. I don’t believe raising public money is for shipping. Shipping needs longer views. Shipping needs a face from your shareholder in the long term. That is something you might not get from the public markets,” he added.

Louis-Dreyfus said his strong view was drawn from the fact the complications and burdens of a public company greatly outweighed the advantages that he described as “money for the summer time”.

“Outside money is OK but not this,” he concluded to loud applause at the Posidonia event.

Rodgers, the chief executive of New York and Brussels-listed Euronav, standing directly to the left of Louis-Dreyfus, said: “Naturally, I disagree entirely.”

Rodgers conceded that he would have agreed until five years ago. “Why would you through the pain of being Frontline, OSG [Overseas Shipholding Group] or Genmar [General Maritime Corp] in the public markets in 2006 or 2007 when people could go on an almost personal basis to a German banker and get 110% to finance his ship at a few hundred points above Libor [London interbank offered rate]? It just made no sense to be public,” he said.

Today, Rodgers said cash is less available, with European banks facing a liquidity shortage, forced to cut out high-risk sectors and those lenders yet to start “eating the losses on offshore”.

“There will be no bank finance available. If you are bigger, you are public and you can comply, you will have a competitive advantage for the first time in the history of shipping by being public through access to capital,” Rodgers said.

Bob Burke, the chief executive of Ridgebury Tankers — at one time rumoured to be an initial public offering (IPO) candidate and which has bonds listed in Oslo — took up the argument. “I agree with Philippe, which is a polite way of saying that I disagree with Paddy, but for a different reason,” he said.

Burke reasoned that owners wanted to make investments before the market takes off and were willing to suffer lower earnings before the spikes arrived.

He said: “With such a small part of the market capitalisation in the States, or anywhere else in the world, we attract attention when the market is hot.

“If that is true and the public companies can only raise money when the market is high, they are required to buy when values are high,” Burke said, pointing out that this was likely to produce low returns.

Angeliki Frangou, who has four public companies under the Navios banner, said shipping equities had endured a crazy, almost surreal six months. However, she argued shipping was no different from any other industry, noting that public companies in the property and pharmaceutical sectors had suffered downturns before returning to be successful.

“Shipping has to go through that level of experience,” she said. “A public company through a cycle is about efficiencies, about being able to capture economies of scale and really be able to weather a full cycle.”

Marinakis, the major shareholder in Capital Product Partners, backed up Frangou’s point. “I think we should trust the guys that are managing the companies,” he said.

“Of course, we can highlight the things that can help and correct any mistakes but we should have faith and wait. It’s a cyclical industry and if you have a strong balance sheet, if you have experience and you have faith, you will make it work, it’s as simple as that.”

Tsakos, the chief executive of Tsakos Energy Navigation (TEN), said that as long as there is an owner behind a public company with a 30% to 50% stake, coupled with a long-term view, and it looked to use the equity markets to compliment debt financing, the model could work.

Thanassis Martinos — who in the same forum two years ago revealed he had considered an IPO for Eastern Mediterranean Maritime as part of succession planning — raised two points about the capital markets. He argued that those looking for a recovery in shipping stocks should look at energy and mining companies. Once they rise, maritime equities will follow, he said.

“At the same time we don’t see any IPO for [dry cargo] shipping companies when the prices are low,” he said. “You have a story to say and need money for investment. So the money will come back when the market will have recovered and share prices will be high.”

June 9th, 2016 17:00 GMT by Andy Pierce Athens
Published in WEEKLY
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