In the light of Seanergy Maritime's acquisition of a 51% ownership interest in Maritime Capital Shipping Ltd., Hellenic Shipping News Worldwide hosts an interview with the company's Chief Financial Officer, Christina Anagnostara, detailing the
background of this new move. According to Miss Anagnostara, there is potential for new investment opportunities in the dry bulk market, which Seanergy is looking to capitalize, while maintaining a mixed fleet profile, in most ship types, which enables for increased added value for the company's shareholders.
Seanergy Maritime recently reached an agreement through a Letter of Intent to acquire a controlling stake at Maritime Capital Shipping. Could you provide with some details of this agreement?
We have entered into a Letter of Intent to acquire a 51% ownership interest in Maritime Capital Shipping Limited (MCS) for a purchase price of $33 million.
MCS is a company based in Hong Kong and is a provider of international maritime transportation services through its ownership of dry bulk vessels. MCS was founded in 2006Β by a team of dedicated professionals with many years of experience of operating vessels in the particular segment of the dry bulk shipping industry. It generates its revenues by employing its ships on time and bareboat charters with well established shipping operators. Its current fleet is comprised of 9 handysize dry bulk carriers with a cargo-carrying capacity of 249,236 dwt and an average fleet age of approximately 10.7 years.
As a result of completion and closing of the acquisition, the size of Seanergy's fleet will increase from 11 to 20 dry bulk vessels with a combined cargo-carrying capacity of approximately 1,292,532 dwt and an average fleet age of 12.6 years comprising of 4 capesize, 3 panamax, 2 supramax, 1 handymax and 10 handysize dry bulk carriers. The acquisition is subject to final documentation completed, which is expected to be entered into by June 1, 2010.
How will it impact your company's future earnings?
Seanergy's mission is to expand its fleet and revenue generating capabilities, while maintaining a strong balance sheet through a growth strategy which is implementing by entering into transactions that increase free cash flows and thus are accretive to shareholder value.
The proposed transaction will contribute positively to our earnings and is accretive to the shareholders. Further details will be provided upon closing of the transaction.
Seanergy has achieved a diversification of its fleet in all major ship types, from capesizes to handies. How has this enabled you to take advantage of the opportunities in the market?
Our broad fleet profile enables us to serve our customers in both major and minor bulk trades for a variety of routes.
Our fleet mix and our relationships with first class charterers provide us with access to different markets for the transportation of a variety of cargos, voyages and accommodation of different requirements.
Which are the company's available funds for future acquisitions?
Our strong cash reserves of $85 million as reported on March 4, 2010 will enable us to take advantage of market opportunities and continue to grow our company.
Are you looking into further investment opportunities and to which ship types in particular?
Clearly for Seanergy, we are and will continue to assess acquisition targets, and we are optimistic that opportunities to expand the fleet are still out there. However, our decisions aim to safeguard the long-term interests of our shareholders, and as such, we always determine both the current and long-term viability of projects on a case by case basis.
Is it preferable to opt for newbuilding orders or second hand carriers at the moment?
Recently 5year-old second hand vessel values are higher than new building contract prices and there are few sellers of modern tonnage.
We see that newbuilding orders are placed mainly from companies/shipowners with cash reserves or shipowners that have disposed their assets during the high markets experienced in the past. They are now placing new orders as they believe that we are at the bottom of the cycle, they see that there is strong demand for tonnage in the market and freight rates are improving. Therefore it depends on the profile of the buyer and his long term view of the market as well as its cash position and/or financing in place.
We, as a company, use mainly Purchase Price to EBITDA multiples to assess potential acquisitions. We aim at investing on assets that will provide adequate and secured returns in the short to medium term rather than committing capital for long term deliveries.
Do you think that ships values are only going to firm up moving forward?
Overall, the general impression is that the market remains solid and we remain positive on the long term outlook of the dry bulk market since we expect that demand for core bulk commodities especially from China will remain strong. Therefore, going forward we may experience further appreciation of ship values.
Second hand ship values have appreciated on the average by more than 10% in the last three months. When compared with one year ago we see now 5year-old capes from $49m to $63m, panamaxes from $28m to $33-$34m, supras from $25m to $32m and handys from $21m to $26m.
Is it safe to say that the freight market will be able to offset, through increased cargo demand, the looming oversupply of vessels, or will it take more efforts from ship owners to cancel orders and scrap old vessels?
World demand for dry bulk goods is increasing as global economy improves. For 2010 completion of annual iron ore negotiations between Chinese steel producers and iron ore miners on quarterly iron pricing should have a positive impact on 2010 demand. With China's 11.9% GDP growth in 1Q 2010, steel demand is expected to increase during 2010. Furthermore, near term dry bulk ton mile demand is likely to grow as more iron ore is shipped from Brazil. Coal Trade projected increase is in line with historical growth and expansion of trade is likely in 2010.
On the other hand, scrapping levels have slowed dramatically since June 2009 and will have to pick up in 2010. Also we believe that freight rate weakness should increase scrapping volumes for aged vessels. Credit markets also have not recovered leading to further delays and orderbook cancellations.
The slippage of the dry bulk orderbook is in excess of 40%, as a result of lack of secured financing.
For the first 4 months of 2010, drybulk newbuilding deliveries totaled 22.9MM tons i.e. 54% of the projected year production and current shipyard capacity does not seem to be in a position to handle current orderbook deliveries within schedule.
Therefore it may be safe to conclude that demand will be there to absorb supply of vessels.
Will the Β«China factorΒ» be enough to sustain the market in the future?
There is steady, sustained growth of iron ore and coal import activity into China. This, as well as activity from other developing nations, will be the leading catalyst for dry bulk shipping in the near future.
Although the short term views are positive, we need to see how the market will perform in the 2nd half of 2010 given the recent initiatives taken by the Chinese Government to prevent overheating of the economy.
In early 2010 we have seen strengthening of crude steel production figures which show China up to 18.2%, Japan up 36.8%, South Korea 32.4%, and Europe 51.1% over the same month in 2009.
Nikos Roussanoglou, Hellenic Shipping News Worldwide