Involved in last week's acquisition of two resale newbuilding contracts by Xilas Group, XRTC Business Consultants has proven its value in the field of finance consulting in shipping. Mr. George Xiradakis, head of the company talks to Hellenic
Shipping News about the future of the traditional shipping company, the recent developments in the market and the need of Hellas to attract as many skilled seafarers and officers as possible, given the large deficit currently observed. Furthermore, he points out to the increased cost of financing, after the recent credit crunch in the U.S., which has spread across the banking sector.
First of all, could you tell us about XRTC and its activities in the shipping market?
Well, XRTC was set up back in 1998-1999 and since we're acting as representatives of banks, especially in the shipping business. These banks mainly are French. Currently, we are representing Natixis Bank, one of the four largest banks in France and among the largest banks in Europe. Of course, apart from shipping, we are also active in areas like project financing and structured financing in real estate, energy, corporate and other businesses. I'd also like to point out that we have developed a global consulting activity, particularly in the short-sea shipping sector, with projects reaching from Oceania to North America.
XRTC was part of the deal that saw two more vessels entering the Xilas Group last week. Could you give us some details about the Group and the nature of the deal?
Xilas Group is incorporating four generations of shipping activities, while the family has its roots in Chios, an island in the Aegean that has given birth to lots of shipping families. Xilas has a high expertise in newbuildings, having built more than 50-60 vessels during the last four decades. The Group had concluded similar newbuilding deals in the turn of the century with cement carriers, which have since been long-term chartered from Aget Heracles, the Hellenic subsidiary of French aggregates leader, Lafarge Group. So, now Xilas Group reactivated an older relationship and cooperation with Scandinavian company Clipper, by acquiring two newbuilding contracts, of the 24 in total that Clipper has on order.
As I've mentioned before, every shipowner has his own strategy. Others insist on older vessels, while others prefer more modern vessels of up to 10-15 years of age. Finally some prefer newbuildings. But we've seen a lot of shipowners that don't just rely on common vessel types, like i.e. panamaxes. Some are investing in more specialized types of vessels, like trader vessels that Xilas agreed to acquire. While these ships are typically bulk carriers, they are capable of hauling boxes, as well as containers.
If I'm not mistaken Clipper is the manager of a shipping pool, where the newbuildings will enter. Can you explain to us exactly how a pool is designed to operate?
Clipper is a large shipping company, which organizes pools between shipowners. Pools are similar to playing a bet with friends, each of which is contributing a specific amount of money in the bet. So, a number of vessels is gathered, where each shipowner has his own percentage of participation and share of the profits, according to the carrying capacity and the specifications of the ships he has brought into the pool. It's like setting up a company with many large shareholders.
During the last week, you were one of the speakers in the International Chamber of Shipbrokers-Greek Branch Forum, which took place in Eugenides Foundation. Which were the main conclusions from this event?
Well, we discussed about the future of the traditional shipping companies. I can tell you that everybody expressed his concern regarding the diminishment of small family companies, mainly because of the major shortages observed in manning the ships with Greek seafarers and officers. But also optimism prevailed, since small shipowners will survive provided that they are prepared to take the risks needed in today's shipping environment.
Nevertheless concerns were raised about the future of traditional shipowners, isn't that right?
Yes, of course. You know seafaring isn't anymore the profession that we used to read in novels, with the dreadful working conditions described. Young people mustn't be afraid of the shipping profession, wages are high, conditions on board are improved and apart from sailing for 6-8 months, everything is better. Despite that, very few of today's youth are attracted by shipping. Furthermore, nobody has to remain active on board until the age of 60. There are lots of opportunities in the sector, not everybody has to become a shipowner. For instance, I used to be captain, only to become involved in shipping financing today.
Talking about financing shipping, would you say that a shipowner has easier access to bank loans these days that the market is booming?
The level of bank support is definitely there. But for a newcomer in the market, he will have to invest more than a well-known shipowner and accept more strict rules. Of course, this doesn't mean that all doors are closed. The newcomer will have to totally respect the corporate structures of a modern shipping company, since corporate governance is essential in today's world. However, I have to say that these days, financing has been affected by the subprime loan crisis in the U.S. and the credit crunch that followed, mainly regarding the cost which has been elevated by 20%-30%, with respect to what was going on at the beginning of the summer, because of the margins that banks are requesting. The percentage of the value hasn't been affected, still ranging between 60%-80% of the vessel's price.
Do you observe a greater caution and reserve from banks, due to the record prices of vessels?
You know that this was also the question two years ago and everyone knows how that went! Really, it depends on the ship type. Yes, bulk carriers are more expensive these days, capesizes are really high in terms of pricing, but there are investors in the market, willing to take the risk. At the end of the day, they are the ones who will put their money on the line.
Nikos Roussanoglou, Hellenic Shipping Newsο»Ώ Worldwide