Hellenic Shipping News interviews Christina Anagnostara, CFO of Seanergy Maritime Corp.
A further decline of the global orderbook should be expected says Christina Anagnostara, Chief Financial Officer of publicly-traded Seanergy Maritime Corp. In her interview for “Hellenic Shipping News Worldwide”, she describes the main ingredients
for a ship owner to fare better in today’s more than challenging financial environment, while predicts that dry bulk rates will firm as we move forward towards the third quarter of the year.
Nevertheless, “some banks will likely have to manage an increasing number of non performing shipping loans and deal with foreclosed assets. As a result of this, we may witness company bankruptcies. Depending on economic and liquidity conditions more lenders will come under pressure to sell foreclosed shipping assets near market lows than in previous down cycles or sell loan portfolios at a discount”, said Mrs. Anagnostara.
Seanergy Maritime Holdings Corp. emerged as the successor to Seanergy Maritime Corp. Why did you choose this different approach?
Seanergy Maritime Holdings Corp a wholly owned subsidiary of Seanergy Maritime Corp. was formed with a purpose to acquire six dry bulk vessels.
On August 26, 2008, following the completion of the business combination, shareholders of Seanergy Maritime approved a proposal for the dissolution and liquidation of Seanergy Maritime Corp. Seanergy Maritime Corp. proposed the dissolution and liquidation because following the vessel acquisition, Seanergy Maritime Corp. was no longer needed and its elimination would save substantial accounting, legal and compliance costs related to the US federal income tax filings necessary because of Seanergy’s Maritime Corp. status as a partnership for US federal income tax purposes.
During the first quarter of 2009, the company’s results appeared more positive than many would expect, with net income of $12.1 million and time charter equivalent rate of $51,727 per day, far better than the market’s average. Which factors contributed to this positive trend, which your shareholders are wishing to keep up until the end of the year?
Our performance reflects the strong profitability of our vessels which operate under time charters we had secured prior to the market decline. All six of our vessels are locked until September 2009, with South African Maritime Corporation, an affiliate of the Restis Group and a top tier charterer with an excellent reputation, securing net revenues of approximately $78 million.
The commercial and technical management of our fleet is outsourced to Safbulk and EST, both with excellent track records. We have achieved a fleet utilization of 99.9%. Furthermore, Seanergy Management team actively monitors and controls vessel operating expenses.
With a fleet comprised of two Panamax, two Supramax and two Handysize dry bulk carriers with a combined cargo-carrying capacity of 316,676 dwt and an average fleet age of approximately 11 years, do you think that the company is now better positioned in order to hedge against the volatility of freight rates for each ship type?
Definitely, fleet diversification allows flexibility to target different sectors thus allowing the company to be better positioned in terms of freight rates for different ship types and cargoes.
Is there a “golden recipe” for a shipping company, in order to shield itself from the crisis?
There is no “golden recipe” given the credit crisis and global collapse of trade.
However, credit & risk management is considered vital for any type of company.
We may say that “entering into time charter contracts with first class charterers in order to secure stable cash flows, maintaining key banking relationships and be proactive with loan restructuring, loan waivers or secure funding for fleet expansion, preserving cash reserves, controlling operating expenses (without compromising quality) and limiting general and administrative expenses” consist basic ingredients of such a “recipe”.
Do you believe that we shall witness more company bankruptcies in the future, especially among smaller ship owners?
Many shipping companies are struggling following the sharp downturn in global trade and challenging funding conditions. We believe that some small private companies with shipping loans originated between 2006 and 2008 are more vulnerable due to covenant structures, high asset recorded values and increased debt servicing commitments.
However, irrelevant of the size, the most important is the company’s income stream, debt position and cash reserves i.e. is it debt free or highly leveraged? Is it cash-rich or there is no liquidity at all?
Furthermore, some banks will likely have to manage an increasing number of non performing shipping loans and deal with foreclosed assets. As a result of this, we may witness company bankruptcies. Depending on economic and liquidity conditions more lenders will come under pressure to sell foreclosed shipping assets near market lows than in previous down cycles or sell loan portfolios at a discount.
In today’s market conditions, which appears to be the best strategy when a vessel is looking for new employment (i.e. when a time-charter contract ends)?
The chartering of a vessel depends on prevailing market conditions and its type and size. There is no specific timing for entering into a new contract. Looking at the broader BDI Q2 is shaping up better than Q1. We think that in the end of second quarter and further quarters we will probably see the dry rates firming.
As part of Management’s strategy we are continuously assessing the market and will enter into new contracts when conditions are favorable. We aim to lock our charters for up to one year if we could get that.
Ship values, especially in the dry bulk sector have plunged by an average of about 60% from the previous September. Do you consider these values attractive and are you actively seeking to expand your fleet through new acquisitions, given that the company has $47 million in available cash reserves?
We are strategically positioned to pursue our objective to build the Company amongst market leaders by expanding our fleet, revenues and profitability and enhancing shareholder value for the longer term. Our strong liquidity and balance sheet are significant competitive advantages in today’s markets enabling us to benefit from business opportunities as these may occur.
Nevertheless, the company, as well as all dry bulk owners, has to deal with operating in a very low freight market, plagued with a huge order book looming, together with adverse economic conditions. Where do you see the market both in the near-term and in the long-term?
The collapse in freight rates was a result of decrease in demand coupled with lack of credit financing due to the economic crisis.
Although we have seen a rebound since the December lows, we maintain a cautious view for 2009 due to the financial crisis and global slowdown in the world economy. The main factors affecting the Dry Bulk Sector are trade demand and of course supply of new vessels. As we expect the world economy to gradually recover we expect to see increased demand from Asia and especially from China for major dry bulk commodities. The application of large stimulus packages in China and the US is reviving global trade and economic activities. New loans extended by Chinese banks across all industries grew to RMD 4.58 trillion (USD 670 billion) in the first quarter of this year according to the latest figures released by the People’s Bank of China. We also expect India’s demand to grow for core dry bulk commodities due to industrialization and urbanization. In the long term we are optimistic for the drybulk sector as it is considered to be one of the main beneficiaries of infrastructure global spending.
Do you believe that there will be more new building order cancellations as we move forward into 2009, or will owners focus mostly on delayed deliveries and renegotiating contracts towards lower prices?
The continuing lack of trade and financial institutions’ reluctance to finance overpriced new buildings will further delay vessel deliveries and cancellations of the order book. Owners are renegotiating contracts and are focusing on rescheduling of orders while the yards continue to take a defensive position. Although the exact number of cancelled units is difficult to be accurately defined, the “on going” discussions and delays as well as the fact that some shipyards are going into bankruptcy due to financial constraints provide an indication that we will experience a substantial decline of the fleet order book.
Nikos Roussanoglou, Hellenic Shipping News ο»ΏWorldwide