Costamare’s Bond Issue Shows That Financing Can Be Found, but Scale is Ever More Important Today
In its latest weekly report, shipbroker Intermodal said that “just a few days ago we witnessed the listing of the first corporate bond in the Athens Stock Exchange by a non-coastal shipping company, namely Costamare Participations Plc. This was good news for both the NYSE listed shipping company and the Greek stock exchange. The former successfully rose €100m in unsecured bonds at a significantly competitive pricing, whilst the latter has proven that it has the depth and volume required for shipping companies, which are now offered a new alternative of fund raising; in other words, a new door has opened for other shipping players to follow suit”.
“However, this is not a fit for all finance tools. This is a very complex procedure that can take many months, if not years, to complete. It took Costamare years to complete regardless of already being a NYSE listed company, partly because market conditions were not favorable when a smaller bond was sought after 4 years ago. Regardless of the complexity and the tremendous effort, the point that we need to keep is that a large, well-established, and structured company not only can find new ways of financing itself, but also create them. Scale has always been important; however, it now seems to be more important than ever. With banks and financial institutions now focusing on corporate structured, sizeable, ‘’ESG compliant’’ clients and full recourse deals, scale seems to be the only way out. But how can this be achieved?”, wondered Intermodal’s Deputy CEO, Mr. George Laios.
According to Mr. Laios, “consolidation, M&As, joint ventures, strategic alliances and pool arrangements are the most obvious methods that an owner could consider in order to attract capital and ‘’grow’’. The consolidation trend will come at the forefront in the next years, considering that 45% of the Greek owned fleet in number of vessels is controlled by 50 companies, while approx. 15.0% of the fleet is fragmented under more than 450 companies that own up to 4 vessels each. M&As are considered the most direct and quick way to scale up. In addition, compared to plain vessels’ purchases they also offer a brand value, not just some additional tonnage. The current market fundamentals (e.g. increased valuations) also favour M&A transactions. However, again, this is not a walk in the park process. Thorough Due Diligence, terms negotiation and documentation preparation are just a few of the challenges that the relevant parties have to go through”.
He added that “joint Ventures are a milder way for two parties to join forces. Most often, they are set up for a specific purpose while there are also pre agreed exit procedures. JVs are becoming more and more popular and are in effect a real life test for two parties to examine if they get along and maybe join forces/merge in the future. If, however, neither M&As nor JVs are preferable for a ship-owner, then maybe a strategic alliance or a pool participation may do part of the scale-up work. There are already alliances formed to serve numerous needs such as consumables’ supply and insurance coverage, whilst there is a significant number of vessels’ chartering pools”.
Intermodal’s Deputy CEO added that “all of the above-mentioned tools have a common denominator: Let’s join forces and grow up together. There are hundreds of small shipping companies that could team-up with a peer and get the benefits of collaboration and larger scale. Financing terms and pricing is one of the most obvious benefits. Raising funds for small owners becomes harder and harder nowadays and whilst alternative lenders have the capacity and the appetite to lend (together with the required flexibility), their internal return hurdles/targets make them significantly more expensive than traditional lenders. In other words, they cannot be a long-term solution, especially when their (larger) peers borrow at significantly lower pricings. However, financing is not the only front that scale is required. There are several other equal important challenges that a modern shipping company faces, such as vessels’ technology, ESG and hefty regulations. Shipping companies, let alone small ones, do not have the luxury of being left behind. Scale, team-up and knowledge sharing seems to be the only and most efficient way forward”, Laios concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide