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Transcript of Charting a course - marinemoney.com Ian... · • ZIM, Excel Maritime Carriers, Torm, OSG, Eitzen...
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Charting a course Financial restructuring and consolidation in the shipping industry
Ian Wallace, 28 January 2015
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Turbulent markets
• Supposed sector recovery in 2014? • Sector challenges:
• Fundamental overcapacity • Estimated global trade volumes increase by 3.5%
to 4% to 2017, vs world fleet growth of 6% • Slowing of Chinese economy • Falling oil price • Strong competition • Increased regulation • Geopolitical tensions in Ukraine/Middle East • New sources of financing
• Increasing need for more permanent solutions for shipping companies?
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Fundamental overcapacity has not changed
Source: Containerisation International
Deliveries Scrap Net
teu
2012 2013 2014 2016 2015
2,500,000
2,000,000
1,500,000
1,000,000
500,000
-500,000
-1,000,000
0
Net fleet by capacity
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Fundamental overcapacity has not changed
Overcapacity in the dry bulk market
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The growth of restructuring
• Major restructurings in the sector 2013-14 • ZIM, Excel Maritime Carriers, Torm, OSG, Eitzen Chemicals, Pan
Ocean, Genco etc
• Increasing prominence of restructuring solutions partly due to: • Influx of new money from PE/hedge funds • Cashflow concerns • Absence of new money from shipowners
• Key restructuring trends: • Growth of LBO and corporate-style restructuring techniques • Debt trading and new money drives restructurings • Traditional ‘enforcement’ still uncommon in complex/high value groups • Chapter 11 and other restructuring tools available
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Consolidation and Strategic alliances
• Some key M&A/strategic deals in 2014 • Hapag-Lloyd and CSAV, Hamburg Sud and CCNI, CMA-CGM and
OPDR, and Horizon Lines and Matson
• Some key strategic alliances
• 2M Alliance; the Ocean Three Alliance; Hamburg Sud and United Arab Shipping Co agreeing an alliance; and the established CKYH Group adding Evergreen Lines and the G6 Alliance
• Increased cooperation among global regulators
Hapag-Lloyd $5.6bn business combination with the container shipping activities of CSAV • Creating 4th largest container shipping co., ~200 container vessels, ~1m TEU capacity • Savings of at least $300m are anticipated as a result of network optimisations
improvements to productivity and cost reductions • Complex transaction – over 30 jurisdictions involved • Market volatility created issues on ship and company valuations • Moved strategic alliances in the focus of antitrust authorities
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Consolidation and Strategic alliances
• Consolidation issues to overcome: • Regulatory/competition clearances • Strategic issues re: management and direction of travel • Legal concerns: JV agreements, merger documentation etc • Stakeholder management: lenders, employees, charterers etc
• Outlook for 2015