On the sidewalks outside the Pierre Hotel, the cigarette smoke rose and so did the anxiety.
The people, mostly men in dark suits, were taking smoke breaks from the conference, called Marine Money Week, the annual shipping-business confab in New York sponsored by a maritime trade journal of the same name. The accents were Greek, Norwegian, Danish, Texan, Oxbridge -- and more Greek. The anxiety had to do with a massive multi-billion-dollar, industry-wide shortfall between the number of ships on order from builders, and the money needed to pay for those orders.
During the boom times, that money would have come from banks. In these times -- reports of thawing credit markets notwithstanding -- the banks were being intractable. At the conference on Wednesday, five banking executives found themselves in the awkward position of sitting at a table on a dais in front of a ballroomful of ship owners, and telling them, essentially, that their hands were tied.
"The commercial banks were up there saying, 'Don't come to us,'" said Omar Nokta, the shipping equities analyst at
, a boutique investment bank that's co-sponsoring the conference. "The banks right now are just not willing to step up."
The numbers floating around the conference told the story. The industry as a whole -- from tankers to dry bulk -- had ordered $5 billion worth of new ships (anticipating, it should be noted, an economic turnaround -- a speculative play, in the opinion of some industry people). So far, only $2 billion of that had found financing.
One of the bankers at the session, which bore the title "Commercial Bank Summit," told the audience not to worry. "The gap will be filled in the next few months, in my view."
But he didn't indicate how that would come to pass, and, anyway, no one seemed to believe him. Of the banks represented on the panel, few were healthy:
, for example, were all bailed out to one extent or another by European governments.
As if to accentuate the point, the moderator of the panel, Philip Clausius, chief executive of
First Ship Lease
, of Singapore, closed the session with an appeal. "To all the banks in the room, I say: Repair your balance sheets. We need you."
It seemed as if the conference was turning on its head the traditional banker-client dynamic -- as the financial crisis has tended to do all over. The bankers hadn't come to the Pierre Hotel, situated at 61st Street and Fifth Avenue, across from Central Park, to sell their services to shippers. Shippers had come to the Pierre Hotel to plead with bankers to re-open their vaults.
As is sometimes the case, anxiety over one thing morphed into anxiety over its opposite. What if that order book
get filled, the attendees asked one another over their Blackberries, and what if all these new boats
come on line? Cancelations may in fact
occur, people started to worry at the conference. And if the economy doesn't turn around, won't there be way too much supply, and won't that lead to another collapse in prices, which had firmed of late?
The basis for this worry lie with the Chinese, none of whom appeared to be present at the Pierre. (Although, upon examining the list of attendees, one did see the name of a representative from the Hong Kong dry bulk shipper,
.) The Chinese government, it was said, was forking over incentive cash to Chinese shipping companies. And those shipping companies were, in turn, using that money to take over new-vessel orders at Chinese shipyards whenever a Western company canceled one due to lack of funds.
Order books, pricing, supply, demand, refinancing, restructuring: it was all on the conference agenda, and in the one-on-one "dealmaking rooms," off the main lobby.
Who went in? Presumably, certain dry-bulk shippers -- who have their own balance-sheet problems -- along with the banks that had loaned them money to expand their fleets during the boom. Like an LBO shop levering up a company in order to take it private, shippers had borrowed during the bubble against ships that are now worth less than a third of their value just a year ago. (Your average Capesize vessel was assessed last year at $160 million. This year -- pop -- it's worth $50 million.)
Loans like that are, as they say, under water. And some ship owners were most likely meeting with financiers during the conference to achieve waivers on those loans -- and to avoid insolvency.
There were attempts at brave faces, however. At an oil tanker panel toward the end of the day Wednesday, Morton Arntzen, chief executive of the
Overseas Shipholding Group
, opened his speech by saying, "I tried to listen in on the sessions earlier this morning, but there was so much doom and gloom that I got depressed, and I left. Later, I talked to some of my sources at the
New York Times
Wall Street Journal
, and I have confirmed: The future has not been canceled."
Among the executives at the conference were Angeliki Frangou, CEO of
Navios Maritime Holdings
, who also rang the closing bell at the
New York Stock Exchange
on Monday; Bjorn Moller, head of
, who presented during the tanker panel on Wednesday afternoon; and Inger Klemp, chief financial officer at
, who did the same.
On Thursday afternoon, the drybulkers take the stage: Pankaj Khanna, COO of
; Alan Ginsburg, CFO at New York-based hometown favorite
Eagle Bulk Shipping
and John Wobensmith,
Genco Shipping & Trading's
CFO, will be panelists in a session called "The Dry Bulk Market."
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