* Sector facing multi-billion-dollar funding shortfall
* Equity market rushes to fill the gap
* Investors getting more sophisticated in stock choices
By Jonathan Saul and Freya Berry
LONDON, April 17 Shipping companies are turning
to equity markets to fill a growing funding gap, betting that
investors hungry for decent returns will provide capital to a
sector recovering from its worst downturn since the 1980s.
Ship owners ordered large numbers of vessels between 2007
and 2009, just as the global economy sank into crisis. Prospects
have brightened in recent months as world trade picks up and the
ship glut is absorbed.
The industry still faces a multi-billion dollar financing
hole after banks, its traditional source of funding, cut back
lending to boost capital in the wake of the financial crisis.
Alternative investors such as private equity firms have been
snapping up shipping assets including loan portfolios from the
banks. Scenting an opportunity, shipping companies are now
trying to take advantage of strong equity markets to seek out
funds through initial public offerings (IPOs).
Avance Gas listed this week in Oslo. Germany's
Hapag-Lloyd and Chilean peer Vapores agreed this week to a
tie-up that will include a flotation in 2015. Principal Maritime
Tankers Corp, backed by private equity group Apollo Global
Management, last week filed with U.S. regulators to
raise up to $100 million in an IPO.
Greece's Quintana Shipping and Bermuda-addressed Nordic
American Offshore both filed in March to raise $100 million and
$115 million respectively in New York IPOs.
Jesper Plenov, global head of equity capital markets at
Danske Bank, said the bank placed A-shares in top shipping and
energy group A.P. Moller-Maersk for 3.6 billion
Danish crowns ($665.70 million) within just an hour and a half.
But the dash into shipping stocks comes with a health
"Hopefully ... enthusiasm with offerings will not get out of
control and encourage poor quality owners and projects on the
roadshow circuit," said Basil Karatzas, a U.S. based ship
Steven Hollander of law firm Watson, Farley & Williams,
said: "We see investor appetite, but the appetite is not going
to buy shares at any price."
Not all shipping share sales have gone to plan.
Last week, Greece's Stalwart Tankers scrapped a listing, the
same day that Britain's Quantum Shipping, backed by billionaire
Idan Ofer, dropped a planned $200 million private placement.
That came despite European secondary offerings of shares last
week reaching their highest year-to-date levels since records
began, according to Thomson Reuters data.
U.S.-based oil products tanker group Diamond S Shipping also
backed out of an IPO in March despite the support of leading
global investor Wilbur Ross.
"There's certainly been a wariness about overpaying, and
watchfulness about company valuations against the underlying
value of fleet," said John Ong, managing director of corporate
finance and capital markets at ABN Amro. "Investors want to be
thoughtful about who and what they're backing."
A source familiar with the Quantum deal said investors were
quite demanding on price. "(Quantum) took the view that, given
that they could fund their investment through their own
resources, they didn't want to drop the price," the source said,
adding they were keen to return to the market in 12-18 months.
The more selective approach to shipping IPOs could be a sign
that investors are growing more familiar with the industry.
Shippers carry a variety of goods from dry bulk commodities
like coal and grains to oil, gas and containers full of consumer
electronics, and demand for different products is volatile.
That can hit shipping firms hard as they often dash to order
extra vessels when business starts to pick up, only to idle them
when it wanes.
"Diamond S flopped partly because some people are getting a
little nervous about the products tanker sector. The expected
upturn might be strangled in its infancy because of
over-ordering in the product tanker segment and also we haven't
seen any real upturn as of yet," a ship finance source said.
As the wider IPO market revives, investors have a growing
choice of companies and brands to invest in, allowing them to be
more selective when it comes to shipping IPOs.
Stocks in shipping companies floated over the past year rose
by an average of 4.4 percent on the first day of trade, against
27 percent for global IPOs, Thomson Reuters data showed.
After a month, shipping shares rose on average 5.4 percent,
against 34 percent for recently-listed stocks as a whole.
Denmark's OW Bunker and Norway's Tanker Investments
floated in March at the upper end of their price
ranges but have since fallen 2.6 percent and 11 percent
"The shipping sector has been out of the IPO market for a
long time and now it's coming back, and what's happening is the
market is scrutinising each target more than previously," said
Adam Kostyal, European head of listings for NASDAQ-OMX.
(Additional reporting by Ole Mikkelsen in Copenhagen, Mia
Shanley in Stockholm and Victoria Bryan in Frankfurt; editing by
Carmel Crimmins and Tom Pfeiffer)