A view of the audience
The 10th Shipping Congress on “Shipping Finance & Capital Markets” meticulously organised by IMES and Maritime Economies at the Athens’ War Museum “Ioannis Kapodistrias” Amphitheatre, bearing the Question: “Shipping as Private or Listed?” – and “The Shipping Finance Alternative in 2018” was the main international event of the day and which most of you have read – its briefing, at the sites daily recap earlier on tonight. Report compiled by Iris Liaskoni who was there with her camera:
The Greek Minister of Shipping Panagiotis Kouroumplis
With a late kick-off/start – as the Greek Minister of Shipping Panagiotis Kouroumplis was once again late to tell us in 22 –twenty-two minutes, despite XRTC’s George Xyradakis humane and friendly advice to be a short one – his party’s and government’s shipping policy and aspirations, other official addresses included: the nine minutes Ioannis Plakiotakis’ speech from the opposition Nea Dimokratia – we shall see as and when they come back in power what they will do; the very eloquent Theodore Kontes’ two and a half minutes harsh and to the point address in his capacity as president of the Union of Cruise Shipowners & Associate Members; the thee minutes address by Konstantinos Achladitis from the Commercial and Industrial Chamber of Piraeus, the three minutes also address by Eleftherios Kechagioglou, chairman of the board of directors of the Hellenic Small Islands network – an excellent and more than to the point address – pity that the minister had left, and indeed the one of Theodore Chouliaras, president of the co-organisers IMES, setting the scene. A good and encouraging point he made was his excitement checking the registration figures just before midnight, being 580 !!!! Indeed who wasn’t there – all the Greek Shipping’s stakeholders and a few hundred students!
George Chouliaras, Captain George Xyradakis and the panel of session one
George Xyradakis, the very eloquent and specialist mariner/banker so to speak – given his background, set the scene of the fist panel presenting in a simple slides presentation an up to date picture with figures of the current situation that real impressed the audience. It was good and also pragmatic to hear him say that we are in a warring environment – at “war”, just after the hostilities ended. Excellent!¬
The first panel kicked off with a thorough analysis on Capital Markets & Shipping; exploring whether a decision to go public is a wise one for the sustainability and growth of a shipping company. Mr. Xiradakis moderated the panel, a conversation that turned out to be quite heated and yet constructive, a panel consisted by Jerry Kalogiratos, CEO of Capital Product Partners; Valentios (Eddie) Valentis, CEO of Pyxis Tankers; Spyros Capralos, CEO of Ocean Bulk Containers; Harris Kosmatos, Corporate Development Officer of Tsakos Energy; Dr Kostas Rokkos, Chairman – CEO of TST International Shipping SA; and George Kofinakos, Senior Representative of Storm Harbour Finance. The whole panel agreed that regarding the management of the company, as clients and shareholders see it, there is no significant difference between private companies that decided to go public. Specifically, Mr Capralos mentioned that the still ensure that the benefits of investors are protected, that their management has yet its decision making power with the investors following their management line and intervening just a bit, and that the management control is in their hands. They are dependent on the markets, with the bulk improved and their share price double, so the odds are considered to be with them. Nevertheless, they have private companies in their group in the sector of tankers and containers, which they aim at transforming them into public companies as well when the share market improves. The wave of going public that was observed in 2008 exists no more, the entry barriers are harder to be broken, the investors more demanding and it is more difficult to satisfy the requirements. Mr Kosmatos, after a short brief of the history of Capt. Tsakos’s company and their expansion through the change of the structure of the company from private to public, he mentioned the methods of seeking investment, as well as the difficulty of being in the sector of energy & shipping in NY’s stocks exchange. Mr Rokkos talked about the importance of examining the factors that influence the different sources of investment, from banks to private equity and funds, highlighting the one of risk’s evaluation. Sometimes, the significance of dividend’s performance is overestimated, being blind to the fact that the high performance in dividends comes with high bond prices. He thinks we should be very cautious about the criteria of evaluation of each company and establish a model that includes all the factors. Continuing with the view from the investors’ side, Mr Kofinakos, described the dominant market trend in financing, private funds, mentioning the exit strategies in the cases of joint ventures: either the shipping company starts selling their ships, one after the other, or the joint venture makes unload of all the vessels one-off, or the company goes public and sails in the stock market. In the last case, size does matter; a small enterprise is going to face many obstacles, while as for the benefits, public companies enjoy a lot of financing opportunities. We shouldn’t forget the danger of flexibility, though, as many public companies have lost their flexibility.
Theodore Kontes
Mr Xyradakis then posed the question of going public, or not going public, giving pace to the main debate. Capital Product Partners, after 10 years of being public and 1,5 mil dollars raised in private equity, has enjoyed great flexibility in equity raised. Mr Kalogiratos believes that there are several options in company structure and distinguished the options of financing – either having your own adequate capital or going to third parties – otherwise, you go public, maintaining a transparent image to your investors in the stock market. In that case, if you satisfy the specific criteria, you have much more possibilities of finding financing even in the difficult periods. However, we shouldn’t forget the demands for meticulousness in compliance and bureaucratic procedures. Also, you should always try to maintain an attractive profile to cultivate investor relations. There is no right answer, the ‘yes’ or ‘no’ is dependent on many factors, like the company’s size, the business goals, the sector in which you perform and the stage of the market. No doubt about the financing options, however, caution should be paid, as the conditions are not the same for everyone. Mr Kosmatos posed a very significant question: why going public? Is that because everyone does it? If positive, that is really dangerous, and many companies that have done this without a specific strategy faded out of the market. A playful example: you go and live in NYC, do you decide to go there as a bachelor of engaged? Mr Rokkos distinguished the different goals of the stakeholders; for the individual investors the rationale is to gain profit and to find the exit strategy, but for the stock markets are to grow the margin to maximize their profit. The crucial matter is how to evaluate clients; how to enter the management ‘play’, and if we take a look at the investor relations’ reports, we will see that each company tries to show a positive image to be attractive to investors; statistics and numbers are important and speak for themselves. Mr Kalogiratos, disagrees with the previous panellist, mentioning that it is not necessary to sell vessels to have the same invent that Mr Rokkos described; they need to grow its fleet number when in the negative part of the curve. He mentioned Euronav’s example, a public company that through mergers & acquisitions have achieved to grow its fleet. After Mr Xyradakis’ comment, he referred to the main goal in each case: the maximization of shareholder value. That is achieved either by a total return calculation, which means dividend plus equity of appreciation or by capital return – two routes that aim to reach the same destination and he believed are dependent on the size of the fleet. Mr Kosmatos doesn’t find any difference from an investor’s perspective, whereas Mr Capralos believes that it is cheaper to borrow money if you are listed. Except the few companies that grace of their name can borrow whether being public or not, the rest of non-listed companies, go only a few senior levels, might find 75-80% of funding but that comes with a 5% or 12-15% if private equity, meaning a very high cost. Non-listed small companies will always have a disadvantage in comparison to bigger ones. Also, he supports that if you are listed, you can attract the brighter minds of executives and strengthen your company’s human force. Also, stakeholders like charterers, suppliers, banks, and others, have much more trust in a big listed company concerning financial reliability. However, according to Mr Kosmatos, NYSE has enormous barriers for shipping companies nowadays, and they see shipping companies as a cluster; when smaller companies have a negative impact, that affects everyone in that cluster. Mr Xyradakis mention that a tiny percentage of the Greek shipping market in on the stock market, whereas the companies that currently perform market analysis are many. Mr Kosmatos sees a small improvement in investors’ interest related to dry bulk and hopefully, the future will bring more. Very significant is the Mr Xyradakis’s question to Mr Kalogiratos: whether we had – and have – the intelligence to see any of the difficulties of being listed previously described. Although it is believed that the markets may have mechanisms to throw away companies that cannot be sustained, Mr Xyradakis mentioned that there are unhealthy companies that are maintained. Mr Kalogiratos doesn’t find that being in the market is an important thing we should care about; he says that intelligence does exist, is a memory that does not. Mr Rokkos, answers the question saying that the Greek shipping market learns through experience in the market and metrics are what matter – how we calculate and evaluate risk; something that has changed. The stock market often forgets about the OPEX and care only about profits.
The audience, then, had the chance to ask questions; one of which was why we don’t have yards, something that is dependent on the money that comes back to Greece, specifically from the 14 million dollars, the 7 million are brought to the country. The second question by Ioannis Choulis, referred to the technology and the possibility to facilitate investments – like Estonia, for instance, that uses blockchain technology. The panellists agreed that technology is important, but the actual product is the vessel itself, not the money, so you cannot disrupt the scenery like in the banking sector. It is something very tangible. Mr Papandreou then asked if the companies that are in NASDAQ would try to enter the Athens Stock Exchange. The answer there is that the equity from the national stock exchange, is not adequate to cover their needs. Mr Xiradakis supports that we shouldn’t forget the intervention of Moody’s and that the Greek shipping market activities and power dominate worldwide.
Mr Faraclas posed the last question of the panel, mentioning that they keep their cards close to their chest. He congratulated those who continued investments; mentioning that although Mr Capralos made important attempts during his presidency in the Athens Stock Exchange, the government didn’t favor those efforts. After referring to the oil companies that created a fleet for having the control and satisfying their interests, he highlighted that the problem here is who actually has the power; in his opinion if you want to succeed you should be private. Greece has always been dependent on the geopolitics, government’s policies, environment and church dominance/power. So who has the control at the end of the day?
Intense networking at the coffee break
Mr Kosmatos, answered the question, saying that there is no significant difference between being public and private in management; only when they want to find financing and expand their fleet. Some private companies are big enough to remain private, other not. Mr Kofinakos supported that a private company is not at a less favourable position at all, he gave an example of a private company that performs very well, and it is financially attractive. Size and history of the operator are what play the key role. Mrs Papastavrou’s comment that regarding Greece, although the crisis, has something important to present, considering the economic situation. It is a fact that some big names have not exited the Athens Stock Exchange, although their size and that proves that the national stock exchange will remain important. The last question was how we would regain the confidence that we once had. Mr Kosmatos spoke from their view, as in the sector of energy the odds were against them regarding the investors’ behaviour, the answer here is that we didn’t see the upside of the oil prices reflected in their market as expected. Sometimes small investors are the ones who control the prices. So, as an ending comment of the panel, we should be cautious regarding our strategy to every investor.
The second panel
The second panel’s topic touched the issue of the alternatives in the shipping finance markets and the future trends, with Gerasimos Zolotas, Analyst & Consultant at EUROFIN, moderating the panel which was consisted by Katerina Stathopoulou, Executive Director at Investment & Finance, Vasilios Maroulis, Head of Greek Shipping at Citi Bank, Dimitrios Anagnostopoulos, Board Member & Director at Aegean Baltic Bank, Vassilios Mantzavinos, Head of Global Shipping Athens at UniCredit Bank AG, Dimitrios Zouzoukis, Senior Vice President – CEO at the Hellenic Branch of FIM Bank plc, Ted Petropoulos, Head of Petrofin Research, and Christos Timagenis, Partner at Timagenis Law Firm.
The session began with a presentation by Mr Petropoulos on the Greek Fleet and Ship Finance Statistics, including numbers that speak for themselves; Greeks always remain 1st in the list of nationalities that own more than 1% of the world’s fleet, having increased its national fleet which consists of bigger vessels now. What it is significant is the fleet’s age, that has completely changed since 2001 when the average age was 21 years, when today is approximately 12 years, except new buildings. We can, thus, say that the revolution in shipping comes now from technology and investment in modern vessels The increase in DWT, the rise in vessels’ number and the fall of the average age can be translated into an increase in the Greek fleet’s value. The number of shipping companies has diminished, though; in 1998 926 companies existed, and after volatility during those years, we come to 2017 when the number has fallen to 597 companies. The 67.07% of the Greek fleet are companies with more than 25 vessels, a percentage with has faced a steady increase since 2010 from 42.27%. Consolidation is an important reason for those figures. The relationship between orders and deliveries of new vessels has also changed – the new vessels are now delivered within 3 years, while in the past, they used to be delivered significantly more quickly. Regarding ship finance sources, we all know that the banks that once covered the market have fallen back, causing a drop in the total amount of financing from 63 billion dollars to 57bn. Western Banks like DVB remains on the pitch with a question mark, as it has been in a period of evaluation, RBS has started diminishing its portfolio, and others like BNB Paribas, Credit Swiss, and others keep a rather good portfolio. Considering the Eastern sources, we have observed an increase in the financing amount of the Bank of China, as well as in the number of Chinese leasing companies with ICBC, Minsheng and Bocomm Leasing among the top 3 financiers.
Mr Zouzoukis is optimistic about the future, although the difficulties of the industry, he believes that supply is somewhat steady and the deliveries of the new vessel are falling as well as demolitions’ number does. We have a freight increase, especially in dry, and in scrap price. Regarding consolidation and its benefits for financing, Mr Petropoulos mentioned that there are specific limits, for instance, companies with more than 70 vessels face difficulties and we often see that those separate into different entities, according to the vessels’ sector. Mr Maroulis, sees that Chinese Leasing companies are important and they understanding and welcome that trend – they don’t see them as competitors, it’s an additional necessary social capital, and they can co-exist. Mr Mantzavinos, shares Mr Maroulis view, and brings the issue of consolidation again – it is , but limits do exist. Shipping is a part of the transportation business, so people considered that it would follow the air and trail market. He doesn’t see any significant difference in bulk neither does in the tanker sector, however in container market consolidation is enormous due to the market characteristics. Mr Anagnostopoulos, except dry, sees consolidation, like what happened with EURONAV and Generate merge. In LNG’s we also know that phenomenon, due to the high expertise needed.
Moving to regulations’ enhancement, Mrs Stathopoulou supports that regulations have not been brought due to the crisis in shipping; it came for the bank crisis. These regulations were created to close windows and doors to the problems that brought the situation to the current point. Shipping is a whole entity; regulations are a way to evaluate who is going to support his fleet on the downside. Shipping is human resources driven, so other criteria are needed; not only quantitative methods of evaluation but qualitative as well. Mr Timagenis referred to the operations’ function importance, the regulations in that function make it unsustainable for small companies to survive. Also, the regulation that causes difficulty in his clients was the strict banking ‘know your client’ relationship; transparency is critical and mandatory. That leads to a more qualitative, a more merit-based evaluation with high-quality demands and strict criteria raised. The moderator also brought the matter of reliability of banks’ clients in the surface, asking about the positive impacts if clients follow the regulations strictly. Mr Anagnostopoulos opinion on that, is that customers’ transparency has always been for the benefit of the customer themselves. Compliance and ‘being right’ is an important thing now and reliability as well, but not adequate. Mrs Stathopoulou adds that the new regulatory frame has promoted industries quality practices. However, we should be careful not to exaggerate, as that would have cost to everyone. Haircuts have been a practice of the banks that wanted to close, so those customers cannot be seen as bad payers, as it was the bank that gave them to the clients. Bad payers are known in the market.
Another opinion heard is that specific banks prefer to have more active involvement in vessels’ operation observation with regulations & compliance. However, the real problem that made banks to withdraw has to do with regulation referred to credit risk monitoring, and the equity adequacy, not compliance or ship operation.
A bank in crisis should play the waiting game; wait the market to go up and then receive. For example, the 30% of the loans doesn’t perform due to cash flow problems, but you are should write down your losses, like if you liquidating that time. However, due to regulations, almost nobody does it. Shipping is less than 1% of the total bank portfolio (from the total of 1-1,5 tn dollars, 5-15bn dollars come from shipping). Mr Petropoulos states that expertise and good track record are helping shipowners to find financing. He summarizes three options for financing for small shipowners that should have a minimum vessels’ number (at least 2 vessels plus a good track record): small banks that give them money even in a more expensive rate, leasing companies are the second option, but the third option that he suggests is to find partners and increase your own equity, rather than being dependent on other third parties. Funds are consciously excluded from the options mentioned. Financing does exist and helps companies to grow, given specific prerequisites, even if situation is not favorable in general. Mr Maroulis suggests stricter requirements to the banks, however, he mentions that the good payer is the one that gets benefitted at the end of the day. The shipowner that accepts a haircut given is one story. The other that has an appropriate corporate structure & a transparent policy can always find financing. Mr Timagenis closes the panel referring to the Norwegian capital market as a smart alternative. He has recently cooperated with Norwegian lawyers via a platform that is consisted by a very powerful team of lawyers and bankers, that monitor compliance with very simple documentation that send to the relevant Norwegian court along with an application, regarding the appropriateness of the vessel. That lasts 7 to 10 days with a team of investment bankers that send the application to Norway, London and NYC. That document is a 30-pages company presentation and it is a smart and simple way that promotes the interests of everybody in the industry.
Marketing product and services
A question raised was the prospects of shipping, given the bad situation of the market. Mrs Stathopoulou answers that the alternative products are not for everybody. For some, it makes sense; but it has to do with the project itself. It has to do with whether the shipowner believes in the project, and also on the exit strategy that each of those fund has. At the end, maybe banks will come back. Another question touched the matter of safety and called Mr Anagnostopoulos to answer: where are banks lying as for a very safe loan in terms of compliance? Do they prefer give loan to listed or smaller, non-listed family companies? Mr Anagnostopoulos trusts the existence of a positive relationship between safety and being public. Mr Maroulis disagreed, stating the public and private companies are equal regarding access to capital. Mr Timagenis added that the main shareholder of a listed company may leave the company to go bankrupt to the American stock market, and open a new one, than a private company that would protect by any means its ‘child’. Mrs Stathopoulou mentions the mandatory transparency regarding listed companies that make investors trust it and fund it. There are cases, though, that may be rejected due to its financial history that is shown to everybody. Mr Anagnostopoulos observes that most of the loans they give have private guarantees; that gives the comfort that you can confront everything. Last, Mr Mantzavinos sees that a difference between a public and a private company is the alignment of interest as a crucial factor. The commitment of the CEO has to do with the personal interests, like the commission he may gains for each vessel ordered. That, therefore, causes blindness in efficiency evaluation in each decision. The forum closes with his bright remark, mentioning the analysts’ predictions that 2018 would be better than the previous year.
Marine equipment, products and services companies were proportionally the largest number of exhibitors in the main hall/entrance outside the auditorium. Other sectors represented were flags, class societies and P and I clubs.
Iris Liaskonis
Once again special thanks to Theodore Chouliaras and all the participants in the organization team in performing excellently this forum.
