Survival strategies and new opportunities for companies, banks and investors in the marine sector
As long as supply exceeds demand, there will be companies at risk of failure. More than four years into the industry’s downturn, market equilibrium is still some way off: There are simply too many vessels for too little trade.
Despite this bleak scenario, maritime industries remain intrinsic to international commerce and have no substitute. They will survive and become healthy again. In this paper, we assess the state of the sector and discuss the strategic and practical measures companies under threat might take to preserve their future. We look at ways for lenders and investors to support companies during difficult times while also protecting and managing their own exposures. And we examine new opportunities for yield and growth. Although 2013 was predicted by some to be the year in which wide-scale recovery would pick up pace, the experts who kindly contributed to this paper have mixed views as to whether this will come to pass. But each could spot reasons to be positive about the industry, despite its continuing difficulties. While there is no easy fix for those marine companies and their backers in trouble, there are often routes to safety. And further opportunities may be opening for new sources of capital and enhanced yield and growth across the sector.
We hope you enjoy this paper, and welcome the opportunity to discuss these subjects with you in greater depth.
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The downturn had three root causes: The first was slowing global demand as world economies contracted; the second was the huge amount of oversupply of new builds on the order book and in the water; and the third was the crisis in the financial markets which saw banks retreat from normal lending practices. Each of these factors is still troubling the industry.
The evolution of bank financing
If shipping companies have had an uncomfortable few years, so have the financial institutions that have historically provided the mainstay of the sector’s financing.
Protecting investors and shareholders; bankruptcy proceedings
Fundamental restructuring of insolvent companies—in any sector—is a fight for survival.
Sources of capital
As certain banks in Europe lick their wounds, certain investors are licking their lips.
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© 2013 White & Case LLP