A long-standing complaint about shipping inventory is that inventory is too high and too small. If there were only a handful of large-capitalization shipowners in each category, such as tankers, dry bulk, containers, and gas, it wouldn’t be a jumble of microcaps.
The good news for “bigger, less” advocates is that the number of shipments is actually declining. Only one IPO shipped in the last 6 years Compared to many delistings.
The bad news is that the rest of the public players aren’t always bigger on average than they used to be. Mergers between public companies that create larger fleets are being overtaken by private transactions that exclude other larger cap public owners from the mix.
This week’s annual Capital Link New York Maritime Forum speaker spoke about what is driving the take-private wave and the outlook for IPO shipments.
M & A
Integration is one way to reduce the number of shipments in stock.
Navios Partners (NYSE:), owner of container and bulk carriers NMM) Navios Acquisition (NYSE:), the tanker owner of the relevant party NNA) On Friday. This followed the previous intra-group acquisition of Navios Containers by Navios Partners in April 2018 and the Navios Midstream by Navios Acquisition in December 2018. The Navios Family Circle is currently shrinking from 5 to 2.
Take a private transaction
Private take deals are much more prevalent than takeovers by public shipping companies.
The first big public departure was Dry Ships, Undisclosed by its founder George Economy in August 2019. Such transactions surged this year.
Teekay LNG (NYSE: TGP) On October 4, infrastructure fund Stonepeak announced that it would acquire for $ 6.2 billion (including shares and debt). GasLog Ltd.Was acquired by the BlackRock Infrastructure Fund Delisted in June. Seacor, the owner of the mixed fleet, was unveiled by American Industrial Partners in April. CAI International, a lender of container equipment, was acquired by Mitsubishi HC Capital of Japan last month.
This trend exceeds US-listed shipment inventory. Oslo-listed Hoegh LNG Ltd. was acquired by the Hoegh family and the Morgan Stanley Infrastructure Fund in June and went private. Oslo-listed Ocean Yield, which owns a diverse fleet, is in the process of being acquired by private-equity giant KKR.
Departure of other shipping inventory
Most public transport departures over the last decade have been due to business failures. Recently, the balance sheet has been strengthened by previous restructuring, most segments enjoy high rates, and tankers, who are the owners of one segment that is not, have a cash cushion from the 2020 rate spike. There is no shipping bankruptcy.
Still, there are other ways to lose the ship’s name besides M & A, privatization, and bankruptcy.
Golar LNG Partners is New Fortress Energy (NYSE: NFE) During April; Inventory is out of shipping space while the buyer is listed.
Last year, Scorpio Bulkers sold the entire dry bulk fleet and entered the wind farm installation business, Eneti (NYSE: NYSE: NETI). The final Valqua was sold in July.
Liner operator Zim (NYSE: ZIMIn January, it marked the first successful shipping IPO since Gener8 Maritime in June 2015. ..
Despite the IPO drought, there are other new entrants. Some shipowners are mostly small and listed by non-IPO means. Torm (NASDAQ: TRMDGrindrod (NASDAQ: NASDAQ:) that appeared on the US public market in late 2017 Green) And Navios Containers; and Castor Maritime (NASDAQ: NASDAQ: sold in 2018) CTRM), Flex LNG (NYSE: FLNG) And Diamond S sold in 2019.
If you add them all together, the Wall Street exit will be higher than the attendees. Adjusted by market capitalization, the pendulum swings further towards the exit.
What is driving the take private exit?
Panelists at Capital Link emphasized that most of the recent private transactions involve infrastructure funds that buy LNG carrier assets. This is not a coincidence given the high long-term charter coverage of LNG carriers and the optimism of institutional investors for natural gas demand.
FlexLNG CEO Oystein Kalleklev said: “LNG carriers have a $ 200 million infrastructure. This is a much more versatile floating pipeline. [land-based] It’s a pipeline, so of course people in the infrastructure can understand it. LNG also expects annual growth of 3-4% over the next 20 years, and there are not really many non-renewable energy segments that are achieving such growth. “
During that time, inventory valuations on most LNG carriers were weak. Karl Fredrik Staubo, CEO of Golar LNG (NYSE: NYSE :) GLNG), Comments, “Most infrastructure companies are’smart money’. LNG revenue is significantly better than renewable revenue. Smart money is there to intervene when the capital markets aren’t there to price efficiently. “
The focus on LNG carriers means that the current private cycle may be on track, with few LNG carrier public companies remaining. Tanker and dry bulk companies do not have the same long-term charter focus as LNG shipping. Container ship leasing has long-term coverage, but the question is whether private equity believes these charters are as unbreakable as LNG charters.
What is stopping the IPO?
Capitallink panelists also commented on the long-term drought in IPO shipments.
Chris Weyers, Head of Maritime Investment Banking at Stifel, said: “The lack of an IPO is a result of private sector dissatisfaction with market valuations. Stock prices have risen significantly throughout the year, but in most sectors they are well below the value of their underlying assets. [the fleet]..
“There was a special situation when Jim went public,” Wires said, referring to legacy shareholders who needed an exit. “I don’t think we’ll see many IPOs among traditional shipping companies until they have a good reputation in the public equity market.”
“I think the pace of IPOs in shipping will be slower than it was seven or eight years ago,” said Christa Volpicelli, Head of Maritime Investment Banking at Citi.
Larry Grasberg, Senior Managing Director of Maxim Group’s Investment Banking Division, had a different perspective. Maxim works with a small shipping company and sees new entrants coming in. “Maxim’s point of view is very different from Citi,” he said, with Citi focusing on a “billion-dollar approach.”Very micro cap type story.. “
“We are actively submitting many IPOs in this area, so we will see transactions in the first quarter. [of 2022] On both the asset side and the investment side, “Glassberg said.
This means that smaller new entrants will come to the shipping space after the larger player has been privatized and left.
As the outlook for shipments increases, the area of shipping inventory shrinks
https://www.freightwaves.com/news/as-shipping-prospects-rise-field-of-shipping-stocks-shrinks As the outlook for shipments increases, the area of shipping inventory shrinks