an insight into credit management in the bunker sector - … · an insight into credit management...

IECA Annual Conference, October 1 – 4, 2017

Simon Hasslacher, Senior Analyst

www.infospectrum.net

An insight into credit management in the bunker sector

Who we are & what we do

• Launched in January 2000 by a group of sector analysts and investigators.

• Privately owned and fully independent.

• UK Head office, satellite offices in Singapore, Sydney, Bogotá and Kiev.

• Circa 40 analysts / investigators worldwide.

• Fully focussed on the provision of maritime and commodity/energy intelligence, in particular on companies registered in low disclosure/offshore jurisdictions.

• Delivering due diligence products, mainly in the form of concise standard reports to the bunkering, commodity trading and shipping sectors, as well as producing bespoke reports for the banking, insurance and legal sectors.

• Online database of over 21,000 companies. Ad hoc or yearly subscription.

Best Practices Bunker Credit Management

• The ability to give credit provides a vital comercial advantage in this industry.

• With such small margins on offer, the financial stability and payment performance of the bunker trader / supplier and the purchaser are fundamental to bunker financing.

• To those receiving it, supplier credit lines form an important part of their overall available liquidity.

• Risk management is focused on the risk element, but potential business opportunities cannot simply be ignored.

• Prevention is better than enforcement

Credit

Best PracticesBunker Credit Management

Why All The Fuss?


Industry Losses Continue:

• “The world’s major container shipping lines made estimated collective operating losses of USD 3.5 billion in 2016“ – Drewry

• Offshore vessel owner Bourbon reported a hefty loss of EUR 279.6m for 2016 in what it characterised as the “most acute crisis” for marine services in 40 years. – Seatrade Maritime News

• During the first half of 2017, DVB’s allowance for credit losses surged to EUR 445.3 million from EUR 83.4 million, reflecting market developments. New allowances recognized for credit losses totaled EUR 519.7 million of which EUR 497 million was accounted for by shipping and offshore segments. – World Maritime News

• “Commerzbank expects its losses on shipping loans to be as high as EUR 600 million euros this year (2017). Losses nearly doubled last year to EUR 559 million (2016) – Markets Insider

• February 2017 - Deutsche Bank announced losses on shipping loans nearly tripled from a year earlier, to EUR 346 million

Why All The Fuss?

2017 - Hanjin Shipping Co., Ltd, Z-Bulk (former Eastern Bulk Carriers AS), Tidewater Inc., Rickmers Holding AG, Paragon Offshore plc, Sinoriches Enterprises Co., Ltd, Ultrapetrol (Bahamas) Ltd, CGG SA, GulfMark Offshore, Inc., SCL Reederei AG, Swiss Chem Tankers AG

2016 - Armamento Setramar SpA, International Shipholding Corporation, United Ocean Group, Zhejiang Ocean Shipping Co., Ltd, Oskar Wehr KG, Finter Shipping BV, Bulk Invest ASA (former Western Bulk ASA), Tranvast Group, Caria Shipping International Pte Ltd, Five Stars Fujian Shipping Co., Ltd

2015 – Daebo International Shipping Co., Ltd, SW Shipping Co., Ltd, Rizzo-Bottiglieri-De-Carlini Armatori S.p.A., Global Maritime Investments, Sahaviriya Group, Winland Ocean Shipping Company Ltd, Shagang Shipping Co., Ltd, Copenship AS, Bunkers International Corp., Copenship Bulkers AS, Tristar Management Ltd, Daiichi Chuo Kisen Kaisha, United Ocean Group

2014 – OW Bunker AS, Nautilus Holdings Ltd, Irano Hind Shipping Company, Eagle Bulk Shipping Inc., Genco Shipping & Trading Ltd, Dalian Suntime International Transportation Co., Ltd,

2013 – TMT (Today Makes Tomorrow), PT Berlian Laju Tankers, Daeyang Shipping Co., Ltd, Lucchini S.P.A., KP Shipping, ELBE Emissionshaus GmbH & Co KG, Excel Maritime Carriers Ltd

2012 – Hany Shipping S.r.L., TBS International plc, General Maritime Corporation – Genmar, Sanko Steamship Co., Ltd, Overseas Shipholding Group., Inc., Deiulemar Shipping S.p.A., Allied Maritime Inc.,

2011 – San Juan Navigation Corp., Magellano Marine C.V., Korea Line Corporation, Beluga Shipping GmbH, Trailer Bridge, Inc., Ambassadors International, Inc

2010 – Transfield ER Cape Ltd, Pan Oceanic Maritime Inc., Peninsula Enterprise S.R.L., Cruise West Inc.,

2009 – TPC Korea Co., Ltd, Parkroad Corp., Mediterranean Maritime, Elliot Bulk Ship Management GmbH & Co KG, Eastwind Maritime Inc., Armada (Singapore) Pte Ltd, Samsun Logix Corporation, D’Amato di Navigazione S.p.A.

2008 – Industrial Carriers Inc., Britannia Bulk plc, Atlas Shipping AS


Why All The Fuss?


Freight and bunker markets thrive on threecommonly accepted, but otherwise highly unusualprincipals

• It is “accepted” to be as offshore as possible

• It is “accepted” to have minimal security in place

• It is “accepted” to have a matter of hours to assess multi-million USD risks

Why All The Fuss?

Best Practices Bunker Credit Management • Credit managers are increasingly tasked with

judging which of their customers might failand when.

• The traditional art of credit management with emphasis on financial analysis and scrutinising ratios, for some of the reasonsmentioned earlier, is often not enough.

• Potential business opportunities cannot be ignored

• Good preparation and sound riskmanagement can help you move forward in this environment

The Bunker Credit Manager?


Confirmation of Company Style

“PGSC”:

Persian Gulf Shipping Company Inc., Anguilla

PGSC Marine Ltd, Anguilla

PGSC Marine (UK) Ltd, England & Wales

Pan Gulf Shipping Co Inc., Anguilla

Pacific Gulf Shipping Company Ltd, Marshall Islands

“NCS”

NCS Co., Ltd, Hong Kong

North China Shipping Co, Ltd, BVI

North China Shipping Ltd, Bahamas

North China Shipping Holdings Co, Ltd, Caymans

NCS Shipping Far East Ltd, BVI

Key factors to consider whenassessing counterparties


Country of Registration

Is the contractual counterparty the same as the company you are dealing with?

Managing agent – Registered in Hong Kong

Operations office – Registered in China

Asset holder/Counterparty – Registered in the BVI / Samoa

Augustus Maritime Co., Ltd, Hong Kong

Augustus Maritime Co., Ltd, BVI

AMC Shipping Co., Ltd, Hong Kong

AMC Shipping Co., Ltd, Samoa

Shanghai Augustus Maritime Co. Ltd, China



Ownership & Management

• Experience

• Solid track record, even during prolonged downcycles

• Are their interests aligned with that of the long-term, sustainable growth of the company?

• If the management does have any skeletons in the closet, is this a case of having been, unlucky, careless, fraudulent ?


Our majority shareholder is controlled by Mr. George Economou who controls two companies that, in aggregate, own 34.3% of us and a foundation that owns 70% of Cardiff. Mr. Economou is also our Chairman and Chief Executive Officer, Interim Chief Financial Officer and a director of our Company. These responsibilities and relationships could create conflicts of interest between us, on the one hand, and Cardiff, on the other hand. These conflicts may arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus drybulk carriers managed by other companies affiliated with Cardiff and Mr. Economou. In particular, Cardiff may give preferential treatment to vessels that are beneficially owned by related parties because Mr. Economou and members of his family may receive greater economic benefits.

Entities affiliated with Mr. Economou, our Chairman, Chief Executive Officer and interim Chief Financial Officer currently own, directly or indirectly, approximately 34.3% of our outstanding common stock. While those stockholders have no agreement, arrangement or understanding relating to the voting of their shares of our common stock, they will effectively control the outcome of matters on which our stockholders are entitled to vote, including the election of directors and other significant corporate actions. The interests of these stockholders may be different from your interests.


What does the counterparty do?

• Shipowner / Operator / Trader

• In what market?

• For what clients?

• Against what pressures?

Identifying potential weaknesses in strategies?

• Asset values or time charter contract prices

• Exposure to small client base or one sector

Structure & Score of Operations


• Are they even available? Based on our database, 65% - 70% of the time they may not be

• Age

• Audited

• Relevance

• Profitability

• Cash Flow

• Liquidity

• Leverage

• Debt Obligations

• Capex Committments

• Retention of Profits

Financials

A M Nomikos and Son (UK) Limited(2015)

Turnover – GBP 3.08m

Loss on ordinary activities – GBP 51,656

Fixed assets – GBP 177,491

Long-term liabilities – GBP 0

Net Current Assets – GBP 587,777

Shareholders’ Funds – GBP 765,268


• Often the most up-to-date information that you can get on your counterparty, and not just from a payments perspective

• Feedback from a wide range of sources as possible is invaluable

• It has to come from sources that you have confidence in

Market Feedback


• Ongoing process

• Ensure that you understand the main risks each counterparty faces

• Ensure full view of global exposures (individual and group lines)

• Strong communication between all parties (e.g., management, business development, trading / sales, credit, etc.,) in the organisation to ensure all have the same goals

Credit Monitoring


• Meaningful guarantees

• Credit insurance

• Price risk

• Remember……..Prevention is far more desirable than attempting to enforce a payment from a non-performing counterparty

Risk Mitigation


• Think methodically and be as informed as you can.

• This is not a precise science, but clear processes should lead to clear decision making.

• No two companies are the same, each counterparty has to be assessed on its own merit.

• Don’t ignore any warning signs (on their own they may appear to be immaterial, but collectively they could be telling you something).

• It is a boom / bust industry, and human nature dictates this is unlikely to change.

Summary

Thank YouSimon Hasslacher

Senior Analyst

Infospectrum Ltd

+1 718 701 1913

[email protected]

www.infospectrum.net

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an insight into credit management in the bunker sector - … · an insight into credit management...

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