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Michalis Bodouroglou-Shipping Industry and Crisis Management
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Michalis Bodouroglou-Shipping Industry and Crisis Management

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  • 1. University of PiraeusMay, 2013
  • 2. Slide 2This presentation contains certain statements that may be deemed to be“forward-looking statements” within the meaning of the Securities Acts. Forward-looking statements reflect managements current views with respect to futureevents and financial performance and may include statements concerning plans,objectives, goals, strategies, future events or performance and underlyingassumptions and other statements, which are other than statements of historicfacts. The forward-looking statements in this presentation are based uponvarious assumptions, many of which are based, in turn, upon further assumptions,including without limitation, managements examination of historical operatingtrends, data contained in our records and other data available from third parties.Although Paragon Shipping Inc. believes that these assumptions were reasonablewhen made, because these assumptions are inherently subject to significantuncertainties and contingencies which are difficult or impossible to predict andare beyond our control, Paragon Shipping Inc. can not assure you that it willachieve or accomplish these expectations, beliefs or projections. Importantfactors that, in our view, could cause actual results to differ materially fromthose discussed in the forward-looking statements include the strength of theworld economies and currencies, general market conditions, including changes incharter hire rates and vessel values, changes in demand that may affectattitudes of time charterers to scheduled and unscheduled drydockings, changesin our vessel operating expenses, including drydocking, crewing and insurancecosts, or actions taken by regulatory authorities, ability of our counterparties toperform these obligations under sales agreements and charter contracts on atimely basis, potential liability from future litigation, domestic and internationalpolitical conditions, potential disruption of shipping routes due to accidents andpolitical events or acts by terrorists. Risks and uncertainties are furtherdescribed in reports filed by Paragon Shipping Inc. with the Securities andExchange Commission.Forward LookingStatements
  • 3. Slide 3“Crisis Management inShipping”
  • 4. Slide 4“Question No. 1: Where are we inthe cycle? Have we reached thebottom?”
  • 5. Slide 5USDperDaySource: Clarkson’s ResearchHistory of Drybulk ShippingPre 2003Pre 2003Less VolatilityPost 2003Post 2003More VolatilityUSDMillionHigh: $92 Mil.Low: $18 Mil.High: $17,400Low: $4,200High: $86,200Low: $3,500High: $23 Mil.Low: $14 Mil.
  • 6. Slide 6“Question No. 2: How long will thedownside last?”
  • 7. Slide 7Drivers of the DownturnDemand: Transportation of Drybulk CargoesSupply: Available tonnageSource: Clarkson’s Research1995 – 1999 Crisis (Demand Driven) 2009 – 2013 ? Crisis (Supply Driven)1995 – 1999Average FleetGrowth3.8% p.a. vs 5.2% CAGR since 1990Average DBTrade Growth2.2% p.a. vs 4.1% CAGR since19902009 – 2013 ?Average FleetGrowth11.4% p.a. vs 5.2% CAGR since1990Average DBTrade Growth5.4% p.a. vs 4.1% CAGR since 1990
  • 8. Slide 8Current Fleet vs Current OrderbookSource: Clarkson’s ResearchDrybulk orderbook is reducing – currently stands at 18% of existing fleetOutstanding Orderbook by Vessel Type Global Fleet vs OrderbookMillionDwtMillionDwt71 m37 m16 m
  • 9. Slide 9Demand & Supply EquilibriumNet Fleet Growth is expected to be higher than required through 2013 inclusiveSource: Clarkson’s ResearchTradeinMillionTonnes14.4%10.2%2.9%8.6%4.9%16.9%16.9%4.8%1.5%5.7%
  • 10. Slide 10Source: Clarkson’s Research5 Year Old Panamax ValueUSDMillionHigh: $23 Mil.Low: $14 Mil.High: $92 Mil.Low: $18 Mil.Pre 2003Pre 2003Less VolatilityPost 2003Post 2003More VolatilityBA
  • 11. Slide 11A Sample of 30 US-Listed Shipping Companies as an example:Dry Tankers Container TotalCompanies in Sample 14 11 5 30Negative Charter-Free NAV 4 2 3 9% of Total 29% 18% 60% 30%Net Debt/Asset Values Charter-Free 85.9% 84.3% 113.1% 90.0%Total Debt/EBITDA (2013 est.) 10.8x 10.0x 6.3x 9.7xMany shipping companies have NO equity left due to declining asset values……and insufficient charter coverage for 2013 and beyond to weather declining ratesBank covenants related to earnings will continue to be breachedCausing many companies to be forced to concentrate on survival not growthShipping Companies Are Breaching CovenantsSource: Seaborne Capital Advisors
  • 12. Slide 12Assumes: Loan repayment profile 15 years of age, interest rate 5%, TVOE $6,000 per day5 Year Old PanamaxDailyBreakevenPoint(USDThousands)Outstanding Loan(USD Million)Unable to payInterestExpensesCurrent 1 Yr TC Rate $8,000Unable to payDebtRepayments
  • 13. Slide 13Matching “WANT” with “CAN”• Failure unless Market improves immediatelyUse surplus cash flow to:• Pay down debt• Possibly buyNegative Equity & Negative Cash FlowNegative Equity & Positive Cash FlowPositive Equity & Negative Cash FlowPositive Equity & Positive Cash FlowSupport cash flow by:• Selling assets• Restructure with banks• All options available
  • 14. Slide 14Retain Corporate Ability to make DecisionsShipowners’ Objective
  • 15. Slide 15Funding
  • 16. Slide 16Private EquityPrivate equity participation in shipping has been significant in the last decadeTransactions have taken place through a variety of structuresMore than $17 billion of known private equity investments since 2002US$MillionSource: Credit Suisse Research
  • 17. Slide 1710 public equity deals in the USA in 2013 YTDOver $10 billion raised by shipping companies since 2005Source: Seaborne Capital Advisors(1)Shipping IPOs and Follow On offerings refer to ocean-going shipping U.S registered publicofferings(2)Deal proceeds include the exercise of the overallotment when applicableEquity Offerings (1) , (2)- US Shipping CompaniesCapital MarketsBond Issues - Shipping Companies GloballyUS$MillionUS$Million
  • 18. Slide 18Bank Lending to ShippingSource: Dealogic, ABN AMROGlobal Shipping Syndicated Loans Tenor of LoansEuropean banking dominated by Sovereign debt crisis, regulations & higher funding costsBanks exiting ship finance or decreasing lending activity & shortening loan tenors
  • 19. Slide 19Conclusions…Cash is King…
  • 20. Investor Relations /Media:Allen & Caron Inc.Rudy Barrio (Investors)Tel: (212) 691-8087Email: r.barrio@allencaron.com Len Hall (Media)Tel: (949) 474-4300Email: len@allencaron.comCompany:Paragon Shipping Inc.15 Karamanli Ave.GR 166 73Voula, GreeceTel: +30 (210) 8914 600Email: info@paragonshipping.gr
  • 21. Slide 21Appendices
  • 22. Slide 22Paragon Shipping Inc. - Operating FleetName & Type DWT Year Built Country of Build Date AcquiredPanamax FleetCalm Seas 74,047 1999 Japan December 2006Deep Seas 72,891 1999 Korea December 2006Kind Seas 72,493 1999 Japan December 2006Pearl Seas 74,483 2006 China August 2007Diamond Seas 74,274 2001 Japan September 2007Coral Seas 74,477 2006 China November 2007Golden Seas 74,475 2006 China December 2007Dream Seas 75,151 2009 China July 2010Supramax FleetSapphire Seas 53,702 2005 China August 2007Friendly Seas 58,779 2008 China August 2008Handysize FleetProsperous Seas 37,293 2012 China May 2012Precious Seas 37.205 2012 China June 2012Priceless Seas 37,202 2013 China January 2013TOTAL 816,472
  • 23. Slide 23Paragon Shipping Inc. - NewbuildingProgramHull No. & Type DWT / TEU Country of Build Expected DeliveryDrybulk Handysize625 (Proud Seas) 37,200 China Q4 2013TOTAL 37,200Containerships656 4,800 China Q2 2014657 4,800 China Q2 2014TOTAL 9,600
  • 24. Slide 24Paragon Shipping Inc. - Fleet Employment(1) Deep Seas: Charterers have the option to extend the charter agreement for an additional 11 to 13 months at $14,000 per day(2) Coral Seas: Charterers have the option to extend the charter agreement for an additional 11 to 13 months at $14,500 per day(3) Golden Seas: Charterers have the option to extend the charter agreement for an additional 11 to 13 months at $13,000 plus 50/50profit share(4) Prosperous Seas & Precious Seas: Charterers have the option to extend the charter agreement for an additional 11 to 14 months at$15,500 per dayVESSEL CHARTERER GROSS HIRE DURATION T/C COMMENCED T/C EXPIRESPANAMAX FLEETCalm Seas Intermare Transport $ 11,800 19-24 Months Mar-12 Oct-13 / Mar-14$ 11,000 plus 50/50 Profit Share 33-36 Months Oct-11 Jul-14 / Oct-14$ 14,000 11-13 Months (1)Kind Seas SpotPearl Seas Cargill International $ 12,125 22-25 Months Dec-11 Sep-13 / Jan-14Diamond Seas Spot$ 12,000 23-25 Months Jan-12 Dec-13 / Mar-14$ 14,500 11-13 Months (2)$ 12,250 22-25 Months Nov-11 Sep-13 / Dec-13$ 13,000 plus 50/50 Profit Share 11-13 Months (3)Dream Seas Intermare Transport $ 20,000 35-37 Months Jul-10 May-13 / Aug-13SUPRAMAX FLEETSapphire Seas Nordic Bulk Carriers A/S $ 11,100 About 25 Days Apr-13 Jun-13Friendly Seas Western Bulk Carriers $ 10,700 18-24 Months Feb-12 Aug-13 / Feb-14HANDYSIZE FLEET$ 12,125 23-26 Months May-12 Mar-14 / Jul-14$ 15,500 11-14 Months (4)$ 12,125 23-26 Months Jun-12 May-14 / Sep-14$ 15,500 11-14 Months (4)Priceless Seas Phaethon International $ 12,150 About 40 Days May-13 Jun-13 / Jul-13Prosperous SeasPrecious SeasCargill InternationalCargill InternationalGolden Seas Mansel (Vitol S.A.)Coral SeasPARAGON FLEET EMPLOYMENTDeep Seas Morgan StanleyMorgan Stanley

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