From the open questions thread - just in

New BrokerFeb 13, 2012 12:19 AM


Dear VS,

I am in the process of fixing a vessel for a first time charterer. The operator has asked for 20% freight advance directly to his account. Charterer however not very comfortable to remit payment directly and wants me to convince the operator to accept BG or Escrow account. Operator says that owner will not accept Escrow and that he can lock the vessel only after getting the deposit. How do I satisfy both the parties.

ReplyDelete

The Virtual ShipbrokerFeb 13, 2012 02:21 AM

Good question new broker.

In these crazy financial times your example is symptomatic.

Without knowing who they are its difficult for me to give good advice. I can make some generalisations though.

There must be a reason owners are asking for 20pct in advance? They probably scared about the financials of the charterer. Why are charterers refusing? What difference does paying into an escrow or straight into the bank account make to them? Unless offcourse the operator themselves are also financially insecure?

IMO an escrow should be used for other purposes. Payment of freight upfront is becoming more and more prevalent. An escrow is better used if for instance there is an amount that may eventually be disputed. In your example this is not infact the case.

So my advice is to work on the charterer. Make sure the agreement states that upfront payment doesnot take place until the ship actually delivers. Sending money to a shipowners bank account without a delivered ship is not a good idea!

At the end of the day if the charterer isnt happy then he can find another ship and the ship owner aint happy he can find another charterer...

cheers
vs

Some good news for a shipowner close to the edge!

Very recent press release (see below)

In short it shows the banks willingness to look for solutions in todays current climate. It also shows that insolvent shipowners can somehow provide some assurances to clients that their ships will not be arrested and detained anytime soon....(a charterers biggest fear when dealing with a financially insecure shipowner)

I do wonder whether TBS are one of the lucky ones in some respect and whether there will be as much willingness to help as this shipping downturn plays out over the next few years.


It states


Qte

Notably, the Company has, subject to court approval, obtained debtor-in-possession (DIP) financing of $42.8 million to fund operations during the Chapter 11 cases. This financing is provided entirely by the  Company’s existing lenders, including Bank of America, DVB Bank, Toronto Dominion Bank and Credit Suisse. Under the Plan, the DIP financing claims and pre-petition secured debt are to be restructured so as to provide new liquidity, extended maturity dates and other terms sufficient to permit the new entity's successful emergence from Chapter 11 and future viability.

“We are very pleased that our banks are supportive of the steps we have taken to improve our balance

sheet and, through it, the long-term health of our Company,” said Joseph E. Royce, Chairman, Chief
Executive Officer and President. “As a result of the restructuring, we should be positioned to be a
financially sound competitor in our global markets. We have taken steps to diminish the impact of this
process on our vendors, customers and employees, and we intend to move forward as expeditiously as
possible to complete the restructuring.

More importantly, I want to emphasize that this agreement ensures that our vessels will not be arrested and cargo will get to its destination as scheduled.”

Information about the restructuring is available at the Company’s website www.tbsship.com, or via the Company’s restructuring information line at (888) 418-5566 or (216) 370-3528 (from outside the US).

About TBS International plc

TBS provides worldwide shipping solutions to a diverse client base of industrial shippers through its Five Star Service: ocean transportation, projects, operations, port services and strategic planning. The TBS shipping network operates liner, parcel and dry bulk services, supported by a fleet of multipurpose tweendeckers and handysize/handymax bulk carriers. TBS has developed its franchise around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North Africa, Africa, the Caribbean and the Middle East. Visit our website at www.tbsship.com.

unqte

Soon i will find report on some good news where people are still making bundles of cash! Its not all bad people.........

VS

Tall Tales But True

An interesting article i just read...

Grab a stiff drink and follow if you will

Goes something like this

a) European company charters a tanker ship from a South Korean Shipowner

b) Ship gets attacked by pirates causing much despair, delays and costs including a multimiliion dollar ransom

c) Principals disagree as to the opportioning of the costs and enter arbitration

d) South Korean shipowner then files for bankruptsy hence avoinding any liabilty with the following being revealed in court transcripts

(my language but here is the crux)

We bought said ship from Greeks in 2008 for approx USD 140 million dollars (peak period). Due to various loan agreements today in 2012 we actually owe USD 187 million on the ship. And here is the kicker....due to the bad market, poor cashflow, this arbitration etc we just sold the ship for a lamentable USD 29 million bucks.....OUCH!!!!!!!!!!!!!!!!!!!!!!!!!!

(where did the 150 million smakeroonies go?)

The ship was actually valued at USD 34 million but due to the fact the Somali Pirates are not very good house keepers (who would have thought?) damages to the vessel are estimated at 5 mill (thank you very much!)

And guess what...........the poor managers who contributed to this terrible line of consequences will probably go into hiatus for 2 years and start a new company from scratch and play poker once again...

No wonder people are nervous.........banks included!

Cheers
The Virtual Shipbroker

Cargo is KING?

A good question from a reader

 Quote

BikafellaJan 30, 2012 09:53 AM

You seem to be a very knowledgeable person - so please can you tell me what the expression "cargo is King" means - does it mean that if you are a shipowner you are a pauper ?

It would seem to be very strange if a shipowner was regarded as someone who was not wealthy person.

i think if market is lacking tonnage then the owner has the upper hand so ship would be king - but i never heard THAT expression before….

if the market has lots of ships the cargo owner or charterer is generally in a stronger position - so both situations are valid but in that case why such expression for only one of them ?

unqte

Thanks question. "Cargo is King" is an old BULK shipping expression and has nothing to do with the wealth or otherwise of shipowners. Infact Shipowners are some of the wealthiest people in the world with a high number being billionaires especially in places like Scandanavia, Greece, London, Hong Kong etc

"cargo is King" is a trading term and it basically means that much of the power is in the hands of the charterer because at the end of the day the 'charterer" or cargo client IS THE CUSTOMER!...

Without cargo a shipowner wont have full ships and without full ships they cannot make money. So its always in a shipowners best interests to keep his clients happy.

Now the waters do get a muddy here especially in high shipping markets when infact it appears that charterers need shipowners more than shipowners need them. Prices for ships go through the roof and it is now the charterers to turn to try and be nice to shipowners so they get a good freight rate rate. It was like this for "naughties" (2000 thru 2011) during the great shipping bubble!

From a shipbrokers perspective I have always found that there is much more power being in bed with a charterer then with a shipowner. Shipowners although they pay the commissions the charterers are usually the ones who can dictate channels and decide which shipbrokers they want to work with. They can do this because they can select who to show their cargo... So in shipbroking very often cargo is KING.

But like most things there needs to be a balance and exceptions to general premises. In shipping we all need eachother and the experienced instictively understand this. Indeed many shipowners due to size and covereage are super powerful and many smart brokers know how to look after their interests. Infact many brokers only broker tonnage.

Shipping is full of Little Kings from all walks of life (and im not sure thats a good thing!)

Keep rocking
The Virtual Shipbroker!

2012 here we go!

We welcome in 2012 with an unfolding shipping tragedy in Italy...

Man....... could this Italiano Capitan be is some serious trouble. Italian Law imposes a maximum of 14 years for Captains who abandon their ships and he must also face manslaughter charges relating to the mounting death toll...

Its very surreal seeing this grand looking primo cruise ship half submerged to the backdrop of the calm waters of the magnificent Italian Coast.

Much like the Exon Valdez, this disaster, also due to human (captain) error, has grabbed the headlines. But spare a thought for the few dozen bulk carriers that also split, crash, sink and kill every year.

Being a seaman can be very rewarding but we can also see very dangerous occupation. Shipbroking on the other hand is less dangerous with the occassional nail breaking on the keyboard when typing a cargo order or a ships offer. I once tripped on a golf ball walking to the photocopy machine....but i managed to get through!


I jest a little - our thoughts are with anyone who have lost people at sea...and respect to those on the ships who are risking life and limb!

Yours
VS

Good question from a reader

qte

So Samoa is skipping friday. If I were a charterer, and was trading the vsl around Samoa, how would this effect the payments i make to the owner? Do I not have to pay for friday?! Well technically that one friday doesn't exist.

http://edition.cnn.com/2011/12/27/world/samoa-dateline/index.html

 

unqte

 

haha - my guess is that a "day" is still 24 hours....so although friday disappears the 24 hours will still count

 

great question though!

 

Btw - to all those readers owed a reply from the Virtual Shipbroker - I am on holidays for a few more days. I realise there are quite a few of you expecting replies. Hang in there and i will revert soonest. Plus i have been in a prerpetual state of drunken stupor for over a week so adding anything to this blog in my condition is not a good idea. 

 

2012 will be the best year yet - of that I am sure

 

Keep Rock'n

VS

 

 

Shipbrokers 12 days of Christmas

On the 12 th day of christmas my therapist said to me

12 Phones are ringing

11 Ships are sailing 

10 Banks are calling

9 Pounds im heavier

8 Trading screens

7 Days a week

6 Figure bonus

5 ..........Failed on sub...........sz,....

4 calling (girls)

3 Hours sleep

2 bottles of gin

and a boss (or wife, or husband) who is never happeeeeeeeeeee.

HAPPY FESTIVE SEASON TO ALL (CHRISTIANS AND NON CHRISTIANS ALIKE)

Sign of the times

In this prolonged recessed shipping market we are starting to see some trends emerge.

Banks are getting increasingly nervous - News that more and more shipping banks (those that lend to the sector) are losing patience and are now refusing extra cash injections, rejecting new investment pitches, being inflexible on repayment plans and are in fact calling in some of the moneys owing to them from shipping companies no longer able to trade as going concerns.

The problem for banks is that they are claiming ships back from clients at a fraction of their market worth from a few small years ago.

So they help finance a ship for USD 50 million, market crashes and same ship is worth 20 million and their client files for bankruptcy.....with 40 million still owing. What would you do if you were the bank?

They are either selling them for only a small portion of their previous market value, or even worse they are sending them straight to the scrap heap for the price of a song (for older cheaper ships).

Demolition yards are reporting more business, which to be fair is probably a good thing for the mid term viability of freight rates which are too low...

Instead of selling the ships to others or sending ships to the scrap heap another option banks are increasingly looking at and in fact doing are keeping the ships and entering into chartering and/or management agreements with some of the industries more reputable (and solvent) players.

So option 3 is keep the ships on the books, charter them out and wait till the market improves the asset values ............and then sell them. The key for many banks is if they sell they lock in a loss...a massive loss.

So some financially strong players like Oldendorff and Klaveness to name a few a being approached to handle "distressed assets"........and one can only imagine that the trade off for a good counterparty would be very attractive rates, terms and conditions. So put bluntly the strong larger shipowners are securing lucrative deals that others cannot get near.....because of smart prudent management over the last 3-5-10 years..

And its not just the banks. Some shipyards have seen customers disappear leaving them to hold the new born babies........so instead of accepting much cheaper prices in the current gloomy markets they too are partaking in interesting chartering deals with shipowners (in order to avoid booking in losses). Charter deals between shipowners and yards are nothing new in both low (current) and high markets.

Economists call this process "consolidation"....the inevitable result of a sustained economic downturn where the smart, secure and cashed up survive.

VS