Event Recap: Marine Money’s 24th Annual Ship Finance Forum in NYC

EXECUTIVE SUMMARY:

There was a frenzy of dealmaking discussions and sideline meetings when over 300 attendees convened at Marine Money’s 24th Annual Ship Finance Forum in NYC in the spectacular Quorum facility in midtown Manhattan with our partner sponsor DNB Markets . Two weeks have passed since the event, and we are aware of numerous new relationships and fresh transactions that are progressing. As organizers of ship finance networking events, nothing could make us happier. If you missed the event, fret not, we have created this recap report to give you some insight into what went on during the event. If you are looking for the original recordings, they are available on the www.marinemoney.com website by creating a free account and navigating to the event page.

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OFFSHORE TAKES CENTER STAGE:

The day began with exciting discussions about the offshore industry. Many believe, as do we (read our most recent white paper report here) that we are at the beginning of a long-term bull market for offshore. But not just oil & gas, offshore wind has seen an explosive amount of investment recently with many projecting vast amounts of market growth. Capturing as much market share as possible, Cadeler and Eneti agreed to merge in a stock-for-stock transaction set to begin trading under Cadeler in mid-December. The combined company is estimated to have €100Bn Euros in Synergies and make better utilization of the assets. CEO of Cadeler, Mikkel Gleerup , was the first to take the stage and tell us, what is to come for Offshore wind. Well, the answer is complicated, but the current largest holder of market share in offshore wind believes there is still promise here in the US although hindered by the supply chain. Europe remains dominant, but Asia was mentioned as a major player in the market. While offshore wind may be paused or slow here, the CEO was adamant that the industry is still very busy in other parts of the world, and I am sure caught many in the audience off guard and piqued investors' interest when he mentioned a $250M USD project could possibly be paid off in 2-3 years.

Following an optimistic wind discussion, traditional offshore took the stage and addressed the elephant in the room with a direct question – is it a bull market? Most would agree yes, as our panel “Making Deals in the Offshore Market” addressed the unique long-term cyclicality of offshore and of course the support of various geopolitical black swan events. Projects take years to develop and require huge capital which require longer-term contracts to see any returns, creating a ripe environment for support vessels, so much so that offshore wind support vessels are being pulled into the O&G space and abandoned offshore projects are being re-assessed.

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INVESTING IN SHIPPING... DON’T GET BLOWN UP!

Stepping away from offshore, the room was packed with panels discussing where the next opportunities lie in shipping, and how to take advantage of them, especially in this economic environment. Does one focus on credit or equity? Like everything in shipping, the answer is not so direct. If you are a credit investor, you may care more about the order book than an equity investor, at least in the short term with James Thomas saying, “Stocks are Uncorrelated to the order book at least in the short term.” So then how does one evaluate equity opportunities? Again, Mr. Thomas dropped a nugget of wisdom on us… “If you can get in low enough, you can hold them long enough” but perhaps keep in mind that he also said, “You can get blown up in a month in shipping”!

But opportunities for investment may not be so ripe right now. Our panel, “Sourcing Equity for Shipping” revealed some harsh truths that maybe you already know. The cost of equity is expensive and hard to determine, stocks tend to trade at or below NAV, and debt is more expensive than usual in these interest rate environments. Shipowners raise capital for a purpose, usually the acquisition of assets, but order books are small and so there is not much to fund, even from private funds despite the interest spread being smaller than ever. And we suppose it does not help investors that companies have accumulated so much cash. If they are not building new ships, what are they doing?

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PANEL HIGHLIGHT: THE COMMODORE IS THE CONTROLLING SHAREHOLDER

M&A!!! Maybe. With cash accumulation, the strategic investment in shares of these companies has picked up pace, but according to Mark Friedman, there is a limiting factor. “The commodore is the controlling shareholder” which he refers to commonly as between 20-30% ownership. The uniqueness of shipping is that so much of it remains a somewhat family business, with a dominant party involved in M&A decisions, both on whether to buy or sell… But where there is a will, there is a way as M&A remains attractive as companies trade below NAV where acquisitions and take privates are more focused on realizing asset values in a longer-term strategy. One can only wonder, what would the industry look like if there were fewer commodores?

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FUELS OF THE FUTURE:

While the discussion around the various panels could go on endlessly, switching gears for a moment decarbonization should be acknowledged. Of course, when talking about shipping and decarbonization, the question is always what is the next fuel? Nobody really knows, and this is one reason orderbooks are small right now as no one wants to bet on what infrastructure will dominate the next decade. GTT (Gaztransport & Technigaz) makes a convincing argument for LNG, as the infrastructure has been in place for decades, it is 22-25% less carbon intense than fossil fuels, and the current production of greener fuels such as methane or ammonia result in its well-to-wake being more carbon emissive than most fossil fuels. With 2024 rapidly approaching and the EU ETS coming into effect, the emergence of carbon markets, and additional regulation, everyone is waiting to see what fuel takes center stage in the green revolution.

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ANOTHER TANKER PARTY, OR TANKER HANGOVER?

It would not be a discussion of a Marine Money event without another Tanker Party panel, would it? Winter is coming, global oil inventories are low, and newbuild orderbooks are extremely small… It remains to be seen if market strength last year should be interpreted as the effect of black-swan geopolitics, or if this year our tanker CEO’s hunch that there is fundamental strength in the Tanker market aided by these events is correct. With the dark fleet having (estimated) doubled since last season, time will only tell if there is another party or if a nasty hangover waits from last season's strength.

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Thank you to everyone who presented or partook in a panel discussion providing key insights and information and thank you to all our attendees for making the event as lively as ever before. Make sure to be there next year!

Special thanks to our event sponsors who made this great event possible:

DNB , International Registries, Inc. , Reed Smith LLP , Watson Farley & Williams , Seward & Kissel LLP , AMA Capital Partners, LLC , AMSC ASA , Ardmore Shipping Corporation , Avantis , Blank Rome LLP , CMB Financial Leasing (Ireland) Limited , Clarksons Securities , Dorian LPG , EGAN-JONES RATINGS CO LTD , Ehlermann Rindfleisch Gadow , Eneti Inc. , Evercore , First Citizens Bank , FPG AIM , Genco Shipping & Trading Limited , GTT (Gaztransport & Technigaz) , Holland & Knight LLP , Hudson Structured Capital Management Ltd. , Jones Walker LLP , Marsoft Inc. , POTEN & PARTNERS , Ridgebury Tankers , Scorpio Tankers Inc. , Signal , Taylor Maritime , Grindrod Shipping Holdings Ltd , Vedder Price , Vortexa