For the shipping market, access to capital is of critical importance as it allows companies to grow their fleets at attractive asset valuation levels. However, bank financing which was considered to be the traditional source of capital has become more difficult to obtain. As a result, capital markets and private equity are now of increasing importance for listed and private shipping companies.
The pressure on traditional ship lenders caused by the downturn in the shipping industry has created an opportunity for alternative investors to reorganize loans or monetize assets. This restructuring cycle will allow ship-owners and executives to maintain and upgrade their positions. In order to do that, they will need to take initiative and lead the restructuring in a commercially reasonable manner, and understand the investment objectives of the new investors. Restructuring can offer opportunities for a new beginning.
Private equity (PE) has entered into the shipping sector after a long period of research. Nonetheless, shipping is not as easy to manage and understand like other investment opportunities. As such, PE investors need to be educated by the ship-owners and have equal commitments as they have aligned interests.
Creative financing aims to offer solutions where traditional financing hesitates to do so. Some investment companies try to fill the gap by investing in projects where ship-owners’ financial needs are not being addressed by banks, or where major private equity players consider deals to be too small for their portfolios.
Initial Public Offering (IPO), the process of transforming a private company into a public one, allows companies to raise expansion capital and to become publicly traded enterprises. Shipping companies should evaluate first whether an IPO is the right choice for a company, taking into consideration that IPO is a time consuming process, highly regulated and costly. The key elements for the preparation of an IPO are to build an experienced management team and a team of advisors; create a positive public image; determine the IPO structure; appoint independent directors to the board; and address accounting and financial reporting concerns early.