Containership orderbooks bulge
Katerina Kerr | Tue, 19 Jul 2011
An overhang of surplus capacity will continue to plague the industry, warns analyst
Vessel deliveries are expected to hit a record high in 2013. Meanwhile, carriers are bracing themselves for a weak peak season following dwindling demand since Q3 last year.
According to Paris-based analyst Alphaliner, the high number of new ships on the way and the current capacity overhang – the result of a tonnage surplus build-up since 2008 and reactivation of idle tonnage – point to a weak market outlook for the next two years.
To date, the amount of capacity scheduled for delivery in 2013 has reached 1.73 million teu, exceeding the previous annual high of 1.57 million teu delivered in 2008.
Alphaliner warned: “With the delivery schedule over the next two years to remain firm against an expected sluggish demand, carriers must anticipate further market weakness.
“The market fundamentals are looking less favourable, compared with last year, as an overhang of surplus capacity will continue to plague the industry.”
The analyst explained: “The strong carrier earnings of 2010 had raised the market’s expectations, setting the stage for a significant reversal in 2011.”
The capacity growth rate is expected to reach 8.7% a year both this year and next, with deliveries expected to reach 235 ships or 1.44 million teu in 2012 and 213 ships (1.34 million teu) this year, according to Alphaliner projections.
And the analyst warned that the number and capacity of vessels scheduled for deliveries in 2013 were cause for even greater concern.
“Most carriers continue to pile up new vessel orders and the order wave does not appear to be coming to an end anytime soon,” it said.
“Deliveries are expected to reach a new record of 1.73 million teu in 2013. This number could rise over the next few months as some yards continue to offer container vessel building slots for 2013 deliveries.”
...there are other means besides equity. Preferreds and subordinated debt, for instance. Market is closed for the latter, not sure about the former. I wonder why convertible unsecured debt isn't an option. Back at 7.50, it seems the convert price could have been reasonably set above market and we could have gotten a low rate in the meantime.
Non-amortzing loans out of the gate, that's how. Until they went into technical default on the LTV covenants and had to renegotiate the financing with mandatory amortization and excess cash sweep, life was good (very good!!).
Hedging- Maybe they should just arrange to pay down the principal balance to the bank the 19 million hedging interest expense.That should guarantee a much lower fixed rate ,and at the same time pay down our debt.The present setup is just throwing 19 million away.But hey. what do I know.
Endless-You got that right. In their initial filing in 2008 GSL"assured" investors they would be able to pay $.23 a quarter indefinitly with the same contracts they have now. What a crock!Maybe they were`nt hedging at that time.
Did a bunch of catching up on GSL last night. I 100% concur with Edge's math on the dividend. The bigger issue for me is how much equity must be raised to execute the ZIM option and maintain comfortable debt/equity ratios. Current debt markets will prevent 100% debt financing for the ships.
EDGE-4.8 Q for interest hedging(swaps)=19.2 million dollars a year additional=$.40 a year that would have been available for dividends without hedging.So what is the actual fixed interest rate on our total debt including Libor + $3.00? You stated the hedge would expire in 2013; When, Jan.-Dec.? After expiration why wouldn`t GSL hedge again?
Another investor pointed out to me that I failed to include the savings from the newly lowered borrowing rate and the lower amount of debt (which was not reflected in Q1). This adds an additional $900k/quarter or 2 cents/share, which gets you to 10 cents/sh in cash flow per quarter w/o the Zim ships. Will they pay it out? Who knows...