Had you followed Urs Durs recommendations over the years, you would be essentially broke by now. He has encouraged investors to invest way before the market was anywhere near a bottom. The man is vastly over-rated. At worst, he should be considered a shill for the industry
Bloomberg has a recent article where they say that a financial market emerged in 2012 for non-performing shipping loans. So the banks have not been so limited in the ways available to deal with these loans. The article mentions:
"HSH Nordbank AG, the largest shipping lender, is preparing to sell a portfolio of shipping loans after a previous package valued at about 300 million euros failed to attract investors, Wolfgang Topp, who heads its restructuring unit, said in a telephone interview on Feb. 10. The bank is only talking to buyers in the industry, not financial firms, because “they pursue a different investment strategy,” he said."
I could be wrong, but I gather he is refering to deals like that made with Navios. HSH is electing, rather than taking a haircut on the loans, they prefer to hold out for a price in excess of current prices. And they accomplish this with the sort of deals they did with Navios. If you believed recovery in the shipping industry was a near-term thing, you might elect to dump these loans at a discount with one of the financial firms buying these loans. But if your perception is that recovery is a near term expectation, then you would go with the HSH Bank strategy. With HSH being the largest shipping lender, I have to believe they have a better sense of when recovery is expected. The Wall Steet private equity firms make their living sucking in as much capital as they can. They don't care if these loans are ultimately good investments They make their money by taking a cut of the capital attracted. This is not the smart money. The smart money is with HSH.
If you got burned on this deal where all the warning signs were in plain sight...then it would appear you do not know what you are talking about.
Bond investors all the time have to assess the strength of the underlying company. Long beore a bond stops paying a dividend, the bondholdrs become aware of the shift and the bond price heads down. But holders of thes MLP's always seem t be taken by surprise.
Why the difference between these two groups of investors? It's the returns offered by the MLP's. They are deceptivly high and so greedy investors like hose in BWP blind themselves to the dangers. Investors in the MLP's are just too greedy for their own good. So things go nicely for awhile and then they get taken to the slaughterhouse. You can blame idiot management if you like, but it's your greed that is the root problem.
I think John Fredriksen largely got his money out of FRO. His eforts ith FRO were more in the nature of a public relations job. He tried to prop up the comany without writing a blank check to them. I doubt he saw himself guaranteeing the survival of the company regardless of how bad things would become in the market for vessels. John didn't get rich by throwing lots of good money after bad.
I gather you don't see the potential for a "collapse". Maybe that is too harsh a word. But Navios has just taken over some vessels of late from "weak hands". If you look at GNK and EGLE you might see more of that on the horizon. But more in the form of banks quietly moving vessels into the hands of more secure parties...maybe like NM & NAA.
The problem for BWP is that they burned the group of investors best disposed toward the company. Rebuilding the share price is largely a matter of bringing in a new group of investors who recognize it as an undervalued play. These are a more sophisticated crowd...not the rather naive bunch that got trounced by being so overly focused on dividends. The dividend crowd were treated rather rudely. Too bad. Management does not care about your foolish complaints. They have a company to rebuild and they just don't care about your irrational fetish for dividends. Grow-up In the short term, BWP has some breathing room on the payouts. They can redirect that cash to better purposes while they rebuild their company with additional cash from the parent company. When this is all done they will be able to return to getting their capital from investors incited by high payouts. To those who feel badly handled by management, maybe next time you will give some consideration to the underlying strength of the company. Consider your recent loss a cheap lesson in the realities of investing. Your simplistic, payout only focus was bound to bring you down sooner or later. Do your homework from now on.
Gee..STNG is expanding 340% and NNA is just expanding 23%. And right at the time John was saying demand for shipping was going to take off.
Seven of STNG’s new ships are VLCC’s but they only begin to arrive in Q3 of 2015 thru Q4 of 2016. I guess they read John’s article where he said the big crude tankers would be later to recover. Strangely enough, NNA has three additional VLCC’s arriving in Q1 of this year. Hey, didn’t they read John’s article?
May 2012: Chairman John Fredriksen says the biggest crash in the cost of ships has yet to happen. It will be within “a year or two and then the market “collapses,” (Refering to tankers, perhaps VLCC & Suezmax crude tankers) “We’ll wait until the market collapses and then we’ll buy up what’s there,”
Comment: We have been scooping up some re-po ships of late. I have to think this is the "crash" he was speaking of. If we end up with significantly more of these, I will say John was right on in his prediction. Funny, I thought a collapse would be a lot more noisy than this...with shipping executives throwing themselves out of tall buildings and lots of worried stories on the news programs.
“The tanker market will recover first,” he said in an interview. (many months ago) “I believe most in the products side, not the big ships. Those will take much more time.”
•Product Tankers: Fredrikson has earlier stated his opinion that that this sector would turn up in 2014-15.
•Jan. 25, 2013 (Bloomberg) — The market for oil and fuel tankers will be the first to recover from a glut in the shipping industry,_reviving over the next 15 to 20 months_as international trade picks up, billionaire John Fredriksen said. (Comment: Hmm…I’m not sure he is still drawing a distinction between the big oil tankers and the smaller product tankers. I’m going to have to put in a call to John about this.)
Comment: Lookout! This means the recovery is going to hit us like a hurricane between April 25 and September 25 this year.
I see STNG has an expansion program in place for 2014.
20 owned vessels currently on the water
+44 vessels coming during 2014 = a 220% expansion during 2014
+20 more vessels on the books after 2014 for a total expansion 340%
But NNA has an expansion program too for 2014:
We start the year with 44 vessels
+ 8 more vessels coming during 2014 = an 18% expansion
+ Beyond 2014 we have 2 more vessels on the books for a total expansion of 23%
The author of the piece put NNA’s NAV at $3.83/sh conservatively valued. Setting aside some of his more conservative assumptions would give a 10% higher valuation , or $4.21/sh
However, a couple of posters pointed out a few errors in the authors calculations. They offered no revised figure of their own. But my perhaps suspect effort at revision comes up with $2.53/sh conservative, or $2.78/sh when the product tankers are valued 2m more each.
-100 m Correction on the over valuation of three ships as new builds, a 2009 build (Nave Galactic), a 2010 build (Nave Quasar) and a 2011 build (Buena Suerte).
-30 m Loss on the debt exchange
-30 m Loss on scrapping of the Navigator & Splendor (2014 Q2)
515.6 Authors NAV
-160.0 Correction (As above)
355.6 True NAV
134.6 m Authors share count (Voting shares only)
6.0 Non-Voting share held by NM
140.6 Total shares that are due a dividend
$355.6 m * 140.6 shares = $2.53 NAV (conservatively valued) or $2.78 NAV/sh when the product tankers are less conservatively valued.
I cranked these numbers, but I'm not sure even I believe what I see here. Anyone else want to take a stab at it?
It seems a mite reckless to describe past purchass as generally accretive. Not when the company chronicly is right around breakeven.
I think we have to concede that the recent spike in NNA was the work of the companies' underwriters preparig to get the maimum price for the new shares. But then the larger market took a spill and the underwriters could not continue to prop up the sock without spending more than they wanted to devote to the task.Wemay not have yet seen the effects of the dilution. The underwriters will ontinue to support the stock for a few more days as I understand it.
I think we have to assume that the bump in the share price during January was the underwriters preparing the stock for a favorable launch. Unfortunately for them,the overall market took a turn for the worse just after and they lost the benefit of their careful preparation. So, the company gets less cash, but the new shareholders get in at a fairer price. I think I like it better this way.
I understand the disappointment with the reduced payout. But no one here seems at all focused on the profitability of the company. Something that management seems intent on portraying more negativly than is the reality. They told us that earnings were down 78% as I recall. But, when disregarding goodwill write-off, earnings were really down only 20% This over-focusing on the pay-out is what created he 46% crashing of the share price. A year from now, management could rstore the payout and the fool shareholders would go right back in, driving up the price without a concern to the true profitabilityof the company
My guess is that the agreement with the bank prevents any such spin-off until those ships are paid off. The bank wants to know who they are in business with. But in the longer term, sure. More likely perhaps, Navios would elect to sell stock to finance expansion of that subsidary fleet. Essentially, investors are brought into these sister companies to provide the down-payment money needed to buy fleets. The parent companies are able to create huge fleets without using much of their own capital at all. It's the banks and small investors that put up nearly all the capital.
Quote From The CC: "Net income for the quarter was 20 m, a decrease of 70 m for the comparable period last year."
And then they say “We reported operating expenses of 254 million for the quarter, an increase of 58 million or 30% from 196 million for the comparable period in 2012, primarily as a result of a $52 million goodwill impairment charge.”
Comment: Am I understanding that 52 million of the 70 m profit decline is a result of a write-off of goodwill?
Management in the CC stated that income was down 78% without qualifying the statement by telling us that all but 20% of that was a non-recuring charge against goodwill. Management in these situations generally tries to put as positive a face on their situation as possible. But what we see here has the unfortunate appearance of management trying to flatten their stock price with comments that overstate the true decline in earnings.
Granted, Navos's upside is somewhat muted by the terms, it has to be emphasied that the Bank is not steping out from under all risk here. In exchange for the very real likelyhood of their recovering an additional 38% more than curent markt value, they retain substantially all of the risk of ownership. That is not, as I understand, being shifted to Navios.
PD, I get what you are saying. This deal expends essentially none of Navios' borrowing capacity. So, the only scenario where they lose on the deal is if the market value of these vessels never recovers. Though there may even be a provision for that eventuallity. Have all the details of the agreement been revealed to stockholders? I'm impressed by the intelligence of the people that hammer out deals such as this one. Some might imagine a bank could do no better than a fire sale arrangement. But, my guess is that both sides completely understand how much each side stands to gain.
The News Article:
"Navios Europe Inc. Closes Transaction With HSH Nordbank AG
Navios Maritime Holdings Inc. December 18, 2013 9:29 AM
PIRAEUS, GREECE--(Marketwired - Dec 18, 2013) -
• Innovative Financing Structure
• Ten vessels with FMV of approximately $218 million
• Strategic Partnership with HSH for further acquisitions
Navios Europe Inc. ("Navios Europe") today announced the closing of the transaction for the acquisition of ten vessels from debtors of HSH Nordbank AG ("HSH").
The ten vessels are five tankers and five container vessels with an average age of 6.0 years and a current fair market value of approximately $218 million. Five vessels have already been delivered to Navios Europe's fleet with the remaining vessels expected to be delivered by the end of 2013.
Fleet Purchase Price
The purchase price consists of $127.8 million in cash and the assumption of $173.4 million Subordinated HSH Participating Loan ("HSH Sub Loan"). The cash payment is funded by $120.4 million senior bank debt and $10 million investment from Navios Maritime Holdings Inc. (NYSE: NM) ("Navios Holdings"), Navios Maritime Acquisition Corporation (NYSE: NNA) ("Navios Acquisition") and Navios Maritime Partners L.P. (NYSE: NMM) ("Navios Partners"). The senior bank debt is secured by a first priority mortgage on the vessels and does not include any holding company guarantees from the Navios public entities."
Comment: The article above fleet value (FMV) is about $218 m. It then goes on o say that creditors recieved from the Navios companies: $127.8 m in cash + $173.4 m in assume debt.. Therefor Navios paid a total of 301.2 m for asset the article says are worth 218 m. I don't see how this makes sense.