We ended 2010 with the fear that continued weakness in the tanker and dry bulk markets might lead to a rapid series of foreclosures and bankruptcies. The market weakness, however, didn’t really gather steam until the end of the year, so at this point, we are on an uncertain precipice and wondering if the proverbial tower of cards will topple.
The watching and waiting of 2010 will shift into 2011. The current market weakness, especially in the tanker sector, already has led to the tightening of belts and the start of renegotiations with banks, most of which seem to be playing ball, albeit with a big and heavy stick.
Those who will fare best in the current struggle are those who willingly and readily work with their lenders and are honest in their expectations and their successes and failures.
“Distress” was the word on everyone’s lips 12 months ago, and although very few assets ever hit that watermark -- no more than 20 or so container ships probably changed hands at “distressed” prices, for example -- it’s possible that with the continued pressure from the freight markets and the desire of the banks to clean up their balance sheets, that more assets will come to market at attractive prices.
There is plenty of money around. Private equity, for example, committed more than $2 billion to the shipping space in 2010, and if prices and values pull back, there likely will be more from that pot. The public market is currently closed for new issues, but this window will reopen soon, and money will be readily available if valuations are attractive.
As the adage goes, there are no bad assets, just bad prices!