Navios Plans Purchase as Drop in Lending Accelerates Shipping Bankruptcies

Angeliki Frangou, who heads three shipping companies controlling more than 100 vessels, said bankruptcies within the industry will accelerate as lending dwindles, allowing her to purchase assets that plunged in value.

The chief executive officer of Navios Maritime Holdings Inc. (NM) and two related companies said in a Nov. 10 interview she’s seeking a “large transaction” for a “group of assets.” Navios will approach banks seeking to sell vessels in order to remove problem loans from their portfolios, while Asian yards need to sell ships built for owners who are unable to make final payments, she said.

“There’s a lot of distressed opportunities,” said Frangou, the only female CEO of a U.S.-listed shipping company. “We’ve grown more during the downturn in shipping than healthier times.”

The sovereign-debt crisis in Europe is curbing lending to the industry, said Frangou. At the same time, a glut of ships depressed the price of vessels hauling oil, dry-bulk raw materials and refined petroleum products. First to recover will be oil-product tankers because that’s where fleet growth is going to be smallest, she said.

38% Decline

Prices for new vessels plunged as much as a third from a record three years ago while used ships lost 38 percent of their value, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

Photographer: Jonathan Fickies/Bloomberg

Navios Maritime Holdings Inc. CEO Angeliki Frangou. Close

Navios Maritime Holdings Inc. CEO Angeliki Frangou.

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Photographer: Jonathan Fickies/Bloomberg

Navios Maritime Holdings Inc. CEO Angeliki Frangou.

Frangou joins Norwegian shipping billionaire John Fredriksen and New York-based Wilbur Ross, chairman of private- equity firm WL Ross & Co., in seeking to buy distressed shipping companies as the market slumped after vessels’ earnings peaked in 2007 and 2009. Fredriksen said in May values had further to fall and he would buy tankers after prices collapsed within “a year or two.” Ross, who invested in shipping for the first time three months ago, said in August deploying “another few hundred million” in the industry “is certainly easy to do”.

Depressed returns for dry-bulk ships and tankers linked to the surplus capacity mean owners of vessels bought at higher prices are unable to cover operating costs and repay loans, Frangou said. Industry cash flows and balance sheets are “stressed” as a result, according to the CEO.

Loan Waivers

The European crisis means banks in the region that make 75 percent of global shipping loans will struggle to grant vessel owners the loan concessions extended in 2009, when the world economy slid into recession, Frangou said. Waivers that were “easily” obtained after rates collapsed near the end of 2008 will be harder to get now, she said.

DnB NOR Bank ASA, the world’s second-largest financier to the industry, said Oct. 5 European lending to owners was dwindling because of rising costs for the continent’s banks to borrow dollars.

Prices for some new ships such as panamax bulk carriers fell enough for returns to cover loan payments and operating costs, signaling that part of the industry had bottomed and was starting to recover, Frangou said. Still, a sustained rebound in demand was reliant on European economies as well as developing nations such as China, she said.

Returns may recover as soon as 2012 for tankers carrying refined oil products such as jet fuel because the supply of new ships is slowing the most, followed by dry-bulk vessels, according to the CEO. Crude tankers will be the last to revive because the excess of new vessels is greatest, she said.

Frangou also is CEO of Navios Maritime Acquisition Corp. (NNA) and Navios Maritime Partners LP. (NMM) All three Navios companies are listed on the New York Stock Exchange and run from Athens, and the combined fleet includes dry-bulk vessels and tankers hauling crude and oil products. There are no plans to add container vessels or gas carriers, Frangou said.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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