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The changing face of ship finance

there was strong demand for offshore installation equipment from Asia and also smaller mechanical parts from Europe.”

Striking out

Two years later, Patsadas decided to embark on a solo venture, opting to start Trireme Maritime, later renamed Target Maritime Transport do Brazil. “We have been active for 15 months now and we have established ourselves,” he says, clarifying that the company has a local business partner in order to fulfil criteria to operate in Brazil. “I head up a global brokerage specialising in heavy lift and project cargo and we also arrange charters for dry cargo commodities requiring vessels up to a supramax size out of South America.” The managing director is confident that

this new venture will pay off and that, in spite of an investigation into corruption at Petrobras, infrastructure investment in the country will continue to bloom. In particular, he believes that offshore exploration in Brazil will stay steady and that steel production and exports to West Africa, the US and Europe are likely to increase. The country’s protectionist cabotage laws

may also boost business for Target Maritime Transport do Brazil, as those wishing to trade will need a broker that has integrated into the local market but still understands the international business mentality. “A handshake in Brazil is as firm as a handshake in Europe,” he says, adding that the main difference is that deals are ham- mered out over long lunches rather than at opposite ends of a conference table. “Plus, once you are accepted in the market, it is an asset you carry with you for life.”

The extended recession has tightened the reins on world trade and thus, by association, shipping. Although the market is slowly recovering, there has been a shift behind the scenes in the marine finance sector. “You’re seeing a lot more shipping banks pulling out or drastically reducing their portfolios. At the same time there is ongoing interest from private equities and other funds looking not only to buy in on assets but to buy on debt,” Patsadas tells The Marine Professional. He believes that the shipping slump proved attractive to non-traditional investors. “We have been in a downward cycle since 2008. This led a lot of investors outside shipping to believe that they would be entering the market at the bottom,” he says, adding that this was a risky attitude as there was no certainty that the sector was at its nadir. However, this speculative investment has proven to be a saving grace for owners that needed cash to weather the crisis, particularly for companies committed to newbuilding programmes. There is, however, the perception that equity investors prey on weak companies and asset strip them to recover their investment. However, Patsadas believes that most investors enter the market in the knowledge that there is a five- to seven-year cycle for profitability. This makes all investments long term if an outside party is looking to recoup their investments. There is also the likelihood that the vessel will see investment in a good ship manager and crew in order to protect the asset during the downturn.

The shipbroker believes that another reason for many owners viewing equity in a negative light is because they are reticent to hand

over control of their companies to parties that may have different views of how their assets should be operated. “If a vessel is idle at a port for an extended period, traditional shipping practice would suggest to ballast the vessel to the nearest active market and try to secure a cargo. However, an investor may consider cash flow and decide that the upfront costs of bunkering the vessel for a voyage ‘without the guarantee of cargo’ is too high a risk. They may believe that the same amount should rather be used to ride out the downturn,” he explains.

Financial posturing

“The thing is,” the Target Maritime Transport do Brazil MD confides, “they are directly influencing how the companies operate. Traditionally, shipping companies are divided into discrete departments that operate independently and the only person who knows the whole performance picture is the owner. But when private equity enters a new industry, a lot of the funds require financial and

reporting transparency in order for them to part with their money.”

While Patsadas admits that increased transparency can be beneficial, he points out that shipping companies are very introverted by nature. This is particularly true regarding their financial standing. “The only time you hear about this is when a company wants to brag about how well they are doing. Having to disclose that a company is struggling could immediately affect your market performance – especially for listed companies that depend on investor confidence,” he says. He points out that charterers are likely to push for cheaper rates if they get even a whiff of negative information.

That said, Patsadas believes that the move to greater transparency is inevitable and that it will erode the market advantage enjoyed by “certain players who … have not given investors a full picture in the past. I think there will be a strong resilience by stakeholders and this will level the playing field.”


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