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Gener8 Maritime IPO and VLCC consolidation

Gener8 Maritime IPO and VLCC consolidation
Some three months after its powerful new tanker combine was established, Gener8 Maritime has filed for a $100m initial public offering (IPO) in New York. The new company, which has private equity backing, was formed from General Maritime and newcomer Navig8 Crude, deploys a formidable fleet of 25 crude tankers of all sizes, with a further 21 VLCCs on order.

The move could not have come at a better time with the tanker market riding six-year highs. Earnings on some VLCC trades are around $100,000 a day and sector average earnings are currently above $70,000 a day. The smaller sizes have been dragged up as well. No doubt investors will be biting the hands off the bookrunners Citi and UBS. A New York Stock Exchange (NYSE) listing is the plan.

Despite everyone agreeing that consolidation in the tanker sector would be a good idea, its history is chequered despite the best efforts of self-confessed “consolidators” like John Fredriksen. Much speculation about a Frontline-Euronav merger turned into a jv under the banner of VLCC Chartering deploying around 60 VLCCs.

Even some years of heavy losses that drove substantial tanker companies into bankruptcy or at least Chapter XI protection, does not seem to have made a huge difference. Successful consolidations (so far), like Gener8 Maritime, have been the exception rather than the rule, and have latterly been driven by private equity funds, which have assumed a much larger role in this most individualistic of markets.

Of course there has been consolidation of a sort via pools like Tankers International which enable owners to retain a degree of independence and offer a full service menu to charterers while still retaining a degree of independence.

Meanwhile the $64,000 question remains. When is the true extent of the tanker surplus going to reveal itself? For the moment, slow steaming, speculative storage plays on the back of still-higher futures prices, and some longer trade routes are keeping the lid on, but for how long?