New York and new money

With his larger than life presence, it seems that Bugbee has single handedly reinvigorated shipping's appeal, turning a market that had gone cold, languishing since 2008, except for a brief flurry in 2010, into a "hot" sector. For proof, witness Scorpio Tankers' $2bn market capitalization with profits for 2013, before a big chunk of vessel deliveries kicks in, estimated to be between $15m and $20m. This past week, Mr. Bugbee provided a keynote at the annual Marine Money Ship Finance Forum, ostensibly a US-centric event, which was followed, the next day, by a breakfast meeting looking closely at Private Equity (PE), organized by New York Maritime (NYMAR).

The Marine Money event took on a distinctly Scandinavian tinge this time around, noting the continuing strength in the offshore service and drilling sectors. Indeed, in his lunchtime shoutouts, Mr. Bugbee praised RS Platou Securities, which spearheaded the very successful Oslo offering for Scorpio Bulkers, with its ticker symbol "SALT". Only several days prior to the Marine Money event, "SALT" had announced that it would be listing in New York, in a $100m offering led by Deutsche Bank. In the drilling sphere, Morgan Stanley is leading a money raising effort by North Atlantic Drilling, an offshoot of the Fredriksen-controlled Seadrill, which had raised private money in Oslo in early 2011.

The NYMAR breakfast offered some candid conversations about this new breed of investor, which is still getting to know the shipping industry, and vice versa.

"Private equity funds are particularly important at this moment when other sources of funding are becoming less accessible", mentioned Nicolas Bornozis, President of Capital Link, a New York based advisory and investor relations firm focusing on the shipping industry. Bornozis, on the NYMAR board, and the moderator of the breakfast session, told Seatrade Global: "Most money in shipping is made with the proper timing of vessel acquisitions and divestitures. Now, we are at or close to the bottom of the cycle and PE funds have been investing significant amounts capitalizing on this opportunity. Whether PE funds will maintain a long presence in shipping and how and when they will exit remains to be seen, but this is bridge to cross when we come to it."

Panelists offered varying perspectives on the shipping / PE mating game and the time horizons of investors. Julian Weldon from Garrison Capital explained, "We are not motivated to sit on assets forever... nor sell at inopportune times." Bob Burke, a local finance veteran whose Ridgebury Tankers has been joined by Riverstone (a PE fund promoter concentrating on energy), emphasized the cultural challenges that underlie relationships between partners. Burke, a onetime banker at GE Capital, said that it takes a lot of time for the PE investors to get to know the shipping players. He expressed a concern that PE is "in the business of trying to find companies to fix", ostensibly shunning asset plays even though shipping is a very cyclical business, and one where personal relationships and reputations may not be readily apparent to analysts conducting "due diligence" investigations from behind their desks.

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