Session chairman was Arthur Regan, Operating Partner at Apollo Global Management, a funds provider and packager with 10 years of experience in providing multiple flavors of capital. Regan, an industry veteran, who spent many years in the Stena organisation, and then headed up Arlington Tankers, before moving to Apollo, recounted previous iterations of Marine Money conferences, circa 2007 and 2008, where “Alternative Capital” offered little appeal to shipowners awash in cheap bank debt with very owner-friendly terms and covenants.
The constraints on available bank debt, in conjunction with shipping’s difficulties in the equity markets, have a brought about a situation where Regan sees Alternative Capital being a more sustained part of shipping’s balance sheets.
Another speaker, Andrew Horrocks, from Credit Suisse Securities (USA) described that markets as “shallow”, with defensive investors, who are favouring certainly and predictability, while undervaluing growth. He suggested that investors in the public markets are looking at short investment time horizons contrasted with the longer time frames considered by alternative capital providers, or by family run businesses, as noted by Leon Patitsas, ceo of tanker owner Atlas Maritime.
After noting that, “shipping is not familiar with all the different flavours of alternative finance” Regan said that shipping deals must be better matched with the different types of alternative finance.
This theme, where the financial instruments better match the particular deal type, was echoed later in the afternoon by another speaker Peter Fortier, cfo of Schuyler Line Navigation Company, a US based owner of bulk carriers, on a following panel, who stressed that capital providers need to strive for “an alignment of interests…and the right fit”, phrased differently by Patitsas, who said that company managements need to have “skin in the game”. Patitsas also reiterated a concern voiced early by Regan that alternative capital needs to have a clear exit strategy when embarking upon an investment.
One ongoing deal discussed on the opening afternoon was “V4”- a transaction where Bob Burke’s Ridgebury Tankers purchased four second hand VLCCs just as the tanker segment was starting to boom. Investor Rob Flowers, a Partner in Atalaya Capital Management explained how this deal, brought to them by DNB Markets, met all of their criteria- including the backing of serious sponsor - in this case, Riverstone - and management’s significant co-investment the “skin in the game” alluded to by Patitsas.
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