Christoph Toepfer-led Borealis Finance is enjoying the benefits of a swift V-Shaped recovery in boxship markets.
Charter rates for its 24 feeder to panamax-sized containership have doubled or trebled, and asset prices look set to follow, Toepfer said.
That is helping the Oslo-listed outfit upgrade its fleet by selling older vessels and replacing them with larger, younger ones.
Borealis Finance sold one vessel and purchased another two in the third quarter, including an unnamed 3,600-teu geared feeder vessel (built 2012) with a delivery expected in early December.
The upgrades are starting to pay-off as higher and longer charter rates kick-in in the fourth quarter, Toepfer said.
"The real increases only started to roll into the portfolio in the last few weeks," said Toepfer, who is founder and chief executive of the London-based management firm Borealis Maritime.
"The lines have been forced to accept longer periods as well. It looks fairly strong into next year."
Toepfer points to panamax boxship rates as high as $25,000 per day and 3,500-teu boxships close to $20,000 per day.
But the recovery is filtering through to the smaller boxship sector. One of Borealis Finance's 2,800-teu vessels was fixed recently for $17,500 per day. That marks a recovery to levels not seen for the best part of a decade.
"We have waited for quite some time for this," Toepfer said.
Sharp turnaround in fortunes
It marks a sharp turnaround in fortunes for Borealis Finance since July, when the company sought and obtained an $18m equity injection to restructure its $200m bond.
Borealis Finance has reported a loss of $9.2m for the third quarter of the year, compared with a loss of $2.1m in the previous three months.
That was partly linked to book losses on "defensive measures", including the sale of vessels such as the 75,000-dwt Paganini (built 2008).
Revenue for the three months to the end of September remained stable at $20.8m.
In hindsight, Toepfer suggested that the caution displayed at the time of market uncertainty was probably overdone.
"We never breached covenants and were probably too defensive in the end," he said.
"We never had to inject the cash, and we are sitting on significant cash at the moment."
Like many in the sector, Borealis Finance was caught by surprise by the pace of the boxship market recovery.
But Toepfer notes the company was not alone as even the big liner companies got caught off guard and found themselves on the wrong side of the market.
Toepfer expects the market to slacken inevitably, perhaps in February and March, with lots of vessels coming open.
In the meantime, the company is making hay with a recovery that looks set to run.
"Every month this continues makes a huge difference for us, because every month a couple of ships are fixed at double or triple the rates we had before," he said.
"So for Q1, Q2, and Q3 next year, the projections are pretty solid."
Asset prices to follow?
So far, asset prices have not followed charter rates upwards, at least to the same extent.
But Toepfer believes the rally in rates will feed through to the asset side of the business due to an increasing number of buyers for containerships, especially for larger vessels.
A number of containerships are under negotiation that, in the next two or three weeks, Toepfer said should result in some pretty big jumps on the value of panamax boxships.
There are also significantly more buyers in the market for smaller vessels.
That should benefit Borealis Finance fleet of 24 containerships — or 25 if recent acquisitions are confirmed. The company's ships range in size from 1,100 teu up to 4,563 teu. It also has two panamax bulkers of around 75,000 dwt.
Analysts appear bullish on the prospect for Borealis Finance's fleet given the lingering disparity between charter rates and asset prices.
"We see 10% to 20% upside in asset values from here given the charter rate rally and increased contract duration," wrote Fearnley Securities.
The investment bank noted that six to 12-month time-charter rates for a 3,500-teu vessel have jumped from $7,000 per day in March to $15,000 per day.
But asset prices for five and 10-year-old vessels has hardly budged. These remain below $10m compared with $30m to 40m a decade ago.
Clutch of S&P transactions
Borealis Finance recently disposed of the 2,490-teu Bomar Hermes (built 2006).
Brokers reported the vessel as having been sold to Mediterranean Shipping Co for $7m with delivery next month.
But the company immediately upgraded to a larger and more modern ship when it acquired the 3,500-teu Nordic Macau (built 2014) for $10.2m.
