Only the "toughest" investors are stepping into the refinancing fray for offshore support vessels, according to Braemar Naves.
The finance arm of UK shipbroking group Braemar Shipping Services has been heavily involved in restructurings in a hard-hit sector before and during the coronavirus pandemic.
Braemar Naves managing partner Axel Siepmann said the market has been impacted twice as badly as other types of shipping, due to Covid-19 disruption and oil price falls.
"I would say nearly the entire industry needs to repair its balance sheet. That doesn't necessarily mean all these companies have to exit, but we will see a lot of debt-to-equity conversions and replacement of bank financing with a totally different type of capital," Siepmann said.
"The companies that have a progressive set-up have a future on a lower level. The weaker companies that are less well managed might be forced out of the market."
Working with the brokers
The group's financial and shipbroking divisions have worked together on the disposal process for a variety of multipurpose offshore vessels, as well as tankers and bulkers, as part of the wind-down of a number of bank loan portfolios.
Since the beginning of Braemar Naves' new financial year in March, ships sales have slowed as a result of the coronavirus crisis, it said, partly because of difficulties in handing vessels over to new owners, and partly because of gaps in perceived valuations.
However, pressure on loan portfolios is expected to increase and to result in more activity as lockdowns are relaxed.
'Only the toughest'
"Only the toughest investors look at this market segment," Siepmann said.
"There are a few strategic buyers that are confident they have some sort of an angle to future employment on a preferred basis. That is companies from the Middle East, some companies in Asia, some in the US Gulf region."
He added that the selective group of financial investors is much smaller than the usually broader universe of shipping investors.
In the year to 29 February, Braemar Naves supported restructurings in Germany, Greece, Singapore and Malaysia, with a particular focus on the OSV market.
Debt and diversification
OSV owners are trying to restructure nearly $8bn of debt in the latest sector downturn, TradeWinds has calculated.
Equity has already been wiped out for investors in Norway's Solstad Offshore through its $2bn refinancing, which included a debt-for-shares swap.
Big-name shareholders, such as John Fredriksen and Kjell Inge Rokke, are being given the chance to build their stakes back up to a combined 33% in a new share issue, however.
The Braemar group itself is diversifying into subsea and renewables shipbroking in a move away from oil and gas.
In Singapore, it has added a team to work in this sector. This operation will be up and running in the next couple of months.
Braemar has been gaining offshore broking market share in recent years, but the current crisis is "going to have a negative impact in the coming months", the firm said.
