Experts sense end to drought for shipping IPOs in New York

NEW YORK January 18th, 2018 / TradeWinds

Finance experts say dry bulk sector is most favourable starting point in 2018 - but they are not exactly issuing guarantees as mergers may be the flavour of the year

Conventional shipping initial public offerings will return to New York in 2018 after a drought of almost three years - and the first will likely be in dry bulk.

This is the majority view of a group of experts polled by TradeWinds as the finance community returns from the holidays and begins to assess the capital-markets landscape again.

That said, conviction does not appear to be overly strong and some feel there will be more cases of private owners merging into public listings or perhaps further public-on-public combinations such as Euronav's pending takeover of Gener8 Maritime in crude tankers.

Mark Friedman, a veteran investment banker at Evercore, said: "I do think you will see IPO activity but the market will be discriminating and the number of companies that can and will list will be limited. The market will require the listed company to be suitably large, with strong shareholder sponsorship and likely to be vertically integrated have in-house commercial-technical expertise. "It would expect the balance sheet to be strong and focus on strong corporate governance with a recognisable group of board members."

He predicts that the first offering will most likely come in dry bulk, product tankers or LNG.

Friedman's generic description of a likely candidate just happens to sound a little like GoodBulk, the John Michael Radziwill-Ied owner of mostly capesize bulkers that listed on Oslo's over-the-counter (OTC) exchange last year.

TradeWinds reported earlier this month that GoodBulk had set the stage for a run at a New York listing in the first half of this year after acquiring 23 bulkers during 2017. Sources indicate that documentation could be in place even sooner, perhaps in the first quarter. Even as dry bulk continues a long-awaited recovery, the sources say GoodBulk may have the IPO landscape to itself for awhile. Erik Helberg of Clarksons Platou Securities, a second investment banker with strong activity in both New York and Oslo, also makes the case for a return of IPO activity this year.

"We expect to see more shipping IPOs in 2018 than we saw last year, and expect activity early in the year," he said. When asked to clarify, Helberg said he was including the US in that assessment. But he declined to say what operating sector might come first.

Investment banker Mark Suarez of Noble Capital Markets is more reluctant to predict an IPO revival, saying the freight market still has some work to do. "We would have to see greater time-charter rate sustainability and improved investor sentiment across a number of segments, like dry bulk and containers, before we are prepared to make any predictions on the next wave of marine shipping IPOs," Suarez said.

Given such improvement, Suarez taps dry bulk as his lead sector, followed by LNG and perhaps product tankers.

Among equity analysts, both Jonathan Chappell of Evercore ISI and Ben Nolan of Stifel also see a return of shipping IPOs this year.

However, both envisage mergers being moderately more active than IPOs. "While things may be open for IPOs, the bar is substantially higher than it had historically been, and size and scale is a fact that can help qualify companies," Nolan said.

Suarez agreed: "We believe we will see a number of private companies roll up into public entities followed by continued interest in M&A [merger-and-acquisition] activity," he said. "The environment for IPOs might still not be ripe for shipping unless a number of market catalysts come to fruition."

The last mainstream shipping IPO came in June 2015 when Gener8 - the product of a merger between General Maritime and Navig8 Crude Tankers - eked out a listing, only to be snapped up this Christmas by Euronav in a stock-for-stock deal.

Read the article online at Tradewindnews