VERY large crude carriers operating in the spot market are likely to earn below $20,000 per day for the next 12-18 months, as heavy newbuildings constrain rate improvements, according to Dahlman Rose.

In its latest report, the US investment bank forecasts VLCC earnings that average just $17,000 per day, up just $500 on 2011 levels. However, it foresees a significant rise in earnings to $24,000 per day in 2013.

“The period between 1990-2004 saw VLCC rates averaging $32,000 a day. We believe VLCC rates can return to the those levels when newbuilding deliveries slow, as we approach the end of 2013,” wrote Dahlman Rose analyst, Omar Nokta.

“We view $30,000 a day as an achievable average rate in a market where newbuilding supply additions are slow and demand remains rather weak.”

Although VLCCs are earning around $22,000 per day so far this year — almost double the second-half 2011 average of $12,000 — Dahlman Rose does not expect a rebound any time soon.

However, “the beginnings of a supply-side correction will allow 2012 to improve marginally over 2011 rates”, Mr Nokta said.

 

With vessel oversupply putting the biggest pressure on earnings for crude and product-tanker fleets at a time of fierce competition, the bank expects continued financial losses and low rates to encourage companies to correct overcapacity.

“We expect to see supply-side corrections, in the form of scrapping, newbuilding delivery slippage and vessel layups to accelerate as part of an industry-wide structural cleanup,” Dahlman said.

The report found that the crude-tanker fleet grew 6.5% last year, outpacing demand growth of 2.4%. The number of product tankers in service climbed 4.1% versus cargo growth of 3%.

“The product-carrier market has been tighter, but weak crude tanker supply/demand has kept a lid on product-rate potential.”

Despite hopes for “a significant wave of scrapping” and newbuilding delays, the crude-tanker fleets are set for huge growth over the next 12 months, with 38.7m dwt of crude tanker tonnage set to hit the water in 2012, increasing capacity 11.9%, or 2.6m barrels per day.

That is equivalent to one VLCC and one aframax entering service every day this year. By comparison, seaborne crude demand is set to grow 1.5%, or 600,000 bpd.

While the VLCC fleet is set to grow 13%, smaller suezmaxes that carry half the cargo – at 1m barrels – will see 17% growth and aframaxes that ship 600,000 barrels will see supply increase 6%.

Assuming a similar scrapping and newbuilding slippage profile to 2011, this year’s net deliveries will expand the fleet by 7.3%, the report said. It forecasts total orderbook slippage at roughly 35%.

“We expect the significant loosening of the tanker market brought on by heavy newbuilding deliveries this year [to] spur shipowners into taking corrective measures, including the scrapping of older tonnage, laying-up existing ships, delaying acceptance of newbuildings, and the adaptation of more efficient trading strategies.”

As an example, the report referred to news this week that Greece’s Almi Tankers was negotiating with Daewoo Shipbuilding & Marine Engineering to swap two VLCC newbuilding orders for one liquefied natural gas carrier.

Dahlman believes “tanker operators will increasingly turn to trading pools to consolidate, and make more efficient the vessels currently trading in the spot market”.

The prediction comes as Mitsui OSK’s Phoenix Tankers, Maersk Tankers, Samco Shipholding and Ocean Tankers have come together to launch Nova Tankers, a pool of 50 vessels that will be the largest of its kind. The Tankers International pool is estimated to have around 40 VLCCs.

Compared to the VLCC sector, the US bank forecasts that suezmax tankers will earn around $16,375 per day this year, aframaxes will average $12,750 a day and medium-range product tankers will generate an average $13,250 daily.

For the three largest crude-tanker sizes, it anticipates that the first quarter will be the strongest three-month period in 2012.

As with the VLCC sector, Dahlman expects earnings to improve dramatically in 2013, with suezmaxes earning $20,000 a day and aframaxes $16,000 a day.

AILING Japanese shipowner Sanko Steamship has secured approval to freeze debt payments to domestic financial institutions after presenting turnaround proposals that could see it sell nearly 30 vessels and defer charter payments for three years.

In its first meeting with creditors under the Japanese alternative dispute resolution system, Sanko secured unanimous approval to stand still on debt payments for three months as it finalises its rehabilitation plans.

According to ADR rules, Sanko will have to present formal proposals in a second meeting scheduled for June 1. Creditors will then vote on the proposals at a final meeting on July 3, although the negotiation period could potentially be extended by mutual consent.

Mediators from the Japanese Association of Turnaround Professionals, a semi-official organisation certified to assist in ADR cases, will discuss the proposals with Sanko and the creditors in the coming months.

At the meeting with creditors, including Shinsei Bank, Sumitomo Mitsui Financial Group, Mizuho Bank, the Bank of Tokyo-Mitsubishi UFJ and Citibank’s Japan branch, Sanko laid out a five-year revitalisation plan saying it would sell 27 vessels this year and defer some charter payments for three years.

In return for Sanko’s efforts to shore up its balance sheets, the banks have been asked to suspend long-term loan repayments totalling ¥29bn ($353.7m) until April 2015, allowing Sanko to make repayments in instalments beyond that date.

Sanko has told its creditors that the company will return to the black and make profits of ¥2.4bn in the Japanese 2014 fiscal year, which ends on March 31 2015, if all goes well.

However, Sanko’s fate may also depend on how other types of creditors react to its proposals; non-compliance from any could trigger a crisis of confidence in the owner’s ability to repay.

Faced with low cash reserves, Sanko has deferred or reduced payments to shipyards, owners, domestic and foreign financial institutions since March 9, though it has continued to pay shipmanagers and bunker suppliers.

To meet demand from shipbuilders, the Japanese company plans to sell its 15 vessels as soon as they are delivered, which could put further downward pressure on ship prices due to overcapacity.

Clarksons data shows the ships may include at least one chemical tanker, three bulkers, two general cargo ships, two liquefied petroleum gas carriers and four offshore vessels.

From April, Sanko will also sell 12 of its vessels on water, equivalent to approximately 40% of its total.

The company’s selling spree has been ongoing since early 2011, reportedly netting more than $300m by selling at least 13 bulk carriers to date.

Sanko also plans to defer charter payments to other shipowners in the next three years, which may raise strong resistance as some of its counterparties are also in financial difficulties themselves.

German KG house HCI Capital, whose funds have chartered 14 vessels to Sanko, has seen four of its HCI Shipping Select XXV single-ship companies file for bankruptcy.

Sanko has already cut its time-charter rates to other owners to 20% below the prevalent one-year rate in the month from March 9, to reduce its charter bill for the month by half.

The company’s counterparties seem to have refrained from legal action so far. However, negotiations for payments in April and beyond may become increasingly difficult.

Some trading houses, worried about potential arrests of vessels, have reportedly stopped time-chartering Sanko ships. This apparent lack of confidence could in turn be detrimental during the ADR procedure, as all creditors will need to agree the proposal for it to move forward.

If Sanko fails to attract a consensus in July, it will still have the option to drop banks that do not comply or turn to Japan’s conciliation court. If all else fails, the company faces insolvency proceedings.

Nova Tankers heralds new consolidation for crude carriers, say owners

THE new tanker pool of 50 very large crude carriers proposed a month ago is now official and has a name, Mitsui OSK Lines’ Phoenix Tankers, Maersk Tankers, Samco Shipholding and Ocean Tankers coming together to launch Nova Tankers.

The last month has seen ripples of excitement across the troubled tanker market about the prospect for new consolidation. Now, the four Nova Tankers partners have signed on the dotted line and chosen executives to head the pool.

Maersk Tankers’ head of gas Morten Pilnov becomes managing director of Nova Tankers, and MOL executive officer Kazunori Nakai its chairman.

Operations will start in early February, building up a combined fleet of around 50 modern VLCCs by the end of the year.

The new tanker pool aims to boost earnings for the owners, following the slump in 2011 due to oversupply, the 570-strong global fleet far exceeding demand.

Experts say pools can improve earnings because owners share costs, including expensive bunker fuel. Having several vessels in a pool increases flexibility, allowing owners to pick up business more easily as vessels can be spread between various locations.

But critics claim that only the pool manager benefits, through management fees, the pool having only a limited ability to raise charter rates and therefore earnings.

The launch of Nova Tankers comes as rival VLCC owners seek new ways to restructure to survive the weak market. John Fredriksen’s Frontline has sold part of its fleet to newly created Frontline 2012. The company is backed by Mr Fredriksen and will take on all of the debt and most of the newbuilding commitments of Oslo-listed Frontline.

ROLLING out internet access across shipping fleets is critical to recruiting the next generation of seafarers, for whom social media and text communication are part of everyday life.

It is unrealistic to expect young seafarers to go to sea for months with no contact with the outside world, agreed panellists at CMA Shipping 2012 in Stamford. The panel felt that offering young seafarers internet access to social networking sites such as Facebook and Twitter and allowing them to catch up on sport and news could also increase motivation and productivity.

Social communication has improved in recent years, starting with crew being able to send and receive text messages on mobile phones. From this, it has snowballed. “We can laugh at it, but that’s the reality,” said Danish Maritime Authority director general Andreas Nordseth.

However, while access to social media for personal use improves crew’s quality of life, it can also help business.

During the commodore panel at the conference, Teekay chairman Sean Day said that introduction of internal social media software last year brought the group “into the 21st century”.

With 7,000 employees at sea and onshore, Teekay’s internal network allows workers to communicate with each other in open and closed forums, watch videos from senior management and flag particular articles that they “like”.

Chief executive Peter Evensen says that the network allows all employees to communicate on a level playing field, and is working to eliminate inefficient problem solving. Instead of having challenges passed up the management chain then cascading down again, the company hopes to improve time management, allowing teams to talk directly.

A BILLION dollars here and a billion dollars there, and pretty soon you are talking big money, as the old joke goes. And$1bn is roughly what five leading tanker operators have announced by way of losses for 2011 in recent weeks.

Topping the table is Teekay, which was $386.7m in the red last year. OSG lost $192.9m, Maersk Tankers lost $151m, and Euronav $103m. At least Tsakos Energy Navigation kept its deficit to double figures, with a relatively modest loss of $89.5m.

Bucking the trend is Sovcomflot, which actually made a profit of $53.7m. That is well down on the $164.3m surplus it clocked up in 2010. But we some how doubt that “the shareholder” — as the company itself euphemistically calls the Russian government — will be complaining, especially as turnover was up by a handy 10% or so.

Its competitors will point out that it enjoys advantages not accorded to others, especially in its close ties with other state-controlled businesses in the offshore sector.

But even factoring this in, Sovcomflot has turned in a creditable performance in tough times. As they say around the poker table, read ’em and weep, boys.

GREEK owners remain collectively the largest nationality in the tanker-owning business, with extensive fleets in all the crude oil tanker and product-chemical tanker segments.

Altogether, Greece-based owners control close to one-fifth of world tanker capacity.

Despite a long recession in tanker markets, Greek owners have remained relatively active in secondhand and resale acquisitions, and interest in newbuildings has begun to return, with selective contracting in certain segments.

Although loyal to the tanker business, a number of prominent owners have pursued a strategy of diversification, notably in the liquefied natural gas carrier sector.

This special report profiles the Greek owned fleet and looks at the latest market activity by some of the leading players.

Prominent shipowners offer their views on the prospects for the various wet trades as the industry hopes to emerge from a highly challenging period.

Click the links below for more analysis and data.

AS THE tanker industry enters a fourth straight tough year, there is little outward sign that the very largest Greek tanker fleets are under undue strain, despite prodigious recent newbuilding programmes.

George Prokopiou, founder of Dynacom Tankers Management, says that the industry is getting closer to navigating through the storm.

“At the start of 2009 we had four whole years ahead of us with huge amounts of ships on order. Now we have ahead of us nine months remaining of 2012 and a few months of 2013,” he says.

“I see the market will improve further as the mountain of the orderbook is getting smaller.”

Dynacom was among the owners to benefit from the recent surge in very large crude carrier rates, as a result of its size and its spot market stance. “We always have ships open,” says Mr Prokopiou.

He expects the market to rise also because of demand factors. “Tonne-mile demand is increasing as security of supply makes the distance from the origin of the cargo almost irrelevant. Increases in production in Venezuela, Brazil and West Africa are definitely adding to tonne-mile demand,” he says.

In addition, “slow-steaming is here to stay because bunkers are prohibitively expensive”.

Mr Prokopiou says he expects companies such as Dynacom, which has epitomised the modernisation of the country’s tanker industry over the last decade or so, to benefit more than others.

“A two-tier market has developed and will develop further,” he says. “There are the owners with fully approved and very new fleets, and the owners with older, less approved fleets. Since they have a choice, oil companies prefer the young and fully accepted vessels even if they are a little bit more expensive.”

The owner sees signs that the disparity between stronger outfits and other owners is becoming more accentuated as the latter feel the squeeze and on occasion have to cut corners.

“We see many companies losing their subjects from the vetting departments and there are cases when charterers then come to us to obtain a quality vessel,” he says.

Dynacom’s modern makeover has already seen it take delivery of a total 62 tanker newbuildings and there are still four VLCCs and five suezmaxes to come from Hyundai Heavy in Korea and New Times in China.

The fleet is already ranked second in size among Greek crude tanker fleets, with an average age of under three years, and it is forecast to rise to a total 9m dwt of tankers when the programme is completed by end-2013.

Maran Tankers, the only Greece-based company with a bigger fleet than Dynacom’s, seems similarly unfazed by the bleak run tankers have endured.

“I do not think we are going to see any spectacular rates but the market has improved a little,” says Stavros Hatzigrigoris, managing director of the Angelicoussis Shipping Group’s tanker arm.

“I hope we are entering a period of more balance and my personal view is we will not see such bad numbers as we saw last year.”

Maran is comfortably Greece’s largest owner of VLCCs, with a total of 23 in operation, of which seven are bare-boated to Chevron-Texaco. The company has one further VLCC under construction by Daewoo and three on order at SWS in China.

In an illustration that the biggest Chinese builders can compete with Korean yards in most aspects of fuel efficiency for larger vessels, SWS agreed to make modifications to the trio of 319,000 dwt vessels, including incorporating the new MAN G-type main engine.

The rescheduling, which will see one of the deliveries pushed as far back as February 2014, came at a price. But although the move promises some impressive gains in fuel efficiency on paper, Mr Hatzigrigoris is of the view that tanker owners should not ink fresh orders on the grounds of fuel savings alone.

“Let’s wait and see how the vessels perform in service,” he says. “But my view is that the real danger is that with lower newbuilding prices people will start ordering too many ships again.” This could imperil the recovery, he says.

Distressed shipowner to sell 27 ships in restructuring deal

SECONDHAND vessel markets already buckling under pressure from weak charter markets could take a further hit soon, as Sanko Steamship looks set to sell off more than two dozen vessels in a restructuring deal.

On Friday, the shipowner announced it had obtained a deferral on loan payments as part of the proposed restructuring. According to reports in the Japanese press, the tanker owner may be forced to sell off 15 newbuildings currently under construction and 12 vessels already on the water.

This is likely to include most of the newbuildings that the company has on order. Shipbroker Clarksons’ database lists only 12 Sanko vessels under construction. According to the London-based shipbroker, eight are set for delivery this year.

The orderbook includes two anchor handling tugs, two platform support vessels, two liquefied petroleum gas tankers, two handysizes and three supramax bulk carriers and one handysize chemical tanker.

The bulk vessels alone should be worth more than $100m at current prices estimated by brokers. The offshore vessels have the most substantial earnings potential in the next few years; deciding to sell them now could hurt Sanko’s recovery prospects.

The vessels will reportedly be sold as they are delivered. Clarksons reports the anchor handling tug vessel Sanko Emblem scheduled for April delivery. The 2012-built, 19,990 dwt Siva Rotterdam chemical tanker is undergoing sea trials.

It is unclear which vessels of its current fleet Sanko Steamship will sell. However, last week, rumours were already circulating that the company was negotiating the sale of two of its panamax bulkers, the 2010-built, 74,603 dwt Sanko Odyssey and the 2011-built, 74,603 dwt Sanko Orion, for $26.7m and $27.2m apiece.

If correct, these prices are in line with current valuations for the two vessels by online appraiser VesselsValue. According to shipbroker Gibson’s weekly report, however, the deal has yet to be finalised.

The timing of the sales is uncertain. However, the restructuring deal has a three-year timeframe, leaving the possibility that Sanko could wait for an upswing in asset values before selling.

Sanko Steamship has been a familiar presence in secondhand markets this year and last, selling 13 vessels in the last 12 months and raising more than $300m in doing so, according to VesselsValue.

Sanko was not immediately available for comment.

Restructured KG house makes €1m profit as it negotiates new finance deal with banks

KG house MPC Capital has seen a small profit of €1m ($1.3m) in 2011, following a loss of €39m in 2010, but needs a new agreement with its banks amid the ongoing difficult situation on the major shipping markets.

The company, which used to be one of the main players on the KG shipping market, had to undergo a massive restructuring during the past two years.

MPC has reached an agreement with its creditor banks over the financing of its newbuilding orderbook in 2010, which runs until the end of 2013. However, due to the dire outlook for the KG market and ongoing problems in the main shipping segments, MPC aims at negotiating a fresh agreement with banks.

“We are in discussion about a prolongation or a restructuring of the agreement,” a spokesman said. “We have to think about what to do with our pipeline of newbuilding projects.”

At the time, MPC did not aim at achieving a complete release from all financial liabilities arising from its orderbook in its agreement with the banks. In this respect, it differed from fellow KG houses HCI Capital and Lloyd Fonds.

Chief executive Axel Schroeder said it was a strategic advantage to have assets in his hands for future KG fund projects. However, the slump on the KG market has proved to be more enduring than MPC had expected. The company is thus seeking to get rid of the vessels in its pipeline.

MPC achieved a major success when it passed on the contracts for the construction of nine 13,100 teu ships. This resulted in a decrease of its potential liabilities towards banks from €2.1bn to €1bn.

In 2011, MPC collected €41.7m in equity from investors for shipping projects. Of this, €26.1m was for capital raises at ailing funds. The remainder was collected for a private placement for the 4,300 teu Polaris J.

The KG fund set up to finance the bulker Rio Manaus had to be wound up, due to too little interest from investors. The ship is now owned by MPC itself. At the moment, it is suffering from the situation at ailing Japanese operator Sanko.

MPC has initiated capital injections by investors at a total of 18 funds to date, none of which has gone insolvent. At the moment, the company is evaluating the need for fresh money at four funds, while it seems very probable that at least one of them will need a capital raise.

Shipowner forced to sell vessels as creditors freeze debts repayments

AILING Japanese shipowner Sanko Steamship has secured approval to freeze debt payments to domestic financial institutions after presenting turnaround proposals that could see it sell nearly 30 vessels and defer charter payments for three years.

In its first meeting with creditors under the Japanese alternative dispute resolution system, Sanko secured unanimous approval to stand still on debt payments for three months as it finalises its rehabilitation plans.

According to ADR rules, Sanko will have to present formal proposals in a second meeting scheduled for June 1. Creditors will then vote on the proposals at a final meeting on July 3, although the negotiation period could potentially be extended by mutual consent.

Mediators from the Japanese Association of Turnaround Professionals, a semi-official organisation certified to assist in ADR cases, will discuss the proposals with Sanko and the creditors in the coming months.

At the meeting with creditors, including Shinsei Bank, Sumitomo Mitsui Financial Group, Mizuho Bank, the Bank of Tokyo-Mitsubishi UFJ and Citibank’s Japan branch, Sanko laid out a five-year revitalisation plan saying it would sell 27 vessels this year and defer some charter payments for three years.

In return for Sanko’s efforts to shore up its balance sheets, the banks have been asked to suspend long-term loan repayments totalling ¥29bn ($353.7m) until April 2015, allowing Sanko to make repayments in instalments beyond that date.

Sanko has told its creditors that the company will return to the black and make profits of ¥2.4bn in the Japanese 2014 fiscal year, which ends on March 31 2015, if all goes well.

However, Sanko’s fate may also depend on how other types of creditors react to its proposals; non-compliance from any could trigger a crisis of confidence in the owner’s ability to repay.

Faced with low cash reserves, Sanko has deferred or reduced payments to shipyards, owners, domestic and foreign financial institutions since March 9, though it has continued to pay shipmanagers and bunker suppliers.

To meet demand from shipbuilders, the Japanese company plans to sell its 15 vessels as soon as they are delivered, which could put further downward pressure on ship prices due to overcapacity.

Clarksons data shows the ships may include at least one chemical tanker, three bulkers, two general cargo ships, two liquefied petroleum gas carriers and four offshore vessels.

From April, Sanko will also sell 12 of its vessels on water, equivalent to approximately 40% of its total.

The company’s selling spree has been ongoing since early 2011, reportedly netting more than $300m by selling at least 13 bulk carriers to date.

Sanko also plans to defer charter payments to other shipowners in the next three years, which may raise strong resistance as some of its counterparties are also in financial difficulties themselves.

German KG house HCI Capital, whose funds have chartered 14 vessels to Sanko, has seen four of its HCI Shipping Select XXV single-ship companies file for bankruptcy.

Sanko has already cut its time-charter rates to other owners to 20% below the prevalent one-year rate in the month from March 9, to reduce its charter bill for the month by half.

The company’s counterparties seem to have refrained from legal action so far. However, negotiations for payments in April and beyond may become increasingly difficult.

Some trading houses, worried about potential arrests of vessels, have reportedly stopped time-chartering Sanko ships. This apparent lack of confidence could in turn be detrimental during the ADR procedure, as all creditors will need to agree the proposal for it to move forward.

If Sanko fails to attract a consensus in July, it will still have the option to drop banks that do not comply or turn to Japan’s conciliation court. If all else fails, the company faces insolvency proceedings.

Stricken single-ship companies own bulkers

GERMAN KG house HCI Capital has again been hit by the insolvency of one of its shipping funds, after a spokesman confirmed that the four single-ship companies that make up HCI Shipping Select XXV have filed for bankruptcy today, having been hit by low charter incomes.

HCI Shipping Select XXV owns the four panamax bulkers Vogevoyager, Voge Prestige, Vogetrader and Voge Prosperity. All four ships were managed by Hamburg-based Vogemann.

In 2011, the fund’s costs for administration, interest, repayments and operating expenses were higher than the income it earned and the market value of the ships was lower than the outstanding bank loan.

Because of this, banks HSH Nordbank and Deutsche Schiffsbank were only prepared to support a rescue scheme on condition that all four vessels were used as collateral for individual loans for the four single-ship companies.

The banks’ second condition was that the investors of the fund had to approve the sale of the ships. But they failed to meet the second condition after a vote failed to secure backing from the required qualified majority of investors.

The KG market has seen a wave of insolvencies in recent weeks and HCI funds have accounted for a large proportion of the casualties. Several HCI product tankers have filed for insolvency as well.

In addition, 14 vessels owned by HCI-issued funds have chartered ships to ailing Japanese carrier Sanko. The effects on the funds are not yet clear but HCI was one of the largest players in the KG shipping market for years and issued a high amount of KG funds.

The initial bank loan amounted to $115.6m and the outstanding amount is $62m. The fund also used a financing tranche in Japanese yen along with the main dollar loan, which became a problem after the yen gained value. However, a spokesman denied that the yen loan was to blame for the insolvency.

It is still unclear how much money investors will lose, the spokesman said, although they have received about 18% of their initial investment and will probably keep this money.

HCI plans to place the vessels in a pool until market conditions are ready to support a sale. Whether that will be possible remains unclear.

MIXING it up seems to come naturally to Stamatis Molaris, who made his reputation in shipping first with tankers, with Stelmar Shipping, then was chief executive of dry bulk owners Quintana Maritime and Excel Maritime.

Now he is at the helm of his own outfit, Alma Maritime, which has one foot in the dry market with ownership of five capesizes, and the other in tankers with four suezmaxes and, since the start of March, a first product tanker.

The 2009-built medium range tanker Box was acquired at a price analysts estimated to be 30% lower than identical tankers fetched in the first half of 2011.

“We believe the product tanker sector has better dynamics in terms of supply and demand, so I’d like to see us expand in product tankers. We are inspecting MRs but we will be patient,” he says.

An attempted initial public offering for Alma failed to excite the capital markets in 2010 just as the window for deals was closing.

Mr Molaris says he will not rule out approaching the markets at some point in the future, even though Alma appears to depart from the reputed preference of US investors for ‘pure plays’ in one sector.

“I am not convinced that being larger in a sector can make you immune from a downturn in the market,” he says. “The people who seem to be faring better are the people who have exposure in various segments.”

The legacy of years spent running publicly-listed companies was evident last April when Alma acquired Mr Molaris’ management company Empire Navigation, which is now a full subsidiary. “A fully integrated entity is cleaner and easier to finance,” he says. “I don’t see any reason to do things differently than before.”

But in other respects a diversified approach reigns, including counterparties. Originally all the suezmaxes were on long-term charter to Sanko, the Japanese giant now in trouble. But somewhere along the line Alma halved its exposure to Sanko.

“It was prudent to diversify,” says Mr Molaris. “We always believed the tanker market had stronger players But one of the lessons from this crisis is that you need to aim for investment-grade companies, rated and with financial information.”

Click here to view the Greek Tankers report 

To survive, the Japanese shipowner needs its creditors to co-operate and show patience

THE next few weeks will be decisive for cash-strapped shipowner Sanko Steamship as it lays out turnaround proposals under the Japanese Alternative Dispute Resolution system, but it will need patience from creditors if it is to survive.

Legal experts say Sanko’s creditors still enjoy full legal rights with the ADR system in place, but that taking the company to court might not be the best way to get repaid if Sanko’s asset values are hurt by insolvency.

Sanko has deferred payments to shipowners, shipyards and financial institutions since March 9. Fewer than 10 Japan-based banks are targeted under the ADR, according to sources familiar with the case, and owners and shipbuilders still enjoy their legal rights as per contracts.

The company will meet targeted creditors at the end of this month in its first ADR creditors’ meeting. According to reports in the Japanese press, the creditors include Shinsei Bank, Sumitomo Mitsui Financial Group and Citibank’s Japan branch.

Sanko’s formal application to launch the out-of-court procedure has been accepted by the Japanese Association of Turnaround Professionals, the certified organisation that mediates in ADR cases.

So far, most banks have been tight-lipped. However, Shinsei Bank has confirmed that its exposure comes to some ¥8.7bn ($105.3m) in loans, leases and instalment receivables.

Sanko is asking the banks to defer debt repayments, but the request will become legal only if approved unanimously at this month’s initial meeting. According to JATP, the initial request “does not prohibit the creditors from accelerating loans or demanding that the applicant establishes new collateral”.

The ADR process usually lasts three to six months. Sanko, the banks and JATP’s mediator will discuss a formal debt-restructuring proposal to be presented to the second ADR creditors’ meeting and put to the vote in the third.

All targeted creditors will need to agree the proposal for it to move forward, JATP said.

If Sanko’s proposal fails to attract a consensus, the company has the option to drop banks that do not comply or turn to Japan’s conciliation court. But if all else fails, the company will face insolvency proceedings.

“Insolvency may not in the banks’ best interest. A company’s value usually falls sharply after it enters bankruptcy procedure,” says Shinichiro Abe, Japan-based lawyer for Baker & McKenzie.

But Sanko’s turnaround plan will be derailed if any creditor of any type loses patience during the process.

According to people familiar with ADR, shipowners, yards and foreign financial institutions, though not directly involved in the meetings, will also monitor the targeted banks’ responses and vice versa.

Non-compliance from any could trigger a crisis of confidence in Sanko’s ability to repay.

“We will continue to talk to all creditors all of the time, even if it is not [gathering all creditors] in the same place,” said Sanko spokesman Yasunao Goto.

The company plans to cut about half its charter bill in the month from March. According to a confidential letter sent to shipowners, Sanko will cut its time-charter rates to other owners to 20% below the prevalent one-year rate this month, and will announce its plans for April and beyond in due course.

Although Sanko has pledged to repay all deferrals eventually, some observers question how much time the company can buy with past goodwill, especially when it has yet to give firm timelines for repayment.

Many of Sanko’s long-term vessel suppliers say the Japanese owner has been a decent partner and has never paid late before, but their priority will be to protect the values of their contracts.

Weak freight rates and rising fuel costs saw Sanko lose ¥19.7bn between October-December last year.

The company, one of the largest non-listed shipping lines in Japan, could struggle to return to profit, as some trading houses have reportedly already begun to shy away from time chartering its ships.

Troubled company’s 1980s reorganisation led to early emergency from receivership

SANKO Steamship surprised the shipping market this week by saying that it was requesting a debt standstill from its counterparties, which include banks, shipowners and other organisations.

Sanko held a meeting in London with some of those owners in order to see whether an out-of-court agreement can be struck, allowing Sanko time to restore its finances.

If the move by the major Japanese company, which operates about 200 dry bulk and tanker vessels, had a slight tinge of déjà vu, there is a reason. Sanko went bankrupt in 1985 with ¥677.8bn ($5.8bn) in debt and was eventually placed into court-appointed reorganisation that was intended to last until 2007. The company, however, managed to pay off its debts nine years early.

Sanko’s problems began as far back as the 1970s. The company was founded in 1934 by Toshio Komoto, who remained president of the company until 1973, when he stepped down. He eventually went on to become a state minister in the government of Prime Minister Yosuhiro Nakasone.

After his departure, the company because what is known in Japan as a “lone wolf”, a firm outside the pack of the classic kiretsu — business alliances between banks, industrial groups and suppliers — and that broke from protocol. In the later part of the decade and in the early 1980s, the company defied the advice of Japan’s Ministry of Transport and began ordering ships.

At the time, newspapers dubbed the company the world’s biggest tanker company. The real trouble started in the dry bulk depression of the 1980s. According to Martin Stopford in his Maritime Economics, Sanko launched a secret ordering campaign of 120 dry bulk ships. Orders of that size are secrets that are hard to keep, and Sanko’s “example was soon followed by a flood or orders from international shipowners, particularly Greeks and Norwegians”.

Sanko’s – and its followers’ – actions actually led to the prolonging of the depressed dry bulk shipping market. Buying looked counterintuitive in 1983-1984, but there were reasons that carried the shipowners along. One was the favourable low price of the yen, which made ordering in ships in Japan more economical. Another was that shipowners at that period had accumulated a lot of cash, following a boom in 1980. And banks, Mr Stopford says, were flush with petro-dollars and eager to lend.

Today’s crisis in the dry bulk market is easier to understand. Ships were ordered at the height of a boom. Owners were carried along by market euphoria and did not anticipate the collapse of Lehman Brothers and the 2008 onset of the financial crisis. However, owners in the 1980s were hoping to buy very cheap because they reckoned the shipping market would eventually revive. Their actions ensured that rates stayed low for years.

Further, Sanko was particularly reckless in its dry bulk bid, because it was suffering badly in the tanker market. According to a bulletin of the Japan Shipping Exchange in 1999, which was covering Sanko’s early emergence from bankruptcy, Sanko fell into troubles in the tanker market during the tanker recession that began in 1977. It had exposure to vessels that it had chartered in to meet expected demand, and, similar to Sanko’s actions this week, tried to renegotiate contracts with its charterparties. The bid to dominate the dry bulk market was audacious, but Sanko also faced paying huge sums to compensate its tanker charterparties for cancelling contracts.

Sanko tried to solve the problem by going directly to its banks, which helped sustain its cash flow for about a year. But in 1985, the banks pulled the plug in early August. At one point around that time, Sanko bunker suppliers and stevedores refused service to 30 vessels in ports around the world. After about a week of this, Sanko filed for bankruptcy in Kobe district court.

The bankruptcy was the largest in corporate Japanese history up to that time, and founder Toshio Komoto resigned his minister’s post in the Nakasone government, apologising for the troubles that that company he founded had caused the nation.

Scholars have since looked at the bankruptcy in the Japanese cultural context. In his 1997 book Alliance Capitalism: the Social Organisation of Japanese Business, Michael Gerlach describes the funding choices that Japanese companies have faced in the post-war development era. They could opt for close alliances to gain access to reliable and stable sources of capital, but with the assumption that this would reduce their freedom to move independently. Sanko stood back from this approach and preferred multiple loose alliances that sacrificed stability but gave the company far more flexibility in markets.

There was a price to pay by standing outside Japan’s traditional kiretsu system. Sanko had three banks — Daiwa, Tokai and Long Term Credit Bank of Japan. The balancing of its borrowing relationships with the three banks “complicated the determination of which one was Sanko’s ‘main bank’ and would therefore lead the restructuring and provide the most extensive support,” writes Mr Gerlach. Daiwa eventually took charge, he says, but negotiations with the other two banks over the proportionate amount of support each would contribute eventually lead to the lending refusal that pushed Sanko into receivership.

Cancellations would be good for oversupplied VLGC market

THE FUTURE of Sanko Steamship’s two very large gas carrier newbuildings on order at Japanese shipyards is in jeopardy following Sanko’s well-documented cash problems.

Speculation is rife in the VLGC market over the fate of the two newbuildings, due to join the global fleet of 142 VLGCs in 2013.

Brokers have not said what will happen to the orders, but concerns exist over instalment payments for the two VLGCs on order at Kawasaki Heavy Industries and Sasebo Heavy Industries.

Concerns come as Sanko is being forced to undergo a major financial restructuring. Sanko, one of the largest non-listed Japanese owners, has asked to defer payments to yards due to low cash reserves. Analysts expect the restructuring to take time because consensus is required from Sanko’s creditors.

Sanko would like the vessels to be delivered on time to start trading and earning money, but delaying delivery would be more beneficial to the VLGC market, say brokers.

This is because there are as many as 13 VLGCs set to be delivered from Asian shipyards into the global fleet in 2013. By comparison, this year will only see two new VLGCs hit the water, data from London-headquartered shipbroker Clarksons shows. Three were delivered in 2011 and nine joined the global fleet in 2010.

Additional vessels set to start trading next year will exacerbate the glut of vessel supply already hampering the main market for VLGCs, the Middle East Gulf, say analysts.

At present, that glut is keeping a lid on freight rates because owners are unable to negotiate higher rates due to charterers having their pick of vessels.

“There are still too many VLGCs available in the Middle East Gulf over the next couple of weeks,” said an Oslo broker in a market note.

Another VLGC broker called the Middle East market “uninspiring”, and this was highlighted by the unwavering sideways movement in rates on the Baltic Exchange’s LPG index over the last week. Rates stayed resolutely flat at around $45 per tonne for most of the last week, which offers owners only around $12,000 per day.

With such low earnings, edging down closer to operating costs of around $7,000 per day, brokers expect owners to put in some resistance and stop further declines in the weeks ahead.

Another factor that could inject some fizz into rates is the recent trend for vessels shipping cargoes from the Atlantic to Asia. This longhaul voyage boosted tonne-mile demand, the effects of which should be felt in the rates in the coming weeks.

Owners will, no doubt, be hoping for a return of the spike seen in October last year, when rates hit around $78 per tonne for owners trading out of the Middle East Gulf, which offered earnings of about $60,000 per day. Such a rally, though, is unlikely, say brokers, and owners can expect at best earnings to rise soberly from present levels over the coming weeks.

 

German KG fund has chartered 14 vessels to Japanese tanker giant

SEVERAL German KG funds are heavily exposed to the threatened collapse of Japan’s Sanko Steamship, but HCI Capital is one of the worst affected with 14 vessels owned by nine of its funds employed at Sanko, a company spokesman has confirmed.

The ships comprise 10 tankers and four platform supply vessels, all managed by Hellespont.

Funds issued by KG houses König, Salamon and Dr Peters have also been hit. Other German companies affected include Erck Rickmers’ ER Schiffahrt, with four capesize bulkers on charter. However, these have not been financed via KG funds and private investors are not affected, a spokeswoman said.

MPC’s Rio Manaus has been chartered to Sanko too, previously part of a KG fund wound up after MPC failed to find enough investors.

Representatives of affected KG companies attended a meeting in London on Friday between Sanko and its business partners.

“We believe that Sanko is working hard on a solution. All business partners have been asked to co-operate and contribute. We have to wait and see what this will mean in detail,” König managing owner Tobias König told Lloyd’s List.

Sanko said in a statement that it will use Japan’s alternative dispute resolution system and appoint a mediator to supervise the company’s restructuring deal. But ADR requires all parties to agree terms of a settlement.

“It is difficult to predict whether it will succeed or not,” Mr König said. “I am sure that other shipping companies would have pulled the trigger much earlier. With hindsight, Sanko’s approach is positive for owners, which have chartered out vessels to the company.”

Mr König said that Sanko had performed well until March, when it slashed its charter hire payments significantly.

Sanko has some 200 vessels on time charter, many hired at rates that are now significantly above current market levels.

The case resembles the bankruptcy of bulk operator Korea Line. However it will not be possible to terminate charter contracts as easily in Sanko’s case.

“At the moment there are charter-rate arrears but also a clear statement that they will be paid,” Mr König said. “It is not easy to interpret this as a breach of contract and withdraw the vessel... as it had been sublet to another charterer.”

Grand China Logistics needs to come clean or lose credibility completely

IT IS time for Grand China Logistics to come clean about its financial situation.

The Shanghai dry bulk operator and shipyard owner has been connected with around 10 cases arising from its financial distress.

Some of them have been running for some time, such as an ongoing dispute with Hong Kong’s Jinhui Shipping, to make good on an agreement to arrears struck in 2010.

In another case, the Vafias Group extracted payment from Grand China, which had also failed to pay monthly instalments on charter contracts, by arresting a Grand China ship.

The latest cut from Grand China has been its failure to pay Hong Kong-listed Titan Petrochemicals the final instalment of Yuan972m ($154m) to buy Titan Quanzhou Shipyard, which Grand China acquired in 2010 for Yuan1.8bn. Grand China’s failure to pay, as of the end of last year, has had repercussions at Titan, which has been forced to suspend debt payments of $106m that became due on Monday. Payments on another $39.8m coming due in June are also in doubt.

Titan, which was seeking the proceeds from the sale for working capital purposes and to pay off debts, now is in talks with a strategic investor that, if the investor bites, will result in a change in control of the company.

Grand China has a legal obligation to pay, but it has no legal obligation to disclose its financial status. Neither does HNA Group, as infuriating as that group is to those who are owed money by Grand China.

Grand China needs to disclose its difficulties, much in the way that Sanko Steamship has done to its counterparties. Sanko stands at least a fighting chance of retaining its credibility and business. Grand China is losing ground fast.

Sanko Mineral reported sold for $20m

ACCORDING to rumours in the secondhand market, distressed Japanese shipowner Sanko Steamship has sold its 2008-built, 50,757 dwt Sanko Mineral.

Earlier reports had said the vessel had been withdrawn from the market last week, after Sanko failed to field any offers for the ship above $20m.

This week, however, brokers reported that the vessel had been fixed for a price of approximately $21m, far below the vessel’s $23.1m valuation by online appraiser VesselsValue.

One broker said the low price smacked of desperation on the part of the seller. “If it’s a done deal, it’s obviously distressed,” one broker said.

One broker suggested Zodiac Maritime had purchased the vessel.

Zodiac had been reported as the buyer of the 2011-built, 74,962 dwt Sanko Frontier earlier this month, and was also reported to have bought the 2011-built, 181,399 dwt Sanko Partner in December.

Brokers noted Sanko Mineral’s special eight-hatch configuration and special shape made it more difficult to sell than conventional supramaxes.

Sanko did not respond to requests for comments regarding the reported sale of its vessel.

Alternative dispute resolution seeks consensus

SANKO Steamship is seeking to restructure its debts through an out-of-court process that will be settled only with consent from all parties, suggesting that it will take some time for the Japanese shipowner to resolve its creditor negotiations.

In a statement, Sanko said it had turned to Japan’s alternative dispute resolution system, in which the Japanese Association of Turnaround Professionals will appoint a mediator to supervise debt-restructuring between Sanko and its creditors.

The ADR system, often adopted by companies that want to avoid bankruptcy, allows the debtor to continue normal operation but requires all the interested parties to agree on the restructuring plan.

“The company today officially filed its application with the JATP and the application has been accepted,” Sanko said.

Sanko, one of the largest non-listed shipping lines in Japan, has asked to defer payments to other shipowners, yards and financial institutions, as its cash reserves are being eroded by weak rates and rising fuel costs.

Company spokesman Yasunao Goto said Sanko had met its domestic creditors once and would meet foreign creditors in London on Friday. “We’ve just started,” he said.

Of Sanko’s fleet of nearly 200 ships, Japanese firms are most exposed to the company’s feared collapse, owning around 60 ships comprising 3.9m dwt. European and Singapore-based companies own much of the remaining tonnage.

Earlier, sources involved with the negotiations told Lloyd’s List that Sanko had turned to ADR to resolve its troubles.

“There are tens of parties involved in the ADR process and everyone needs to agree to the same proposal… this thing will take a long time,” said an East Asia-based owner who has long-term charter contracts with Sanko.

“Their payments to me were never late before but this is a really bad time in the shipping industry now so I’m not really surprised. Sanko going down [would] be very bad for the industry, but I have to protect the value of my contract.”

• Among the shipowners which have chartered vessels out to Sanko are a number of well-known German companies and KG funds.

The suezmax tankers Hellespont Trinity, Hellespont Trader and Hellespont Trooper, which are currently trading for Sanko, are owned by the HCI Capital issued fund HCI Shipping Select XVI.

Whether Sanko’s difficulties will have an effect on the earnings of the KG fund is not yet clear, an HCI spokesman said. “We will have to wait and see what Sanko wants to negotiate,” he added.

Erck Rickmers’ E.R. Schiffahrt has four capesize bulk carriers on charter at Sanko: E.R. Bayern, E.R. Boston, E.R. Buenos Aires and E.R. Brazil. All are owned by E.R. Schiffahrt, not by KG funds

A spokeswoman said. “Private investors are not affected.”

European and Singapore-based owners at risk too

JAPANESE shipowners are most exposed to a possible meltdown of Sanko Steamship, with about 40% of the troubled shipping line’s chartered-in vessels linked to domestic firms.

A detailed study of Sanko’s fleet list indicates that the company owned up to 49 ships with 306.8m dwt at the beginning of this year, equivalent to roughly 24% of the total fleet tonnage. Other Japanese firms owned 60 ships with 391.4m dwt in the fleet. Europeans and Singapore-based companies accounted for much of the rest.

These estimates have not taken into account changes after January 1, when the list was last updated by the company.

Among Sanko’s most important business partners, Japanese owner Doun Kisen leased out at least eight vessels comprising 597,000 dwt, of which most are bulk carriers. Shoei Kisen leased five ships comprising about 260,000 dwt.

Trading house Marubeni supplied at least three vessels to Sanko’s fleet, owned directly or through its unit Koyo Line.

Outside Japan, Hamburg-based Hellespont is feeling the heat as it had 15 vessels on Sanko’s fleet list, including five crude carriers, six product tankers and four offshore vessels. The company declined to discuss details of its charter contracts.

A year ago, Hellespont and Sanko set up a joint venture in Singapore on an equal partner basis to manage the two companies’ offshore fleets, highlighting their close relationship. According to a statement issued at the time, Hellespont and Sanko have a business relationship dating back more than 40 years.

Lomar Shipping had three vessels on charter to Sanko’s offshore fleet. Singapore-based players RK Offshore and ACS Shipping supplied ten vessels apiece

Other big names exposed to Sanko’s troubles include DSD Shipping, which had three aframax crude carriers on the list and Navios Maritime, which had three bulk carriers.

Cash-strapped Japanese shipowner seeks restructuring deal with creditors

SANKO Steamship is due to meet its creditors in London on Friday, where it will seek to secure consent for a debt-restructuring plan, which has sparked concern throughout the shipping markets.

The cash-strapped Japanese shipping line is trying to defer its payments to other owners, shipyards and financial institutions via a particular out-of-court procedure.

At the same time, Sanko has vowed to keep operating normally and to fulfil its financial obligations, indicating that it is seeking to increase its cash reserves from daily operations – a strategy that requires eventual market recovery.

This also means Sanko will continue to make payments to shipmanagers, port agents and bunker suppliers “because we want to keep our operation going”, a company spokesman said.

Out in the market, however, some industry players are already feeling stressed, even though Sanko has not delayed payments in the past and previous credit reports generally give it positive feedback.

“I’ve been hearing they may have some debt issues over the past two months, and then comes this announcement,” said an Asia-based broker. “Lots of people got scared.”

Sanko, tanker and dry-bulk operator, has a diversified fleet of 72 bulk carriers, 29 boxships, 52 crude and product tankers, 36 offshore vessels and six liquefied petroleum gas carriers.

It is easy to draw a parallel between Sanko’s financial situations and that of Korea Line, whose bankruptcy in January 2011 started a chain reaction that created cash-flow problems for many other companies.

This sort of analogy puts Sanko at a disadvantage.

“Some shippers may not want to fix Sanko’s vessels because they are afraid that ships could get arrested with their cargoes onboard,” said another broker.

Creditors usually only seize vessels as an act of last resort. Torm and Berlian Laju Tanker, two other major shipowners facing a financial crunch, have stayed above water to a degree after halting repayments.

But the psychological threat cannot be ignored as Sanko struggles to revitalise its business. The Japanese shipowner must regain market confidence but it has a long way to go.

Statements from two John Fredriksen affiliates may shed light on the extent of Sanko’s woes.

Oslo-listed Golden Ocean Group calmed investor concern by announcing late on Monday that it had experienced no problems receiving payment from Sanko with regard to the 169,232 dwt, 2009-built Golden Feng that is chartered out at $46,000 per day until early 2014.

Similarly, Knightsbridge Tankers released a statement about its 169,391 dwt, 2009-built capesize Battersea that is on hire to the Japanese firm at $39,500 a day until at least June 2014, saying that it had not experienced missed payments either but would seek to protect the value of the contract.

If many of the 72 bulk carriers Sanko operates in its fleet have also been chartered in similarly high rates, it is no surprise it may face a cash crunch.

A close look at Sanko’s fleet list shows that more than half the ships it operates were built between 2008-2011, which implies that many were ordered at record high levels during the shipping boom and for the chartered-in vessels could have high rates attached accordingly for long-term contracts.

In comparison to the capesize rates detailed by Golden Ocean and Knightsbridge, the Baltic Exchange reports average earnings in the spot market of around just $5,500 per day, well below most companies’ operating costs.

If Sanko’s owned bulkers are being chartered out in the spot market at these low levels, the income it generates may not be enough to cover the high outgoing costs of chartered-in tonnage.

Analysts have suggested Sanko will need to renegotiate a sizeable portion of its time charter contracts, possibly extending hires at lower rates, to improve its balance sheets.

In comparison the Golden Ocean $46,000 per day contract, London-headquartered shipbroker Clarksons reports the average price for a three-year capesize time charter contract of $17,000 per day, having fallen steadily over the past couple of years as newbuildings flooded the market and increased competition.

It means that if ships were potentially redelivered to owners many companies could struggle to secure contracts at healthy rates.

In addition to the Fredriksen-related operators, other publicly-listed owners that have ships appearing on Sanko’s fleet list - as of January 1 - include Navios companies and Japan’s Mitsui OSK Lines.

Germany’s ER Schiffahrt confirmed to Lloyd’s List that it had four modern capesizes on charter to Sanko but declined to comment further on the situation, saying only that they would be attending the Friday meeting.

Compared to the case of China Ocean Shipping, the Japanese company may fare better due to its sound reputation. That said, unlike COS, Sanko cannot rely on government support.

Price paid shows deterioration of the market in past weeks

SANKO Steamship’s 2010-built, 47,378 dwt medium range tanker Sanko Lynx and its sistership Sanko Libra were confirmed sold last Friday after “weeks of speculation”, according to shipbroker Clarksons.

The two Sanko Steamship-owned pump-room tankers had first been reported sold for a price of $31m-$32m each, well above the $30m asking price Galbraith’s had reported when the vessels first hit the market in October, but apparently this deal has failed.

According to brokers the two tankers have now changed hands for $28.5m and $30.5m, reports which promptly led to a drop in the valuation of this type of tonnage. Last week VesselsValue.com still assessed these ships at $32.9m each, but by the weekend its appraisal had fallen to $30m.

Most brokers reported Tanker Pacific as the purchaser of the two ships. Sanko Steamship was unavailable for comment.

The price marks a whopping decline when compared to the sale of the 2006-built, 48,710 dwt High Century, which fetched a comparable $28m only two months ago, in spite of being four years older.

Sales of other small modern tanker tonnage followed a comparable pattern, with the 2005-built, 37,432 dwt Dai Viet reported sold for $21m-$22.3m to Greek interests, which shipbroker Galbraith’s identified as Eastern Mediterranean Maritime. According to Lloyd’s List Intelligence, the vessel was beneficially owned by Vietnam National Shipping Lines.

The deal marked a substantial decline from the $25.5m paid for the 2005-built, 37,252 dwt chemical tanker Yellow Stars in late July.

Though no resales were reported last week, shipbroker Gibson noted a pair of 158,000 dwt suezmaxes under construction at Sungdong Shipbuilding on the market at an asking price of $53m each, affirming the decline in

values which was already apparent two weeks ago, when the 2009-built, 164,772 dwt Wilsky was reported sold for $52-$52.5m.

The average resale price for of a 160,000 dwt suezmax as reported by Clarksons still stood at $62m this month, indicating the speed at which prices have dropped.

Japanese owner sells capesize and medium range product tanker pair

JAPANESE shipowner Sanko Steamship is understood to have finalised the sale of two medium range product tankers over the last week.

The 2010-built, 47,300 dwt Sanko Lynx and Sanko Libra , reportedly fetched between $31m and $32m for each one of the vessels, according to brokers’ reports.

The buyer of the vessels was a matter of some dispute, though most brokers cited the involvement of a US investment fund, which Galbraith’s identified as private equity fund manager Wayzata Investment Partners.

The price paid was somewhat higher than the $30m Sanko had hoped to achieve according to brokers’ reports last week, but still rather soft compared to other recent sales of modern MR tankers, a fact shipbroker Clarksons blamed on the vessel’s lack of a deep-well pumping system. However, another sale of an MR tanker last week proved beyond a doubt the relative weakness of this segment. The 2003-built, 46,345 dwt Ioannis P sold for a price between $21m and $22m, according to brokers reports, well below the $24m reportedly paid for the 2004-built, 45,898 dwt Stavanger Eagle only two months ago.

The sale of the tanker pair brings the total number of vessels reported by Clarksons to have been sold by Sanko so far this year to seven. Sanko announced in June, when it published its annual figures for the year ending in March 31, that it would be selling off tonnage in an effort to raise cash, having posted a ¥14.2bn ($175m) loss.

Deals in addition to VLCC sale, as Japanese owner shrinks fleet

JAPAN’s K Line has sold two aframax tankers in the last week as it continues to shrink both its wet and dry cargo fleets.

The 2002-built, 107,160 dwt Singapore River is understood to have been sold for around $21m-$21.5m to Mediterranean buyers, with some brokers reporting Cyprus Maritime but others pointing to Greece’s Centrofin Management.

If true, the price paid is notably below the $23.4m that VesselsValue.com estimates the ship’s worth.

In addition, the 1999-built, 107,160 dwt Rainbow River is reported to have sold for $20m-$20.5m to Malaysia’s Bumi Armada, well above the $18m price VesselsValue estimates.

London-headquartered shipbroker Clarksons pointed out in its weekly report that the price paid for the Singapore River was more than a third less than the $34m aframaxes of similar size and age were being sold for at the start of the year.

Both sales follow K Line offloading a very large crude carrier in the secondhand market over the past week.

The news of the K Line sales came as other brokers reported that subjects had been lifted on two modern Italian-controlled aframaxes.

The 2011-built, 115,000 dwt Neverland Star and 2009-built sistership Neverland Sun are understood to have been sold by Finaval for $52m and $48m respectively to Kazakhstan-based buyers Kazmortansflot.

These prices are notably above price estimates from VesselsValue that rate their worth at around $48m and $42m respectively.

“It is rumoured that the buyers may also have options to buy further vessels from the Finaval fleet,” broker Galbraith’s said in its weekly report. It assumed the vessels to be two sisterships —the 2009-built Neverland Angel and 2011-built Neverland Dream.

Also reported sold in the secondhand tanker market over the past week, the 2003-built, 47,994 dwt Northern Star is understood to have been sold for $22.5m. Some brokers report Norwegian buyers, however others report that doubt has been raised about whether the deal has actually been finalised.

Galbraith’s noted that this week will see offers submitted for two Sanko-controlled medium-range tankers — the 2010-built, 47,300 dwt Sanko Lynx and Sanko Libra — for which the seller is hoping to achieve around $30m.

Another MR tanker sale is understood to have failed on subjects, however. The 2006-built, 46,000 dwt Maohi which was reported earlier this month as purchased by Norway’s DSD Shipping for $28.5m, including a two-year bareboat charter back to owners Socatra at $9,000 per day, is said to have failed as the buyers’ subjects fell through, Galbraith’s weekly report said.