Saturday, March 07, 2009
Listed companies should name charterers
Michelle Wiese Bockmann and Rajesh Joshi - Friday 6 March 2009
PUBLIC shipping companies face calls to disclose more information about the charterers of their vessels after the freight market collapse saw bankruptcies and contract defaults dramatically cut revenues and raise risk.
Exchange regulations and international auditing requirements do not require shipping companies to directly name charterers when providing details about long-term time charter contracts.
But charter party risk is now front and centre of investor queries after a string of high-profile listed companies were hit by non-payment or reduced payment of charter hires, early redeliveries of vessels and cancelled contracts of affreightment.
A Lloyd’s List poll found that 84% of 384 respondents agreed that listed companies should name the charterers of their bulk carriers to allow investors to properly assess risk. “The more information, and the more precise information, the better,” said a Europe-based shipping analyst.
“When it comes to charter parties you want to isolate the names that might be at risk, because there are several companies going bankrupt these days and those who are exposed [to them] are more at risk.”
He found varying attitudes from companies about naming charterers.
“Some are really open minded and distribute that information freely, while others are tightlipped. It’s something you have to address with every company,” he said.
John Fredriksen’s struggling Golden Ocean Group has taken hits on several fronts from non-performing deals, including one from bankrupt Britannia Bulk to buy six panamax newbuildings now under construction. Excel Maritime Carriers also faces losing up to $100m in revenue this year after Chinese owner and operator Transfield and freight trader ETA defaulted on three capesize vessel contracts. Excel declined to reveal whether Transfield or ETA were the charterers.
New York attorney Patrick Lennon said he supported greater disclosure but cautioned that any mandatory reporting may interfere with privacy needs and rights of counterparties.
“In other words, it should be a requirement but only to the extent that legal disclosure requirements within the regulatory scheme under which the company is traded mandate that counterparty risk be publicly disclosed,” said Mr Lennon, of law firm Lennon, Murphy & Lennon.
Genco Shipping & Trading and Navios Maritime Holdings are among the most transparent public companies. Navios recently provided a list of its major charterers to investors.
“We owe everything to our investors and the public,” Genco president Robert Gerald Buchanan told Lloyd’s List.
“As a public company it is our legal and moral responsibility to be as transparent as possible, and we strive to be 100% transparent. In fact, we are surprised that some of the other public companies do not do the same thing.”
Genco’s status as a public company overrode privacy and confidentiality concerns, he said.
Deloitte global head of shipping George Cambanis said companies already provided enough information.
“You can get the information that is necessary for the financials without saying who it is,” he said. “If you know that you have a problem with your charterer, if you know that they’ve filed for bankruptcy, that’s the kind of information that you need to be sharing. But to obligate shipping companies to name their charterers, I don’t think you’d get much more.
“If there’s a problem you should be disclosing it and the rules say you should.”
Companies were also required to reveal the fleet’s exposure to charterers and did so without naming them, he said.
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