Shipping bonds issuance momentum continues - October 2017
A growing number of shipping companies have taken advantage of the low interest rate environment and tapped the debt capital markets. This comes at a time when the availability of funds for the shipping industry is declining. We highlight four reasons behind the increase in high yield bond volumes coming from the shipping sector.
We have analysed a sample consisting of 61 shipping bonds outstanding with an aggregate amount of USD 28bn equivalent that filled our criteria: international bonds with a minimum size at issue of USD 100m, denominated in one of the major currencies (USD, EUR and GBP). Our Drewry Maritime Financial Research (DMFR) coverage accounts for more than 50% of these bonds.
The container shipping and port sectors account for 61% of total issues with tanker shipping bonds adding eight issues, gas shipping five, offshore eight and three more bonds raised by companies operating in the dry bulk space.
Bond primary issuance YTD is strong and we have recorded over USD 4bn equivalent in new issues. This is also supported by data from the Oslo Stock Exchange that suggest new bonds of NOK 45bn (USD 5.65bn) coming from the shipping and offshore sectors since the start of the year after pretty low volumes in 2016.
We at DMFR have been long on the dry bulk sector since June 2016 and also assigned an attractive view on the container shipping sector early this year. Both sectors have performed very well in terms of bond returns, in line with market improvement from rock bottom in 2016. Additionally, however, we believe that value can also be found in distressed sectors, for the right credit name.
Drewry Maritime Financial Research (DMFR) has 30 bonds under coverage.
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