Several top maritime lawyers who serve Norway’s shipping industry are working even longer days than usual, as miserable shipping markets wreak havoc with the finances of major shipowning companies. Some are comparing the situation to the crisis of the 1970s, when ships came out of the yards, were put straight into lay-up, and shipping fortunes disappeared.
“We’re crying with our clients over the sad state of the markets,” Øystein Meland, head of the international shipping and offshore division at major Oslo law firm Wikborg Rein, told newspaper Dagens Næringsliv (DN) on Thursday. Offshore is generally doing well, but owners of large tankers, for example have been suffering all year.
The basic problem involves daily charter rates for vessels that are lower than the daily operation costs of a vessel. That means that even if a broker “fixes” a vessel on charter to an oil trader, for example, the shipowner will operate at a loss.
The length and depth of the bad markets for shipowners have been eating away at their liquidity. Then they need to sell some assets to raise cash, but the sale and purchase markets are poor as well.
“It’s the old story all over again: When liquidity runs out and you can’t sell assets for a decent price, things go wrong,” said Stephen Knudtzon, head of the shipping department at another Oslo law firm, Thommessen.
DN reported that Knudtzon recently defended a client from a claim for USD 500 million, but won’t say who it was. There’s no question, though, that many major shipowners including tycoon John Fredriksen and his Frontline operation have been struggling in the bad market.
Wikborg Rein has a team of 65 lawyers who are preparing for more tough times ahead. Shipping companies need help in dealing with payment conflicts, restructuring and refinancing.
“Based on the signals we’re getting, 2012 is going to be a very tough year for the (shipping) branch,” Meland told DN. “We’ll see forced reorganizations and sell-offs, in numbers we’ll have to go back to the shipping crisis in the 1970s for comparison.”
Meland says he and his colleagues share the concerns that some banks have for shipping customers, but he also noted that most used profits from the good years to set up buffers against the kind of trouble seen now. While owners of tankers, bulkers, containerships and car carriers may be having problems, owners of offshore vessels are still earning money, he said.
Views and News from Norway/Nina Berglund
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