Shippers Strike Back But Their Bonds Still Adrift : Ezra 5% 09/2015
Sept. 11 (Bloomberg) — Shipping rates extended gains to the highest since 2011
as Chinese steel mills replenish iron ore stockpiles amid record output.
The Baltic Dry Index, a benchmark for costs to ship iron ore, coal and grains,
rose for an eighth session, adding 5.6 percent to 1,628, the highest since
December 2011, according to the Baltic Exchange, the London-based publisher of
freight rates. Earnings for Capesizes, the largest ships tracked by the gauge,
led the gain, climbing 9.8 percent to $29,674 a day, data show.
The rally follows six months of Capesize rates averaging below operating costs.
Earnings are still 87 percent below the 2008 record as owners ordered too many
ships before the global recession. The glut of vessels may push rates down
again after China’s import spurt subsides, said Nigel Prentis, head of
consultancy at Hartland Shipping Services Ltd., a London-based shipbroker.
Ezra’s stock price has risen some 45% for the month. The market is awash with rumours of Samsung Heavy’s interest in the company even though it was denied on 28 Aug.
“Ezra Holdings has moved quickly to quash talk of a takeover of the Singapore offshore firm by Korean shipbuilding giant Samsung Heavy Industries.
In response to an article published in a Norwegian industry newspaper and a CIMB analyst report, Ezra stated that it was “not aware of nor has it been engaged on the subject of a takeover of the Company by SHI” and it would remain focused on its strategy to grow its subsea business.”
http://www.hellenicshippingnews.com/News.aspx?ElementId=1c9317e9-5846-4e90-a07c-b5b3baf6fab3
The new Ezra 5% 2015 bond is still somewhat of an anomaly after its re-tap last month at 100 which drove prices down more than a cent. The secondary market took a turn for the worse and the bond is still trading under water between 99.60-100.
As for the rest of the smaller shippers, we are not seeing much support in the secondary markets despite the initial euphoria when they were issued.
This says to me that banks are increasingly tight fisted with their trading limits and paring down their books. Traders buy bonds for 2 main reasons, 1. if they think the credit has potential to improve and 2. if interest rates are going lower without affecting the credit worthiness.
Banks are not buying even as the equity improves.
Takeovers can be good for the company if it is a friendly (mutually agreed) one and if the company taking over is a better credit.
Ezra’s hurry to issue last month raised many eyebrows and suggests the building of a war chest in preparation for a near term event. The 2015 paper is trading >1.5% over Ezion, a similar but slightly superior credit.
Would welcome any feedback from readers.
Hi tradehaven,
Many thanks for the various beneficial and insightful posts again. Btw may I ask this: previously after signing up for the old tradehaven website, everytime there is a new post or reply, I get the alert at once in my email. But nowadays I only get a email alert everyday around 11am one time of any new post for the past 24 hrs. Is there anyway I can receive new post in my email once they are uploaded? Particularly when there is a new issue, books usually close quite fast. I apologise for asking such a silly question cos I am really not tech savvy at all. 🙁 Thank you so much.
Hi Oldfolk,
I apologise for the set back on this new site. Will try and see if we can work to get email updates going more regularly.
Thanks for the feedback.
Hi tradehaven, thank you so much for the reply and more thanks for the various write ups again.
Looks like the tapering of QE is imminent, I am wondering when QE officially end next year, is there probably going to be another major recalibration in the bond prices? I am particularly concerned about perpetual bonds that has a short re-fix date for the coupon. Eg. GLP perpetual which has a refix in 2017. Wondering how will such bonds most likely be affected next year.
Have a fantastic trading day and a wonderful Mooncake festival in advance.