Oh this is lovely

Yours for $1: 58,429 deadweight tonne bulk carrier, one previous owner
Goldenport delists from LSE and agrees to fleet sell-off as it faces debts of over £100m, underlining severe headwinds faced by shipping industry

Well, no, not really. There’s a much more fun tale here.

Goldenport, one of the last shipping companies left on the London Stock Exchange, has delisted from the market and sold off six of its remaining eight vessels for $1 (69p) each.

The giveaway reflects the most dismal shipping conditions in decades, caused by economic slowdown in China combined with an oversupply of vessels due to a building spree during a previous boom.

The Greek owners are looking for buyers for two remaining vessels and are taking Goldenport off the stock market, saying it no longer makes sense to list shares which have dropped from highs of £50 in 2007 to less than 1.5p.

John Dragnis, the chief executive of Goldenport, said the company’s lenders and shareholders had agreed to the fleet sell-off at a time when the company had debts of more than £100m to RBS and other banks. “The value of the vessels is less than the value of the loans due to extreme market conditions.”

OK, seems fair enough. But there’s more to it than just that.

Dragnis said family and management controlled almost 60% of Goldenport and had suffered along with all other shareholders from the downturn. The Athens-based shipowner declined to predict when market conditions might pick up although he thought it could be between one and three years.

So, family owned company, business is booming, flog part of it on the stock market. Great.

Market turns. Oops. What then?

The six ships already sold have been transferred to the ownership of small companies owned by the Dragnis family which originally set up Goldenport and brought the company to the stock market.

The announcement of plans to float in 2006, when the shipping markets were riding high on China’s fast-tracked industrialisation programme, boasted of the value to come.

Return the assets to the family when the price is low. Very well done indeed, no?

Shades of the John Paul Getty strategy (and Onassis). When oil’s cheapo go drill for it on the stock market. When oil’s expensive got sell it on the stock market. Rinse and repeat.

Got to get the timing of the cycle right but still…….

14 thoughts on “Oh this is lovely”

  1. “when the company had debts of more than £100m to RBS and other banks. “The value of the vessels is less than the value of the loans due to extreme market conditions.””

    Peripheral question, but WTF are banks doing, lending to a company like this?
    An enterprise where the value of the assets depends on the performance of the business sector is what I’ve always regarded as very high risk. In a downturn there’s a feedback effect, where all the players are going to be trying to liquidate their assets with no buyers to take them up. This is what equity is for. You puts up your money – you accept the risk.
    With banks, the risk is going onto their depositors – and through them, ultimately onto the taxpayer via the deposit guarantee system & “too big to fail” bail outs.

  2. I would tip my hat to the gentlemen at Glencore. Listing in 2011. No doubt they will go private at some point, regretfully buying out the external shareholders.

  3. BiS.

    Usually the banks are pretty savvy about this – they usually have claims to individual vessels and strong claims. It is possible that RBS was a sucker at the top of the market.

  4. @ken
    “Usually the banks are pretty savvy about this”
    I’d say that requires the banks to know more about the shipping industry than the shipping industry.
    Likely?

  5. The Laughing Cavalier

    Furthermore, RBS must be asleep if it allows the ships to be given away. Even as scrap they are worth more than a dollar. RBS should have the ships arrested

  6. Yes, they’re clearly worth more than $1 apiece. It’s a classic tale of insiders (the family) making off with the loot, while outsiders lose their shirts.

  7. Tim, why would the other companies buy them with the mortgage when the article tells us “The value of the vessels is less than the value of the loans” ? This implies that the other companies could have bought cheaper ships elsewhere.

  8. because they think they can do a deal with the bank to write-off some of the debt, and very possibly already have signed such a deal

  9. “It’s a classic tale of insiders (the family) making off with the loot, while outsiders lose their shirts.” Exactly. Beware of Greeks bearing shares.

  10. BIS … WTF are banks doing, lending to a company like this?

    Trust me, banks aren’t the problem – everyone is drowning in money, are queuing to lend to the least bit credible. Likewise investors. And if the taxpayer is willing to support that risk, what’s not to like. That said RBS was pure hubris, pricks of the first order.

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