Friday, October 29, 2010

Shippers and connection Covenants

Falling ship values are now wreaking havoc in the shipping world, and many shippers are starting to breach their bond covenants because of-the loss of values. With the most recent sales of certain ships coming in atonal $28 million, the value of these shipping vessels have dropped over 70%from their peak this summer, and this is bad news indeed because “most of theory-bulk companies need to maintain their net-asset values at 130% of their outstanding loads,” according to Oppenheimer analyst Scott Burk, an expert Anthe dry-bulk industry.

Things have degenerated to the point where there have been only 10 reported sales of ships in the dry-bulk market, and “after a long absence of second-hand vessel sales during the rate decline since the end of summer, a couple of modern ships have been sold at prices 50% or more below prices previously recorded.”

Companies with greater debt have found themselves struggling against the current of an ever-weakening dry-bulk market, and many shipping companies have found their statuses changes from “overweight” (good) to“underweight” (bad), and many more have lost their status, having it changed to “neutral” rating. Diana Shipping, however, was upgraded to “overweight,”mainly due to the fact that they have relatively little debt, and will be the best candidate for surviving this weak market.

Banks are still trying to work out a deal with some companies, but the going is slow, and many companies are looking toward alternate methods of making money, if only to make sure they don’t default on their loans and sink even more into debt.

This can spell bad news for a lot of consumers here, because most of our goods are now coming from overseas. If this is any indication of things to come, we’ll need to start growing our own food again, opening up our-own toy factories and getting us away from the free trade system that has plunged this country into chaos. If the dry-bulk market is failing, it’s ongoing to get worse, and we need to start thinking about self-sufficiency, like we have in our domestic auto shippers