Dry bulk: a deep pocketed private equity play by Wilbur Ross

Another week brought another announcement of a financial investor coming together with shipping veterans. This time it was WL Ross & Company getting together with a group of investors, including German shipowner Conti Group to form Nautical Bulk Holdings Ltd.
Ross is putting a stake in the drybulk market, after having established positions in handysize tankers, suezmaxes, and LPG tankers. As described in a news release, the new company has raised more than $100m, and has ordered eight geared 64,000 tonners, in vogue ultramaxes from the Chinese yard Jiangsu Hantong, with deliveries starting in 2015.
A database search shows them priced at $24.5m  each. The yard has mainly specialised in building supramaxes, for owners including Coeclerici, Eagle Bulk/ Delphin and another German outfit Peter Dohle. Some reports had the yard granting options on additional vessels.
In analysing club deals of this type, it’s useful to dissect the investor slate for hints about motivations and potential strategies for the new company. Fearnley Advisors, an investment packager, is likely to bring in European institutional shipping investors Conti, besides being an owner, has also been an investment promoter. So, if and when the KS and KG markets show signs of life, or new partnership structures come into play these assemblers will be one phone call away from assets to parcel out.
More to the point of this deal, Solus Alternative Management, based on “Hedge Fund Alley” in New York has a distressed investing pedigree. Wilbur Ross, who has dabbled as a “consolidator” in the LPG sector, is ultimately a very savvy bottom feeder buyer with deep pockets to ride out the false troughs of highly cyclical industries, and sell on the real bounces. His big successes have come in the steel business, where he bought into legendary U.S. companies exactly when they hit bottom in the early 2000’s, and then sold them, on a big bounce, to Mittal, as China was revving up. This is not too different than very savvy moves by shipping investors at the time, with Foremost Maritime coming to mind.  
Though Ross had talked of “consolidating” in the product tanker business early on, there has been no such talk, yet, about the bulk carrier investment. This has the look of a good old-fashioned cyclical play. Anybody remember Majestic Shipping, in the tanker realm? No economies of scale or market concentrating-just buy low and sell high.
Whether or not drybulk fundamentals are truly set to improve has been subject of some debate, as newbuild deliveries slow. However, perceptions have improved, if performance of listed companies is any guide. Eagle Bulk, a supramax specialist, has seen a doubling in its share price since it hit bottom at end 2012, while peer company Baltic Trading has seen a 50% run upward. Safe Bulkers has also regained its luster with investors, seeing a big bump up in recent months.
Source: Seatrade Global