Costamare Inc., the Greek owner of about 60 container ships, is using its new joint venture with investor York Capital Management to acquire five container vessels at a total price of more than $190 million.
The purchases include two new vessels built in Asia with a capacity of 9,000 20-foot containers, or TEUs, costing $81 million apiece and due for delivery in 2015, Gregory Zikos, Athens-based Costamare’s chief financial officer, said in an interview. The other three ships are smaller and second-hand.
“We have close to half-a-billion dollars of equity to invest within two years, which is substantial capital for container shipping,” Zikos said by phone Wednesday. That “doesn’t mean that we will rush into transactions.”
Costamare’s joint venture with York Capital is part of a wider trend of ship owners joing with private-equity companies to invest in vessels. As the industry has entered its sixth year of crisis amid overcapacity and low freight and charter rates, many European banks such as Commerzbank AG and HSH Nordbank AG are exiting or cutting down ship finance. This has made it harder for small and medium-sized operators in particular to refinance debt or raise funds for fleet renewals and investment.
Rickmers Group, a Hamburg-based shipping company, on Monday announced a venture with funds of New-York-based Apollo Global Management LLC to buy container craft, initially focusing on second-hand ships, with a total investment of as much as $500 million.
There are also partnerships between ship owners. Quayside Maritime Partners is a joint venture announced in August between Hamburg-based E.R. Capital Holding and Schulte Group to buy vessels at the current low rates with the aim of selling later at a profit.
Costamare, which has been listed on the New York Stock Exchange since 2010, charters ships to container lines such as Hapag-Lloyd AG, AP Moeller-Maersk A/S and CMA CGM.
“What’s unique about our venture is that we invest up to 49 percent of equity and that’s what we did at the latest transactions,” said Zikos. “From what I have seen in the industry, ship owners usually invest 5 to 10 percent of the equity, while private equity firms provide the rest.”
Costamare’s minimum investment in purchases through the joint venture with York Capital will be 25 percent under the terms of their deal.
Costamare will partly finance the transactions by taking on debt, said Zikos. “We definitely enjoy access to lending and commercial banks, so we did not enter the agreement with York to replace debt,” said the executive, who in a previous role as a banker managed leveraged and acquisition debt financing transactions at Citigroup Inc. in London between 2000 and 2004.
The order book in the container industry is 21 percent of the total container fleet in the water today and mainly consists of larger vessels starting at a capacity of 8,000 TEU, said Zikos.
“As these big ships get delivered, liner companies around the world may adjust their capacity with regard to medium and smaller-sized vessels, bearing in mind their trade lanes and business models,” said Zikos.
The delivery of big ships such as the 18,000 TEU vessels delivered to Maersk Line is causing container carriers to dispose of smaller ones to rein in supply and avoid further increasing capacity in the market.
“Regarding the joint venture we don’t have a pre-defined growth target,” Zikos said. “This a cyclical industry, so there may be deals that we will pass on, or there may be some where we are quite aggressive.”
Three of Costamare’s and York’s purchases were for used ships of a size between 1,162 TEU to 5,576 TEU. The biggest vessel, called Ensenada Express, cost $22.1 million and was subsequently chartered to Hamburg-based Hapag-Lloyd, for about two years at a rate of $19,000 a day.
“Time-charter durations are on the low side, but we still see transactions of one to two years or even longer, bearing in mind differences between smaller, bigger or newly built vessels,” Zikos said. He declined to give a forecast for the business. [Bloomberg]