Shipping finance : debt or equity? A comparative analysis between syndicate loan and initial public offer based on the IRR model

Abstract

If there is a country in the world that comes to mind when shipping is discussed, that country is Greece, a place where owners have a long history in the business and a glamorous reputation of gaining through market peaks and troughs. It always constitutes a very interesting subject among market participants and historians why “small” Greece and its people tend to be committed to the sea and most of them successful operators in the shipping industry. Many people believe that Greeks have shipowning circulate “in their blood”. One shipowner, in mentioning the significant results of the Greek maritime industry by 2005, stated that Greeks can be characterized as having a “shipping D.N.A”. Perhaps it was this cultural or biological explanation, if you prefer, that drove me to deal with this sector two years ago as a Masters Degree student of the Department of Maritime Studies. Until then I had no contact with this interesting and traditional sector of the Greek economy. The only contact I did have was with the old captain and sailor stories of the travels and the sea adventures that they faced in their trips all over the world, and from the Greek drama movies of the 1960s and 1970s. It is true that my first contact with the shipping industry was during a period described as “hot” by a number of market participants. Suddenly I realized that I was in the top of a shipping cycle that I had never known before. The period between 2004 and 2006 was remarkable for the international and the Greek shipping industry. It was a period of records. Freight markets due to China expansion reached unprecedented levels both in the tanker and bulk sector. It was also marked by an all time low in laid-up tonnage and a massive world fleet renewal. Of course, I was not so lucky to have my own fleet during that period but I was lucky because I found a very interesting sector of the shipping industry, which prospered again during this period and roused my interest. This sector was shipping finance.