Chairman's Commentary

The world has changed dramatically in the past 30 days. The financial crisis has wrought a major upheaval to all and sundry and there is not one person in our industry who is not affected by the drama that has played out in front of us.

In an age of instant communication we have been bombarded with visual images day and night courtesy of unrelenting media coverage. We have learned to live and love massive gyrations and volatility and perhaps more than ever revel in the quiet of a market free week-end!

The final chapter has of course not been written and nor will it for a long time to come but one thing is for sure. All eyes continue to be on the U.S and more particularly on Wall Street…which happens to be in New York!

So throughout it all the New York maritime cluster will remain all the more important and we will continue to highlight the opportunities and credentials of our cluster.

NYMAR will be hosting two conferences shortly – first at the New York Stock Exchange and then in the spring as we lead with an exciting new partnership with Baruch College and their international business center.

We will also be working with the Journal of Commerce to help bring NYMAR to the forefront of a broader maritime and trade community as we link up with their vibrant web based community and develop content and information for the broad constituency.

Crisis? What crisis? NYMAR will soldier on and continue to strive to benefit all of our members.

 Where in the world is NYMAR?

NYMAR is happy to announce that Lorraine Parsons of IMS and Niovi Christopoulou of Dechert LLP are joint winners of September’s “Where in the World is NYMAR?” The correct answer, ‘Statue of David, Florence, Italy.’ Each will receive a bottle of champagne.

Can you guess where in the world our NYMAR member took their photo this month?

Dahlman Rose Indices

Monthly News

Blue Marine secures funding

New York based boutique investment bank, ICP Capital, just announced it has structured and arranged a $121m financing package for Mexico’s Blue Marine Shipping to purchase two vessels over 40,000dwt (deadweight tons) of cargo capacity. The two ships have been leased to Pemex Refinacion for a period of 10 years with purchase option at the end of the lease.

“We are extremely pleased to arrange this transaction on behalf of Blue Marine. This represents a major step forward for our client as they provide lease acquisition services to Pemex,” said Andrew Mauritzen, head of the Shipping & Trade Finance group at ICP Capital. The finance house also said that the deal demonstrates its superior structuring expertise and ability to deliver capital in a tough financing environment.

Blue Marine and ICP Capital launched a Mexican trust to allow the transaction. The trust will qualify the ships under Mexican domestic shipping laws and protect the Pemex lease receivables and the investor’s security interest in the ships.

“ICP Capital represents a new and flexible source of capital for our business. Without ICP, our ability to acquire and lease these two vessels to Pemex, one of our most important clients, would have been uncertain,” said Juan Reynoso Duran, General Director of Blue Marine.

ICP Capital, established in 2004, specializes in fixed income capital markets and asset management services with offices in New York and London. Its asset management division manages approximately $13bn in direct lending, private equity and hedge fund strategies.

Founded in 1998, Blue Marine provides offshore services to the Mexican and global oil industry, and operates a fleet of oil tankers and off-shore vessels, provides geotechnical and geophysical surveys, and offers technical maintenance services.

OSG and Euronav’s $500m Loan

Just when pundits declared the lending market has been closed for the year, Overseas Shipholding Group (NYSE: OSG), a leading tanker player together with Euronav NV (Euronext Brussels: EURN) announced a $500m senior secured term loan. The loan is to finance the purchase of two 442,000dwt vessels, TI Asia and TI Africa by joint venture companies owned equally by Euronav and OSG and the conversion of the ships into FSO (Floating Storage Offloading) service vessels.

The credit facility is provided by ING, Fokus Bank, Fortis Bank (Belgium), Sumitomo Mitsui Banking Corporation, BNP Paribas and Nordea, acting as lead arrangers and ING as global coordinator and facility agent, and Danish Ship Finance, Deutsche Schiffsbank, Dexia Bank, Scotia Bank and Helaba Landesbank Hessen-Thuringen acting as co-arrangers. The facility has an eight-year maturity from the delivery dates of each of the two vessels on site. Both companys’ success at securing this bank facility during such a difficult financial market emphasizes not only the strength of the project and the charterer but also the strong belief these banks have in both OSG and Euronav.

The vessels are due to be delivered to Maersk Oil Qatar on the Al Shaheen field offshore Qatar and commence operations respectively on July and September 2009.

Northern Navigation’s new fund

Connecticut’s Northern Shipping Fund I LLC (“NSF I”) which was recently launched to invest in the shipping and offshore sector has completed a first closing in excess of $110 million in equity. Specifically, the fund said it will engage in the business of providing structured finance and private equity products and will utilize lease (bareboat), mezzanine financing, time charter and other asset-based structures for its investments.

As a provider of alternative financing, NSF I believes it will be well positioned to provide financial solutions by providing equity for structured transactions. Northern Shipping Fund I will be led by Sean Durkin as President, who was previously with NFC and Northern Navigation’s CFO. “We are pleased to have successfully closed this new Fund and have with us the support and expertise of some of the industry’ most knowledgeable investors. Being liquid in these times as well as having an ability to underwrite transactions will allow the fund to have the pick of the deals out there,” Sean Durkin noted.

The Fund is sponsored by Northern Navigation, a company controlled by Oivind Lorentzen III and Jan Naess together with an affiliate of the MTMM Group, represented by Doug MacShane and Christina Tan. Both parties were involved in the successful NFC Shipping Funds, where Northern Navigation acted as a general partner. In addition to the sponsors, NSF I investors include entities affiliated with shipping families from Greece, Norway, United Kingdom and India.

Joining the team are two highly experienced shipping bankers, who will serve as Senior Investment Advisors, and the technical director from the predecessor company. Sybren Hoekstra, previously running DVB Bank’s New York office and John Hartigan formerly from the Bank of Ireland (BOI). Jan Erik Wahl of Northern Navigation will serve as the technical director.

New vessels in Heidmar Pool

Connecticut based Heidmar recently announced that Mercator Lines Limited of India, China Shipping Development and Conti Reederei of Germany will be joining the Sigma Tankers pool. Meanwhile, Dubai’s Emirates Trading Agency (ETA), an existing member of both Dorado Tankers pool and Sigmar Tankers pool managed by Heidmar, will be entering two more vessels into Sigma Tankers. “We are always delighted to welcome new pool members, but it is also very gratifying to have existing pool members enter additional vessels into Heidmar pools,” Tim Brennan, President and CEO of Heidmar, said.

Mercator and China Shipping, also members of the Dorado Tankers pool, will enter one vessel into Sigma Tankers respectively. Conti will take delivery of two coated LR2 tankers from Hyundai Heavy Industries in 2009, which have been fixed on time charters and will be entered into Sigma Tankers at the end of these charters.

Sigma Tankers recently entered the clean LR2 trade with the delivery of two newbuildings in July and September.  The company said, further expansion into this market will continue with three additional LR2 tankers being delivered to the pool in the next few months by China Shipping and by ETA.  These and other committed ships will bring the Sigma Tankers vessel count to over 30 ships by early 2009. In addition, Sigma Pool members have more than 30 aframax and LR2 tankers on order. Glenn Gronseth, Managing Director of Sigma Tankers said, “The addition of these new LR2 tankers will further strengthen Sigma’s position as a major player in the world’s aframax market and expand our trade in the clean petroleum market.”

Heidmar through its offices in the United States, England and Singapore commercially operates a fleet of over 90 tankers. Heidmar is the general agent and commercial manager of five pools that include, Star Tankers Inc. (panamax/LR1 tankers between 55,000 and 80,000 DWT); Sigma Tankers Inc. (aframax/LR2 tankers between 90,000 and 120,000 DWT): Dorado Tankers Pool Inc. (mid-range product tankers between 37,000 and 55,000 DWT); Marida Tankers Inc. (short-range product tankers between 10,000 and 18,000 DWT) and Blue Fin Tankers Inc. (suezmax tankers between 140,000 and 180,000 DWT).

Arcade to buy ten container vessels

Blank check company, Arcade Acquisition Corp. (OTCBB: ACDQU) just announced a reverse merger to acquire 10 feeder service containerships with a total capacity of 21,135teu for approximately $261.7m. In order to effect the Acquisition, U.S SPAC (special purpose acquisition company), Arcade and its newly formed Marshall Islands subsidiary, Conbulk Corporation will enter into an agreement to merge, with the latter being the surviving entity. Six of the ten vessels will be purchased from Dimitris Dalacouras run Palmosa Shipping Corp. in exchange for common stock and debt repayment. And four of the vessels will be acquired from companies whose ships are managed by Tsakos group for a combination of cash and common stock. Conbulk looking to list in New York as a container feeder company focusing on operating smaller vessels that accommodate regional trade flows globally.

Conbulk has about three years remaining on its time charters, and anticipates generating approximately $60.3m in revenues and $38.2m in EBITDA in its first full year of operations, which represent a purchase price multiple of 6.85x the first year’s EBITDA. The acquisition will be financed by issuing 9.7 million shares of Conbulk common stock worth $76.1m to be issued to Palmosa and Tsakos, approximately $68m of cash held in Arcade’s trust account, and borrowings of $126.4m from an expected $200m credit facility. All of the consideration paid to Palmosa will be in stock. Following the final closing, 47.9% of the company will be owned by Palmosa and Tsakos, 9.3% by the Arcade sponsors and 42.8% by the public.

Dimitris Dalakouras will be the Chief Executive Officer of Conbulk, Maria Tsakos will be President, George Bamiotis, co-owner of Palmosa will be the Chief Operating Officer, and Stefanos Kardamakis will be the Chief Financial Officer. Arcade completed its initial public offering of 8.625 million units at $8.00 per unit on May 22, 2007, generating gross proceeds of approximately $69m dollars.

Cruiseship auction

Florida based SeaEscape casino cruiseship, Island Adventure will be auctioned as the owner has been unable to sell the ship or secure financing that would have satisfied creditors claims. The15,400gt vessel built in 1976 will be sold by the US Marshal on 16 October at a Broward County courthouse.

Marshals seized the vessel end August after a warrant was issued following some crew members claims that they had not been paid wages. SeaEscape’s creditors claim they are owed more than $2.3m. That include about 145 crew members claiming they are due about $500,000. National Maritime Services of Fort Lauderdale, which is responsible for the vessel’s safekeeping, estimated its monthly costs are about $550,000. “The cost of keeping the vessel under arrest have become disprop ortionate to the vessel’s value, which most recently was estimated at $3m as part of a scrap sale and at between $1m and $2m as a gaming ship,” U.S District Judge Ursula Ungaro wrote in an order.

SeaEscape operated out of Port Everglades for 21 years before terminating sailings early August, citing the weak economy, higher costs and competition from land-based casinos. Sources indicated lawyers for the company talked with parties from California to the Netherlands about financing but because of its seizure the efforts to conclude a deal were obstructed by the inability of parties to tour the ship.

U.S Shortsea scheme

The U.S Maritime Administration (MarAd) published a final rule on 30 September, to put the new CCF (capital construction fund) expansion rules into effect based on the 2007 Energy Act that permits CCF trades to include the short sea transportation trade. In other words, the 2007 Energy Act now allows tax advantaged financing for container vessels and roll-on/roll-off vessels engaged in the U.S contiguous trade. Up until enactment of the 2007 Energy Act, the only qualified withdrawals were ones for U.S flag vessels engaged in either the non-contiguous U.S trade or the foreign trade. Vessels servicing offshore drill rigs attached to the U.S outer continental shelf may also qualify as being engaged in the non-contiguous U.S trade.

The CCF program is more or less like a ‘401(k)’ account for ship owners as it allows parties to defer federal taxes on deposits of vessel income, gains on sales of eligible vessels, and income on deposits. Qualified withdrawals decrease a vessel’s cost basis therefore lowering a shipowner’s depreciation deductions.

Short sea shipping has often been indicated as a resolution to highway and rail congestion. That trade was defined as the carriage of cargo by vessel contained in intermodal cargo containers loaded by crane onto a vessel or cargo loaded by means of wheeled technology to and from ports in the United States or ports in Canada located on the Great Lakes St. Lawrence Seaway System. The 2007 Energy Act has barred the transport of dry and liquid cargoes in bulk and passengers from the CCF expansion.

ABS donates over $3m to Massachusetts Maritime Academy

International classification society, American Bureau of Shipping (ABS) has donated over $3m for a proposed new library at the Massachusetts Maritime Academy (MMA). The donation is the largest single gift in the Academy’s 117year history. “The decision to make this gift to fund the planned Information Commons at Massachusetts Maritime Academy was an easy one as ABS considers maritime education a natural extension of its mission,” said Robert D. Somerville, Chairman and CEO of ABS. “ABS wants to be a catalyst for helping to make American maritime colleges the best in the world,” he added. The donation for the library to be named American Bureau of Shipping Information Commons is the largest single corporate contribution to any public college in Massachusetts.

As MMA President Richard G. Gurnon said, “At sea, sailors use the lighthouse as a beacon of safety; here at MMA, we view the library as the beacon of knowledge.”

The proposed building will provide access to countless web-based resources as well as the academy’s own stacks of books and periodicals. It will house a Full Mission Bridge Simulator, an amphitheater with digital audio/visual streaming capabilities, computer laboratories, smart classrooms, a multimedia laboratory, an Academic Resource Center, study spaces, workstations and unique maritime collections. The Academy will seek LEED (Leadership in Environmental and Engineering Design) certification for the building and incorporate the latest in environmental efficiencies and sustainable design into the 44,000 square foot edifice.

Jones Act execs guilty plea

Five Jones Act carrier executives have agreed to plead guilty following the US Department of Justice probe into price-fixing. Of the five, three were former executives for Charlotte based Horizon Lines who plead guilty in a wide-ranging conspiracy to rig bids, fix prices and allocate market shares for customers transporting goods between the continental United States and Puerto Rico. The former Horizon executives were Kevin Gill, vice president of marketing; and Gregory Glova, director of refrigerated cargo; and Gabriel Serra, senior vice president and general manager of the Puerto Rico division.

Alexander Chisholm, an executive for another shipping company, Jacksonville based Sea Star Lines, also plead guilty to the same charge, while another Sea Star executive agreed to plead guilty to destroying evidence of the shipping conspiracy according to Justice officials.

Each was charged with violating the Sherman Act, which carries a maximum sentence of 10 years in prison and $1m in fines. Under terms of their plea agreements, the executives agreed to serve a jail term determined by the court, pay a $20,000 fine and cooperate with the investigation.

The conspiracy began as early as May 2002 and continued until this April, Justice officials said. The goal was removing competition and raising prices for shipping goods between the mainland U.S and Puerto Rico. Horizon Lines has about 1,900 employees, including about 75 in Charlotte.

USCG opens first COE

The US Coast Guard has just established its first Cruise Ship Center of Expertise (COE) in Miami, a part of a plan to open a series of COE’s that will be located throughout the country. Each COE will focus on a specific segment of the maritime industry and the Miami COE in Miami will focus on the cruise ship industry. “We are always assessing our performance, making course corrections or charting new courses, and we understand that our success depends on a strong foundation of partnership with our maritime stakeholders,” said Rear Adm. James Watson, Coast Guard Director of Prevention Policy.

The selection of Miami as a cruise COE center is consistent with Miami being long considered the cruise capital of the world. It is envisioned that the Miami COE will be the focal point for developing and maintaining highly skilled Coast Guard personnel and others in cruise ship operations and examinations. As part of its responsibilities, the COE will administer a six-day course to train Coast Guard cruise ship inspectors on examination requirements of cruise ships for safety, security and environmental protection requirements. The COE is also expected to provide support to other Coast Guard commands across the country and overseas responsible for examining cruise ships and maintain close liaison and outreach with industry and government stakeholders.

The COE concept is one of several initiatives included in the Coast Guard’s Marine Safety Performance Plan that establishes what the program intends to achieve during the next five years to keep pace with the maritime industry’s growth and needs.

SMA celebrates 45th anniversary

The Society of Maritime Arbitrators (SMA) has completed 45years and celebrated the occasion by thanking everyone that made the organization what it is today. “From its humble though foresighted beginnings in 1963, the SMA has worked on its mission with diligence and tenacity, to grow in stature and scope, to be recognized today as one of the leading and most respected Dispute Resolution organizations in the world,” Klaus Mordhorst, SMA president said in his speech.

The SMA rules, the Shortened Form of Arbitration, Code of Ethics, have become models for other associations to copy or emulate, said Mr Mordhorst. The SMA Award Service now comprises of more than 4000 decisions that is well regarded in the world of maritime arbitration. “I recognize some of my predecessors in this office of President, whose wisdom and wise counsel have guided us to where we today,” Mr Mordhorst added. The society consists of some 80members including a Board of Governors, elected officers and general members.

Financial Performance Charts

Shipping Company Performance Chart (NYSE)
(source: NYSE)

Shipping Company Performance Chart (NASDAQ OMX)
(source: NASDAQ OMX)

Transportation Index Charts
(source: NASDAQ Market Intelligence Desk)

Taste of NYC | Upcoming Events and Entertainment

NYC Websites

• www.nycvisit.com
• www.zagats.com
• http://www.ny.com/nightlife/
• http://www.ny.com/museums/
• http://www.allny.com/antiques/auctioneers.htm
• http://www.nytix.com
• http://www.majorleagueevents.com
• http://goingcoastal.wordpress.com

• Bryant Park - The Pond at Bryant Park | The Pond (The ice skating rink features free admission in addition to rental skates, skating shows, special events, and activities) Oct 24 –Jan 25, 2009; Tricks and Treats | Le Carrousel Oct 31, 4pm–6pm(www.bryantpark.org)
• Grand Central Terminal - "The Great White Fleet", through Oct 19 [The Great White Fleet exhibit documents the 1908 heroic efforts of Italians and American servicemen who came together in one of the greatest humanitarian efforts in European history]
• Guggenheim Museum - Catherine Opie  | American Photographer, through Jan 7, 2009; Artists including Liam Gillick, Angela Bulloch, Maurizio Cattelan | theanyspacewhatever, Oct 24 –Jan 7, 2009 (www.guggenheim.org)
• MOMA - The Yoshiko and Akio Morita Gallery | Looking at Music, through Dec 31; Kirchner and the Berlin Street, through Nov 10 (www.moma.org)
• Metropolitan Museum -Landscapes Clear and Radiant: The Art of Wang Hui (1632–1717), through Jan 4, 2009; Giorgio Morandi, 1890–1964, through Dec 14, 2008 (http://www.metmuseum.org)
• Christies - New York, Rockefeller Center. Viewing and Auction | Minton Pâte-sur-Pâte Masterworks from a Distinguished Private Collection [Sale 2124], Oct 21, 10am; 19th Century European Art and Orientalist Art [Sale 2035] Oct 22, 10am & 2pm; Maritime Art [Sale 7660] Oct 29, 2pm (www.christies.com)
• NYMAR Restaurant of the Month - Blue Water Grill | www.brguestrestaurants.com (Serves “top-shelf” seafood in a “glossy” marble-clad “converted bank” with “jazz combo” sets)
• October 2008 Street Fair Schedule -Saturday, Oct 18th | Washington Square Festival, Waverly Place between Broadway and 5th Avenue; Saturday, Oct 18th | Village Independent Democrats Fest, Greenwich Avenue between 6th and 7th Avenues; Saturday, Oct 25th | Manhattan Republican Club Festival, Park Avenue South from 17th to 23rd Streets