At least four U.S.-listed shipping companies are likely to face restructuring or declare bankruptcy over the next 12 months as the long downturn in the freight market forces further consolidation, an industry executive told Reuters.
Norton Rose, a leading law firm in the transport and commodities industries, is involved in "numerous consolidation discussions" as maritime firms struggle with rock bottom freight rates and a glut of new vessels, said Harry Theochari, the company's global head of transport.
"I suspect my firm will be involved in a lot of new restructurings, particularly of U.S.-listed companies," he told Reuters in a telephone interview from Hong Kong.
"I would be astonished if we didn't see within the next 12 months four, or possibly even five, Chapter 11s of listed companies."
Theochari did not specify which companies were most in danger of restructuring, but said those in the tanker and dry bulk markets were more vulnerable than their counterparts in the box shipping sector.
"I don't see a pick up in the market, so these guys are going to either have to enter joint ventures, consolidate with others, or find some way of getting their costs down because their cash positions are precarious," he said.
The difficult economic environment, exacerbated by global recession fears and a credit squeeze in the West, has already claimed several high-profile victims this year, including bankrupt shippers Korea Line, The Containership Company and Omega Navigation Enterprises.
The head of Frontline , the world's largest independent oil shipper, told Reuters last month that players in the oil tanker market were in concrete talks over consolidation.
Oil tanker earnings on the Baltic Exchange's benchmark Middle East route have traded in negative territory for most of the last two months, dropping to a record low of -$6,492 a day on Friday.
In other words, ship owners pay $6,492 more a day in bunker fuel and other variable voyage costs than they receive from companies using their very large crude carriers (VLCCs) to ship crude oil from the Middle East to Japan.
Norwegian rig firm Sevan Marine, which had been struggling to avoid bankruptcy, found a savior in Teekay after it agreed last week to acquire a significant ownership position in a recapitalized Sevan Marine.
U.S.-based Horizon Lines said in March it could be forced to seek bankruptcy protection if it cannot comply with its debt agreements.
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