Investor Lawsuit against Dryship

I haven't followed Dryship for some time. As I wrote previously, in my opinion
this stock was manipulated by the owner(s) and should be avoided.

This last week I saw headlines saying there is a class action lawsuit about to be filed against Dryship. Apparently there was one filed in the Marshall Islands (where Dryship is registered, due to financial advantages for a shipping company), and it
was dismissed. I read the investors were now trying to sue in the U.S., but not
sure if this is accurate.

Anyway, as I went searching around for move info, I found something interesting on
Seeking Alpha, who was all in favor of these stocks a couple of years ago.

Benko Investigated For Money Laundering: What Does This Mean For DryShips And Ocean Rig Investors?

November 29, 2011

The international media is reporting detailed information about George Economou's business interests which are not covered by the U.S. media. In fact, the articles are generally not written in English. Recently, an acquaintance of mine translated some of the latest news media concerning George Economou and his business partners for me. The news was insightful, to say the least.

Rene Benko and George Economou are business partners. Benko is the largest property investor in Europe - founding his company at the age of 22, likely financed from family wealth. Economou owns 50% of a company run by Benko called Signa Holding. The company Economou owns which has this ownership interest is called GlobalBasis Limited. Both Benko and Economou are making plans in a joint venture of sorts to try and purchase Galeria Kaufhof, 134 shopping malls in Germany, for the price of 2.4 billion euros.

The media is also reporting that Rene Benko is in the focus of the Vienna general prosecutor. He is suspected of money laundering, and the prosecutor has a large amount of evidence. This means that George Economou is not only highly suspect of illegal and unethical business activities himself, but his largest and most current business partner is now being formally accused of money laundering in Austria.

Economou and his related parties have been suspected for insider trading on the recent purchase of OceanFreight (OCNF), as illustrated in my prior article.

Economou has led many, many transactions between his private companies (Cardiff Marine, Drytanks) and his publicly traded companies (Dryships (DRYS), OceanRig (ORIG), OceanFreight). On a daily basis, Economou's private companies manage the logistics of Dryships and Ocean Rig. The fees are widely seen as out-of-line with arms-length transactions. Additionally, most every ship Economou has purchased for Dryships can be demonstrated to have been overpaid for by at least a few million dollars when compared to purchases he has made for his privately held companies.

Most Dryships followers are aware of the infamous options Economou sold to himself and then let expire, allowing him to bank millions during the peak of the financial crisis, but even the more recent oil tankers purchase was dramatically out of line with market values. Economou evaded the subject of valuation by talking up a spinoff for the assets, which still has not happened.

All of this information begs the question, who will protect the Dryships and Ocean Rig investors in the United States if all of these allegations prove correct and these companies go bankrupt? It also begs the question, why would bankers be so stupid so as to make exceptions for Dryships' broken loan covenants over and over again? Why would banks trust someone who clearly has such a questionable ability to fairly and competently manage a company? It also begs the question, are the Greek shippers and their related parties somehow partly responsible for the debt problems in Greece?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
This article is tagged with: United States

Will NOL buy Hapag-Lloyd?

Report in Journal of Commerce says talks are on....

Report in Germany comes as TUI prepares to sell remaining stake

Neptune Orient Lines is back in talks with Hapag-Lloyd about a possible purchase of the German container ship operator, according to a published report in Germany.

Singapore-based NOL broke off acquisition talks in 2008 after failing to agree on a price for Hapag-Lloyd, which is owned by a consortium of Hamburg-based investors and tourism group TUI.

TUI plans to sell its remaining 38.4 percent stake in the German container line by January so it can to focus solely on its tourism business.

The German newspaper Die Welt, in a report Saturday that did not identify sources, said NOL was in contact with TUI management, with more talks planned for January, and a concrete offer is expected early next year.

A TUI spokesman confirmed its intention to divest its stake in Hapag-Lloyd but said he would not comment on market rumors.http://www.blogger.com/img/blank.gif

The Hamburg investors have a right of first refusal to buy TUI's stake, the paper said.

If no such deal emerged by Sept. 30, 2012, TUI could sell its stake to a third party along with enough shares from the Hamburg investors to give the outsider a majority stake.

click here for link

Moody's Downgrades CMA CGM

Moody's has downgraded CMA CGM. Following is the report from Moody's.

They do not make any mention of the just announced cooperation with MSC.

I don't know if this action was taken before that announcement, or,
more likely, Moody's will just wait to see what the numbers show. Meaning,
what benefit to the bottom line CMA CGM demonstrates from this new cooperation.

Rating Action:
Moody's downgrades CMA CGM to B2 from B1; outlook negative
Global Credit Research - 02 Dec 2011
Approximately USD920 million of rated debt affected

Milan, December 02, 2011 -- Moody's Investors Service has today downgraded CMA CGM's corporate family rating (CFR) and probability of default rating (PDR) to B2 from B1. Concurrently, Moody's has downgraded to Caa1 from B3 CMA CGM's EUR325 million and USD475 million worth of senior unsecured notes maturing in 2019 and 2017, respectively. The outlook is negative.

RATINGS RATIONALE

The downgrade was triggered by CMA CGM's weak performance for the third quarter. As a result 2011 will be significantly weaker than estimated by Moody's last September translating into credit metrics that are likely to be very weak for the category at year end. This is linked to the poor performance of the industry during its peak season (between September and October) caused by the oversupply of vessels on the water that slashed freight rates to a very low level. The agency further commented that the rating still incorporates an assumption that industry conditions would not further worsen and that actually freight rates recover, at least modestly, in the last weeks of the year as well as in 2012, following the withdrawal of capacity currently underway on the main trade lanes.

These developments partly reflect the highly competitive structure of the industry and the concerns over increased capacity coming on stream. This has exerted pressure on operators to expand their market shares, which makes difficult for companies in the sector, including; CMA CGM to pass on the material cost increases acknowledged in the first 9 months of the year, despite good traffic volumes.

Fierce competition exists between the main players in the industry, which remains cyclical and over-reliant on short-term contracts (this, in turn, limits market-revenue visibility). These factors have credit-negative implications for the ratings of container shipping companies, because they have high operating leverage and are therefore highly sensitivity to operating cash-flow shifts.

However, Moody's continues to acknowledge that CMA CGM has a strong business profile with solid market shares globally, as well as a distinctive position in some secondary lanes that are more profitable. CMA-CGM also successfully strengthened its capital base early in 2011 and sold certain assets sold recently. This in particular boosted its liquidity. Moreover, all the major new deliveries of ships that are scheduled before end of 2012 are fully financed.

The negative outlook reflects Moody's concerns that the container market's operating conditions will remain difficult in 2012; CMA CGM's performance will therefore remain under pressure. The material slowdown in the recovery from the 2008-09 global financial crisis and recession has prompted Moody's to revise downwards its growth forecasts for most G-20 economies in November 2011. In addition, it now seems likely that traffic volumes in 2012 will be under pressure compared with both the current trend and Moody's previous expectations. Moody's notes that lower demand could exert both immediate and long-term pressure on CMA CGM and the industry as a whole, given the amount of new deliveries scheduled for the coming years. Moody's acknowledges that CMA CGM has recently obtained approval from its lender to waive the covenant test due at year-end 2011 but the next semi-annual periods could remain challenging if the current market conditions were not to improve substantially; the current B2 rating captures Moody's assumption that CMA CGM's lenders will continue to remain supportive of CMA CGM.

WHAT COULD CHANGE THE RATING UP/DOWN

Downward pressure on the rating could result from lack of short term improvement in market conditions leading to financial leverage failing to decrease below 7x; or (ii) EBIT/interest expense coverage failing to increase materially above 1.0x, both by the end of 2012. Furthere downward pressure on the ratings could result from liquidity pressures and/or failure to restore headroom under covenants.

Conversely, upward pressure could materialise as a result of (i) a reduction in CMA CGM's financial leverage sustainably and materially below 6.x; and (ii) an increase in its EBIT/to interest coverage above 1.5x on sustainable basis.

PRINCIPAL METHODOLOGIES

The principal methodology used in rating CMA CGM S.A. was the Global Shipping Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Marseilles, France, CMA CGM is the third-largest container shipping company in the world (measured in twenty-foot equivalent units, or TEU). CMA CGM recorded last-12-months revenues of USD14.8 billion as of the end of June 2011, and employed approximately 17,500 employees worldwide. As of June 2011, CMA CGM's fleet amounted to 390 container ships (297 chartered-in and 93 owned), with a total capacity of 1.283 million TEU.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
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Will Maersk continue to chase market share?

Bloomberg News has an article covering the new vessel sharing accord between MSC and CMA CGM. click here for link (also quoted below).

In the article the, this previous comment by Maersk is mentioned.

Maersk has said it is prepared to outlast rivals as the industry faces four years of overcapacity, and will reduce prices to preserve market share.

I wonder if in 6 months time Maersk will still be signing this tune. Furthermore,
if one looks at the history of VSA's, the carriers involved do not generally increase their market shares. That is, until one of them takes over their competitor, and even then, the original combined market share does not generally last.

I hope the management of Maersk thinks about this, before they continue the
drive for market share. How about changing the focus to improve service and performance?

You know, "build it and they will come?"

Offer exceptional service and the customers will come to you?

Just a thought.

By Christian Wienberg - Dec 1, 2011 8:54 AM CT

Mediterranean Shipping Co. and CMA CGM SA, the world’s second- and third-largest container lines, agreed to a vessel-sharing accord meant to fight falling rates as overcapacity makes the industry unprofitable.

The deal includes cooperation on Asia-Northern Europe, Asia-Southern Africa and South American routes, Marseille, France-based CMA CGM said today in a statement.

The partnership will compete with industry leader A.P. Moeller-Maersk A/S, which in September merged some of its Asia to Europe trades into a fixed daily service with a fleet of 70 ships. Maersk has said it is prepared to outlast rivals as the industry faces four years of overcapacity, and will reduce prices to preserve market share.

“The partnership is a result of the incredible tough competition we see in the container market with falling rates and overcapacity,” Janne V. Kjaer, a transport analyst at Silkeborg, Denmark-based Jyske Bank A/S, said by phone. “The industry will have more of these partnerships going forward as the market conditions force container lines into action.”

Maersk’s Copenhagen-based container unit has a global market share of 15.8 percent, according to estimates released today by Alphaliner. MSC, based in Geneva, has 13.2 percent and CMA CGM has 8.5 percent, according to Alphaliner. The smaller rivals are closely held.

“The agreement, which is designed to improve the two partners’ respective performance, will help to drive extensive operating synergies and enhance quality of service,” CMA CGM said. The companies will be able to “deploy the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailing.”
Maersk Prediction

Maersk’s container unit last month lowered its full-year forecast to a net loss from an August prediction of a “modest” profit. The unit lost 1.58 billion kroner ($287 million) in the third quarter versus a 5.9 billion kroner profit a year earlier.

“It’s not unlikely that we will see some container lines going out of business in this unprofitable market,” said Jyske’s Kjaer, who has a “buy” recommendation on Maersk shares.

Maersk declined 580 kroner, or 1.5 percent, to 37,220 kroner at 3:46 p.m. in Copenhagen. The stock has lost 26 percent this year.

Press Release - MSC and CMA CGM agreement

Here's the press release which is on the MSC web-site (click here for link)

December 1st, 2011

MSC and CMA CGM sign major partnership agreement


The world’s second and third-largest container shipping companies have announced
the signature of a major agreement. The two family-owned companies, the Swiss-
Italian MSC and France’s CMA CGM, today agreed to form a broad-based operating
partnership spanning several trades, including Asia-Northern Europe, Asia-Southern
Africa and all of the South American markets.

The agreement, which is designed to improve the two partners’ respective
performance, will help to drive extensive operating synergies and enhance quality of
service for all of their customers.

On a certain number of trades, the partnership will also enable the Groups to deploy
the best ships in each of their fleets, while increasing the number of ports of call and frequency of sailings.

Diego Aponte, Vice President of MSC, said: “we are very happy to have signed this
broad-based partnership, which will unite our two family-owned companies in the
years ahead. The agreement offers us new opportunities to optimise the use of our
respective fleets, improve our transit times and increase our performance.”

Rodolphe Saadé, Executive Officer of CMA CGM Group, said: “for more than 30
years, our two companies have followed the same trajectory and for a number of
years we’ve cooperated on a few lines. Based on this experience and our shared
vision of the shipping industry, we have decided to step up our partnerships, which
reflect a commitment to long-term cooperation and will enable us to offer customers
improved solutions and services.”

More on CMA CGM agreement with MSC

The Financial Times has an article about the new announced
partnership between CMA CGM and MSC.

click here for link

They don't really say what the agreement entails...so guess we will have to
wait and see.

Generally these agreements are some sort of Vessel Sharing Agreement. If
they try to do anything beyond that, they will most surely get into trouble
with authorities.

In fact, I wouldn't be surprised if governments aren't looking closely at
all of the containership companies. Tt hasn't been that long ago
that they could legally get together and fix rates, and old habits die hard.

MSC and CMA CGM were 2 of the biggest rate cutters around. But, looks like
this might have come back to bite them.

We shall see.

CMA CGM to partner with MSC

CMA CGM has stated they will partner with MSC. The official announcement has not yet been made.

This is what is reported in the Journal of Commerce

MSC and CMA CGM, the world’s second and third largest ocean carriers, are joining forces on key trade routes in a game-changing move that is likely to trigger a new round of consolidation in the container shipping industry.

A spokesman for French carrier CMA CGM said the carriers will shortly issue a statement about the alliance, which is expected to involve the Asia-Europe route, the world’s biggest liner trade.

CMA CGM’s partnership with Geneva-based MSC also will cover trades to Latin America and between Asia and South Africa.

The alliance between the two family-owned companies comes at a time of deepening losses in the industry triggered by excess capacity and slowing world trade that has prompted moves by smaller carriers to pursue consolidation.

In the past week, Chile’s CSAV and Zim, the Israeli carrier, have been reported to be seeking partners, while Malaysia’s MISC announced it will exit container shipping because of mounting losses.

The CMA CGM/MSC partnership is also expected to exert fresh pressure on Japan’s top three shipping lines, MOL, NYK and “K” Line, to re-examine plans to spin off their ocean container activities into a single unit.