Alternative Sources of Shipping finance

Scope of the Course

The course aims to introduce attendees to the main alternative sources of shipping finance (other than traditional bank finance), that may be available – and possibly necessary – to shipping firms.

It discusses the increasing need for such sources of financing for the shipping industry and covers financing options such as raising equity and debt from the capital markets, as well as doing so from alternative investment funds, such as private equity and hedge funds.

The course also provides insights regarding the financial analysis and valuation of shipping firms, which is a critical input to the equity and debt financing process. In addition, it also presents various possibilities of collaboration between shipping firms and private equity funds and under this prism introduces the concept and value of flexibility in such deals.

Attendees of this course will be able to:

  • Understand the increasing need of the shipping industry for alternative financing sources, especially after the global financial crisis which occurred a decade ago, as well as its repercussions for the banking industry.
  • Comprehend the main characteristics and the mechanics of capital markets and the potential they may offer to shipping firms, from a financing perspective.
  • Know the advantages and disadvantages of raising equity and/or debt from the public markets and understand the main pricing mechanisms.
  • Be in a position to analyze the financial statements and estimate the value of a shipping firm using different methods.
  • Appreciate the role and the potential of private equity and hedge funds in the broader shipping finance landscape.

BENEFICIARIES

  • Maritime industry professionals working in the finance department of shipping enterprises, seeking to understand and practically utilize alternative methods of shipping finance so as to finance new investments and/or reformulate the company’s capital structure.
  • Professionals seeking to increase their employability within the maritime industry.
  • New entrants in the maritime industry, specializing in shipping finance (i.e., BSc & MSc graduates).
  • Banking professionals specializing in the maritime sector, seeking to acquire a professional and solid understanding of sources of shipping finance that go beyond traditional bank finance.

PREREQUISITES

  • Basic knowledge of algebra and statistics is recommended, but not an absolute requirement.
    Familiarization with the way the maritime industry functions would be helpful.
  • Knowledge of the fundamentals of the global financial system would also be helpful.

COURSE STRUCTURE (5 modules)

Module 1: INTRODUCTION TO ALTERNATIVE SOURCES OF SHIPPING FINANCE

  • Overview/brief history of shipping finance
  • The need for alternative sources of shipping finance
  • The main alternative sources of shipping finance
  • Capital structure considerations

 

Module 2: RAISING EQUITY FROM THE CAPITAL MARKETS

  • Main methods of becoming public
  • Main advantages/disadvantages of being a public company
  • Issues specifically related to shipping companies
  • The IPO process
  • Pricing a shipping IPO
  • The importance of timing in a shipping IPO

 

Module 3: VALUATION OF SHIPPING STOCKS

  • Appreciate why it is difficult to value a shipping company/stock.
  • Understand what equity analysts do.
  • Apply DuPont analysis to shipping companies.
  • Critically discuss/evaluate the various valuation methods that might be applied in the shipping industry
  • Highlight the importance of the P/BV valuation method.
  • Reflect on DCF valuation and how this might be applied to a shipping company.
  • Discuss asset-based valuation and its relevance for the shipping industry.

 

Module 4: RAISING DEBT FROM THE CAPITAL MARKETS

  • Discuss the possibilities offered by the debt markets for shipping companies.
  • Understand the basic characteristics of a bond; particular emphasis will be given to special features of bonds (e.g., callable, puttable etc.)
  • Appreciate the fundamentals behind the structure of a shipping bond.
  • Critically discuss shipping bonds both from the perspective of the shipowner and the investor.
  • Appreciate how a shipping bond is priced; particular emphasis will be given to how the spread is determined.
  • Discuss how the assessment of default of a shipping bond may be carried out

 

Module 5: PRIVATE EQUITY AND HEDGE FUNDS

  • Introduction to private equity and hedge funds
  • Private equity investments and the shipping industry; what are the possibilities?
  • Hedge funds’ involvement in the shipping industry
  • Case: Example of a private equity deal, with option to abandon (using “real options” to enhance investment analysis)

INSTRUCTOR

Stelios Markoulis, PhD. is an Associate Professor of Finance and Shipping Finance at the Cyprus International Institute of Management, a member of the visiting faculty at University of Cyprus and an Honorary Visiting Research Fellow at the Business School of City University, London.

He has taught extensively and carried out research in the area of finance and shipping finance; with regards to the latter, his research has focused on the determinants of stock returns of shipping firms, as well as on shipping initial public offerings.

He also has 17 years of experience in the banking industry, and in particular in the area of investment banking, where he worked as part, or managed teams, that were in charge of transactions such as stock and bond private and public offerings, mergers and acquisitions, company valuations and restructurings, among others.

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