Shipping eyes new funding

As 2009 closed out, two listed shipping companies offered glimmers of the way forward. Nasdaq-listed product tanker owner Omega Navigation Enterprises and Nasdaq-listed Euroseas, an owner and operator of drybulk carriers and container vessels and provider of seaborne transportation for drybulk and containerised cargoes, both announced partnerships with entities that will bring in funds from different parts of the investment sector.

These are both smaller outfits: Omega has a market capitalisation of around USD50 million; and Euroseas has a market capitalisation of USD124 million, based on current share prices.

The Omega deal, a newly announced joint venture dubbed Megacore, continues a relationship that has been evolving since Omega launched an initial public offering (IPO) in early April 2006. In a deal hailed by analysts at investment bank Jefferies & Co as "a game changer for Omega", both Omega and commodity trader Glencore are now contributing vessels under construction to the new joint venture. Jefferies has mentioned "concerns related to capital requirement [that] needs now [to be] effectively resolved" as the newbuildings find a path off the balance sheet.

Omega had already experimented with Glencore in a 2008 deal in which Omega took a 47,000 dwt product-carrying vessel – then under construction in South Korea – off its books through the sale to the 50/50 joint venture. Two vessels, the joint venture ship and a sister ship that stayed on Omega's books, were put into evergreen charters (ongoing unless terminated) with ST Shipping, a unit of Glencore, at rates that covered debt service plus operating expenses. Importantly, with this precursor to the Megacore deal, debt was moved from Omega to the one-ship joint venture.