A Leasing Industry Perspective

Transcription

1 A Leasing Industry Perspective How is the economic uncertainty affecting the container leasing industry? Will it lead to more consolidation? Can lessors add value to their basic rental services? John Maccarone 11 th Global Liner Shipping Conference 1 April 2009

2 Why Shipping Lines Lease Containers Achieve capital preservation Obtain off balance sheet financing Meet peak demands Provide new services Add capacity to existing services Balance container supply/demand Reduce cargo flow imbalances 2

3 Leasing Company Share of Global TEU Purchases (%) * 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Source: Containerisation International Market Analysis/ Andrew Foxcroft Container Data UK * Includes dry freight standard and special (open-top, flatrack, cellular pallet-wide, vent, bulk open-side, etc) 3

4 Why Did Shipping Lines Purchase Such a Large Percentage of Total New Production ? 10% average annual growth in containerized cargo volume* Many new vessels entering service Improved freight rates Easy access to cheap debt Strong shipping line profits enhanced ability to borrow Low prices for new containers during parts of this period * Source: Drewrys, Clarksons 4

5 Leasing Company Environment Leasing companies were all competing for only 35% of the pie The well established lessors also had access to easy/ cheap debt KG Funds supplied up to 1 billion each year as managed capital to lessors Margins declined due to too much money chasing too few deals Terms and conditions were relaxed, especially redelivery quotas Credit quality was relaxed 5

6 In 2008 Leasing Companies Supplied 40-45% of New Containers Purchased Credit crisis made borrowing more difficult (or impossible) Higher borrowing costs High operating costs, e.g. bunkers Low profitability 10%+ increase in world containership capacity put pressure on freight rates Competing needs for limited capex (vessels, terminals, IT) High prices for new containers 6

7 Leasing Company Outlook: 2009 First Quarter of the Year Shipping lines returned containers surplus to current requirements Shipping lines increased retirements of their older containers No new production ordered by lines or lessors since 4Q 08 Lack of container storage space became a critical issue Several smaller lines went out of business, requiring recovery of containers Utilization declined for all leasing companies 7

8 Leasing Company Outlook: 2009 (continued) Remainder of the Year? Depends on how many containers are still surplus to requirements A case can be made that the surplus may be declining Some lines have picked the low hanging fruit, and now have mostly containers which they cannot return in 2009 Some lines have already cut to the bone and no longer have surplus containers Any up tick in cargo volumes may quickly consume the current surplus 8

9 Container Supply/ Demand Million TEU 1 Average annual new container production Average annual older container retirements (1.2) Annual net growth of world container fleet 1.8 Base Case Downside Estimated 2009 new container production Estimated retirements (1.2) (1.5) Estimated net growth (decline) in world container fleet 0.3 (1.5) 1. Andrew Foxcroft, Containerisation International 9

10 How Many Surplus Containers Exist Today? TEU in Millions 1 World container fleet in January Percent of idle world container vessel fleet in TEU 10% 2 Theoretical surplus containers today 2.4 Estimated 2009 net growth (decline) in world container fleet +0.3 to -1.5 Conclusion: With no new production in 2009, the world container fleet could decline by up to 1.5mm TEU, which could absorb most of the 2.4mm TEU currently surplus Sources: 1. Andrew Foxcroft, Containerisation International, SDF container fleet at January AXS Alphaliner 10

11 How Will the Economic Environment Effect Container Lessors in 2009? Optimistic Scenario Lines renew expiring leases to avoid redelivery expense Lines lease off-lease depot containers as opposed to more expensive new containers Sale/ Leaseback opportunities are available Well financed lessors supply >50% of new containers Few bankruptcies, and none among major carriers 11

12 How Will the Economic Environment Effect Container Lessors in 2009? Pessimistic Scenario (continued) Lower utilization as lines continue to return surplus leased containers Depot storage space continues to be a problem Bankruptcy increases among weaker shipping lines 12

13 Recent Trends in the Container Leasing Sector Time Lessor Activity 1Q05 Transamerica sale to Jordan IPO (as TAL International) 1Q06 UES acquisition by GVC 2Q06 Carlisle sale to Fortress Seacastle 3Q06 Gateway acquisition by Textainer 2Q07 CAI IPO 3Q07 Capital Lease acquisition by Textainer Textainer IPO Interpool go private Fortress Seacastle Cronos go private Fortis 4Q07 Beacon establish new lessor 3Q08 Xines acquisition by Capital Intermodal 13

14 Leasing Company Fleet Breakdown - January 2009 Textainer Florens Group Triton TAL GESeaCo CAI Seacastle Gold Container UES HK Cronos Group Dong Fang Capital Intermodal Amficon Leasing Beacon Intermodal CARU Blue Sky Waterfront Leasing Other ,100 1,515 1,615 2, ,000 1,500 2,000 2,500 Total: 11,516 TEU Source: Andrew Foxcroft container data for dry freight standard and special containers (TEU in thousands) 14

15 Can Lessors Add to Their Basic Rental Services? Sale/ Leaseback Frees up capital for other uses Line retains use of the containers Life Cycle Leases Containers remain on lease through agreed upon age Lessee returns containers with reduced or no repair liability, and a wider range of redelivery locations Sale of shipping line containers to leasing company Avoid non-core task of disposing of old containers Reduces residual value risk Often obtain better prices, with cash up-front 15