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Shipping catches a rising tide

Shipping is returning to the capital markets, six years after many borrowers defaulted. But are the top investment banks, which have the most direct access to high-yield investors, necessarily best equipped to lead new issues?

FOR MOST OF the past six years the shipping industry was holed below the waterline and sinking fast, making it a sector to avoid in debt capital markets. But recent bond issues by shipowners and operators have helped rehabilitate an industry renowned for its extreme and unpredictable economic cycles.

Container company CP Ships kicked things off last year when it raised $250 million through an offering of 10-year senior notes. In March 2003, oil tanker company General Maritime Corporation priced a private offering of $250 million in senior notes. Another tanker company, Overseas Shipholding Group (OSG), priced a $200 million senior unsecured notes offering in the same month. France's largest container company, CMA CGM, closed a e100 million high-yield bond offering on May 15 - the first euro-denominated high-yield issue by a shipping company.

The industry needs new money to fund consolidation and to replace ageing fleets. Financially strong companies are buying up rivals and commissioning new vessels.

General Maritime is using the proceeds of its note issue to buy 19 tankers from Metrostar Management Corporation, making it the second-largest owner and operator of mid-sized tankers. CP Ships is nearing the end of a four-year, $800 million, ship replacement programme.

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