Things do not always develop as planned, as German investment company Lloyd Fonds has noted after most shipping markets went from bad to worse last year, and the markets do not look set to improve anytime soon.

As such, the goal of establishing a listed shipping company, a process that Lloyd Founds launched in early 2015, have cooled off somewhat today, explains CEO Torsten Teichert in an interview with ShippingWatch. Last year the Hamburg-based company was faced with the fact that the original plans to acquire a series of KG-owned vessels had failed. And things have not improved since then:

"Our plans failed last year. Unfortunately shipping, as we all know, has deteriorated significantly over the past 12 months. We're still looking into the possibilities in shipping, but I doubt that this will be realized within the next few years. The shipping markets today are too poor. So we’re keeping an eye open and observing, and as soon as there's a change in shipping we'll follow up on our ideas, but right now there's no way to realize this process," he says.

"The capital market is very complicated these days. Shipping is monitored closely, and everyone's hoping to find signs indicating the right way, but it's difficult and hard enough for those already in shipping today, 'why not wait just one more year'."

A piece of advice that will likely ring true to most observers when looking at the development of several carriers these days, with Norwegian Bulk Invest's bankruptcy as the latest example, as well as the widespread efforts to secure rescue plans, a process that South Korea's Hyundai Merchant Marine is currently in the midst of.

Plans for 25-30  vessels

When Lloyd Fonds in early 2015 launched its plan to reorganize the entire investment company Lloyd Fonds AG, which realized an investment volume of more than five billion euros, to a listed shipping company, the plan's initial focus was on KG vessels. The ships would be acquired by Lloyd Fonds, and this process could lead to a fleet of 25-30 vessels in the following years, noted Teichert at the time.

The focus today is no longer aimed at German KG vessels. These formed the backbone of the latest attempt, but the plan has become more complex since then. The ships are a year older, the banks are a year older, and not least more nervous, as Torsten Teichert explains. As such, it would be too risky to base a future company on these elements.

 "This doesn't mean that it's not worthwhile to bundle the vessels, but it will not be on a platform under Lloyd Fonds AG. It would be too big of a risk to take these assets on the Lloyd Fonds balance."

Lloyd Fonds sticks to its shipping ambitions 

Lloyd Fonds has a majority of its investments in shipping, but the company is also active in sectors such as aviation, real estate and renewable energy. Right now the key matter is getting the ships which the company has placed under management through the crisis in solid form. Beyond this, the company has at this point in time no investments planned in the crisis-stricken industry.

Lloyd Fonds currently has a fleet of 44 vessels, including 27 container ships, 14 tankers – especially crude oil tankers – and three multi-purpose vessels. As is the case for other tanker carriers across the globe, the crude oil tankers are delivering solid profits these days as the low oil price has spurred booming demand for the ships, which last year sailed at record rates.

But things are looking different for most other segments, with container ships currently unable to even cover operating costs.

"It's not as bad as the dry bulk market, which is virtually non-existent. We need an increase in charter rates, we need this bloodbath to end. We're confident that this will end, but no one knows when. And as we know, no one predicted that the crisis would be bigger last year than the year before," explains Torsten Teichert, adding:

"So we're working in various sectors, but the new investments we'll be offering to our investors these days concern areas outside of shipping, such as real estate and aviation."

Need assets in the market

Even though Torsten Teichert has postponed the plan for now, his faith in a new financing model for the shipping industry remains intact. All the major liner carriers need refinancing in the coming years – a need which in the past decade has been met by, among other elements, the German KG system, private Greek shipowners and other parties.

"This is bound to change, and we believe that there will be room, especially in Europe, for listed shipping companies which own assets and serve as tonnage providers to the major carriers at a good price," he says.

He adds that shipping, before the crisis really got hold of the industry, was first and foremost a private business with a very small number of publicly listed companies, most of which were based in the US and with the Maersk Group in Denmark. Only six months have passed since German container carrier Hapag-Lloyd went public. Following the crisis, a huge amount of capital flooded into shipping from big equity players such as Apollo and Oaktree, a development that led to excessive building in the market.

"The new money has disappeared again, but ship financing is now open. The privatization that characterized shipping ahead of 2008 will never come back. The banks are currently suffering huge losses, and the same of course applies to the shipowners, so it doesn't make sense to enter the market at this time. But I’m confident that ship financing will become a regular business as in other industries, where there are listed companies in aviation and energy providing capital to build, for instance, wind farms," explains Torsten Teichert, pointing to Seaspan as an example in the current market.

"More of these are emerging, and there will be some prominent examples in Europe as the region will remain a shipping hotspot. And I think there are better chances of doing this here in Germany than in Norway. The Norwegian capital market will on the long term not be as successful as the German."

More open to ship financing

When Lloyd Fonds first announced the plans to create a listed shipping company, the decision raised frowns in the sector, says Torsten Teichert. Was there even a need for this, people asked. Today several companies harbor similar ambitions:

"The market is much more open to this capital market structure for ship financing. There are no European listed shipping AGs right now, which is of course a result of the current assets and values, as in all complicated situations. Placing distressed assets in a listed company will not boost the share price, but I believe in this concept, and I know that several players are working on it," he says, adding:

"We're not sitting here waiting; we're currently setting up other funds and investments in other sectors than shipping. So when the market turns around in a year or three years, we'll evaluate the situation for Lloyd Fonds. I hope the market turns soon, and I'm fairly convinced that we'll be able to do this. However, until shipping picks up again, we are focusing on other market sectors in which we have long expertise as well."

Lloyd Fonds disappointed by KG failure 

Lloyd Fonds earned less in 2014

Rescue plan for German KG ships fails first try

Lloyd Fonds will have 30 ships in two years

Lloyd Fonds to rescue collapsed German KG ships