After the welcoming address by Riaz K. Janjuah (White & Case), Bernd Richter (partner at Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft) laid the foundation for the subsequent discussion with his keynote address. It initially showed the pure number-based development of the shipping crisis using the freight index from 2007 to 2017. Richter then presented five theses on the shipping crisis and their transferability to other industries. The first thesis read: “The shipping crisis is a structural crisis that was triggered in particular by inefficient capital allocation.” Another thesis dealt with market participants who, according to Richter, would continue to act irrationally for the most part. In a thesis, Richter highlighted the lack of sustainable public interest in comparison to other structural crises and the lack of structural solution as a clear unique selling point. Finally yet importantly, he predicted a further worsening of the crisis for the shipping industry, as the industry had mostly not yet arrived in the digital age and had neither the time nor the capital to invest in innovations. The verdict of Richter: “Due to its specific characteristics, the shipping crisis is only suitable to a very limited extent as a model case for the structural crises to be expected in other industries.”
Following the keynote speech, the participants in the panel discussion led by Dr. Thorsten Bieg (GÖRG Partnership von Rechtsanwälten mbB) were asked. Ralf Jung (Chief Financial Officer at OFFEN GROUP) made it clear right from the start that shipping was suffering from a structural crisis and not an economic one. The problem is not the demand side, since it has remained stable over the years, but the enormous excess supply. Global shipyard capacity has increased fivefold and is therefore out of proportion to unchanged demand, said Jung. That has not gotten under control since the crisis broke out. At the same time, financing is very difficult: “Extremely volatile assets were financed with a structure that no one else in any other industry would choose,” stated Jung.
Ralf Schmitz (Interim Manager/CRO, Schmitz & Partner Unternehmensberatung) was convinced that the industry had been overwhelmed and could not assess what was in store for it. “The shipping companies were surprised and were not prepared for it. In some cases, some of them acted completely irrationally. As soon as you supposedly saw light on the horizon, new ships were commissioned,” says the experienced consultant. A decision that was completely irrational against the background of the enormous oversupply. In addition, this behavior can even be observed today.
Ken Kinscher (Director, M.M.Warburg & CO), like his fellow discussants, critically questioned the banks, some of which had aligned their loan portfolios too one-sidedly without taking into account the associated risks. Both Kinscher and the other discussion participants were also skeptical about the widespread business model of asset management in the shipping industry. This business model is only partially sustainable. On the other hand, there are certainly business models of shipping companies that are interesting for investors - above all foreign interested parties or private equity houses.
Dr. Sven-Holger Undritz (lawyer and partner, White & Case) pointed out that the industry had gone through an enormous phase of intoxication with the subsequent extreme slump. “Many of those involved forget, however, that the market had been stable for years, but at a much lower level,” said the Hamburg insolvency administrator. In his experience, the various insolvency cases of companies with only one ship are of little help. “These ships are not disappearing from the market, but are mainly finding international buyers. However, this does not solve the structural problem of the crisis, namely overcapacity,” explains Dr. Undritz. The other three discussants shared this important insight.
From the point of view of the four participants, there were some lessons learned for other industries: “Already in the early phase, a distinction must be made between what is cyclical and what will never go away. This results in the necessary options for action,” says Jung. However, this was not done during the shipping crisis. Kinscher emphasized again that the consideration of the business model and its future viability is elementary. Moreover, this did not happen in the shipping crisis.
With its second event, the Hamburg Restructuring Forum continued the series of discussions on topics relating to reorganization, restructuring and insolvency, which were already successful in Berlin, Dusseldorf, Frankfurt am Main, Munich and Stuttgart. Those familiar with the subject will present a current topic from various perspectives and share their expert knowledge in the discussion with the guests. At the same time, the events provide enough space to discuss your own projects. The organizers of Hamburg Restructuring Forum are Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, GÖRG Partnerschaft von Rechtsanwälten mbB, hww hermann wienberg wilhelm and White & Case. The next edition of Hamburg Restructuring Forum will take place in autumn 2018. Further information at www.hamburger-reststrukturierungsforum.de.