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Mar. 03, 2014

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 88 THE JOURNAL OF COMMERCE www.joc.com MARCH 3.2013 WHEN GREEK CONTAINER ship owner Dan- aos said it was taking a $19 million hit because of Zim Integraged Shipping Ser- vices' debt restructuring, it had to seem like a depressing air of déjà vu for the Ger- man shipping community. For German shipowners that will have to reduce charter rates on 20 Zim ships, the $3 billion debt settlement recalls their role in the 2009 rescue of Chilean carrier CSAV, when charter rates began their plunge to record lows. At the time, German owners, including some that now find themselves involved in Zim's restructuring, swapped a collec- tive $360 million reduction in charter rates for an 18 percent stake in CSAV. They also acquired an equity stake in CCNI, Chile's second-largest ocean carrier. The CSAV deal immediately prompted other troubled carriers, including Zim and Hapag-Lloyd, to seek reduced charter rates. Five years later, CSAV has re-emerged a s a potent ia l t h reat to shipow ners, aga in ma inly Germa n, a s its merger talks with Hapag-Lloyd could create a com- bined carrier requiring fewer chartered vessels. CSAV set another troubling precedent as the fi rst carrier to seek across-the-board discounts for an entire fl eet of charter ships. Carriers previously had negotiated cuts on a ship-by-ship basis. The industry has come full circle with the Zim equit y-for-debt deal, as some shipowners, along with bond holders and other creditors, will end up owning 68 percent of the carrier when its current parent, Israel Corp., dilutes its holding to 32 percent. The Zim deal won't impoverish the companies involved. Danaos, for example, is getting $29,000 a day for each of the six 4,250-TEU ships chartered to Zim for 12 years through 2020-21. Even after the discounts, it will make far more than the meager $7,000 daily rates similar-sized ves- sels are commanding for 12-month charters on the spot market. In return for trimming rates, Danaos also will get unsecured interest-bearing Zim notes, maturing in nine years. The hit on the German industry will be limited as well, because the charters are spread among several owners, including top names such as Rickmers, Claus-Peter Offen and Peter Dohle. But the Zim deal has put the spotlight again on the German container ship sec- tor, which is mostly focused on small and medium-sized ships up to 4,500 TEUs, the hardest-hit sector in a bear market moving into its sixth year. More than 300 KG-funded single-ship companies have shut down so far, costing private investors more than $5 billion, and hardly a week goes by without news of fresh failures. Charter rates for 4,000-TEU Panamax vessels were down 15 percent year-over-year in January, at $7,000 a day, versus $8,800 in the same month of 2013, according to Alpha- liner. Rates for smaller vessels were up 18 to Zim's debt restructuring deal puts a familiar onus on beleaguered charter ship owners By Bruce Barnard THE MORE THINGS CHANGE … More than 300 KG-funded single-ship companies have shut down so far, costing private investors more than $5 billion.

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