Hochschule Bremen

Transcription

Hochschule Bremen

Hochschule Bremen
University of Applied Sciences Bremen
Bachelorarbeit zur Erlangung des akademischen Grades
„Bachelor of Arts (B.A.)”
im Studiengang Int. Studies Of Shipping & Chartering
The Hamburg Ship Evaluation Standard and its impacts on ship
appraisal
Der Hamburg Ship Evaluation Standard und die Auswirkungen
auf die Schiffsbewertung
Vorgelegt von
Name:
Kalle Maximilian Wanner
Anschrift:
Herderstraße 50, 28203 Bremen
Matrikelnr.: 201411
Prüfer: Prof. Dr. Henning Jessen
Korreferent: Dipl.-Ing. (FH) Bernd Holst
Abstract
The appraisal of ship values is a core business for the shipping industry. Market values
form the basis for any book or collateral value. Hence, their calculation requires a correct
evaluation of current ship values. The necessity of collateral values on the one hand, and
the requirement for asset backing on the other hand stresses the importance of current
market values for lending institutions. However, ship owners and KG-houses also have a
desire for accurate ship values, as these display reserves.
This bachelor thesis devotes to the problematic situation of ship appraisal in dysfunctional
markets. The purpose of this thesis is to enhance an understanding for the methods of ship
appraisal and for the influences on the value. Further, this thesis gives an overview on the
distinct methods in place in contrast to the Hamburg Ship Evaluation Standard (HSES)
developed by the Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V.. This
paper outlines the development and the principles of calculation as well as the scope of
application for the Hamburg Ship Evaluation Standard. Additionally, this complementary
work tries to assess the impacts of the HSES on the collateral value and the asset backing
by financing institutions.
However, the focus of this thesis lies on the appraisal according to the HSES and the
herewith connected difficulties in analysing and adjusting the parameters. Among these,
the discount rate accompanied by the difficulty in reflecting the risk structures of shipping,
and the assessment by the Capital Asset Pricing Model (CAPM) has been given special
attention.
Keywords: ship appraisal, collateral value, market value, dysfunctional market, HSES,
discount rate, risk structure, CAPM
Eidesstattliche Erklärung
Ich erkläre hiermit an Eides Statt, dass ich die vorliegende Arbeit selbständig und ohne
Benutzung anderer als der angegebenen Hilfsmittel angefertigt habe; die aus fremden
Quellen (einschließlich elektronischer Quellen) direkt oder indirekt übernommenen
Gedanken sind als solche kenntlich gemacht.
Die Arbeit wurde bisher weder im Inland noch im Ausland in gleicher oder ähnlicher
Form einer anderen Prüfungsbehörde vorgelegt und ist bisher nicht veröffentlicht.
…....………………….
Bremen, den 08. März 2010
Kalle M. Wanner
I. Table of contents
I.
Table of contents
I.
Table of contents .................................................................................................................I
1.
Introduction .................................................................................................................. 1
2.
The principles of ship appraisal.................................................................................. 3
2.1
Influences on the ship value ................................................................................... 4
2.1.1
Economic and regional factors....................................................................... 4
2.1.2
Charter revenue .............................................................................................. 5
2.1.3
Operation expenses ........................................................................................ 6
2.1.4
Age and condition .......................................................................................... 6
2.2
3.
2.2.1
Market value................................................................................................... 7
2.2.2
Collateral value .............................................................................................. 8
2.2.3
Fractional value .............................................................................................. 9
2.2.4
Insured value ................................................................................................ 10
2.3
Appraisal reports .................................................................................................. 10
2.4
Appraisal procedures............................................................................................ 11
2.4.1
Reference value method ............................................................................... 12
2.4.2
Material asset valuation................................................................................ 13
2.4.3
Earning rate valuation .................................................................................. 13
The application of the traditional ship appraisal in the prevailing markets ........ 15
3.1
4.
The term value........................................................................................................ 7
Impacts of the traditional ship evaluation in dysfunctional markets.................... 20
The Hamburg Ship Evaluation Standard ................................................................ 26
4.1
Development and introduction of the HSES ........................................................ 26
4.2
Principles of application....................................................................................... 28
4.3
Principles of calculation and definition of parameters......................................... 30
4.3.1 Charter income .................................................................................................... 30
4.3.2 Operation costs.................................................................................................... 32
4.3.3 Discount rate ....................................................................................................... 33
4.3.4 Inflation rate ........................................................................................................ 36
4.3.5 Residual value ..................................................................................................... 36
5.
Analysis of the parameters ........................................................................................ 38
5.1
Charter income ..................................................................................................... 38
5.2
Operation costs..................................................................................................... 42
I
I. Table of contents
6.
5.3
Discount rate ........................................................................................................ 43
5.4
Inflation rate ......................................................................................................... 48
5.5
Residual value ...................................................................................................... 48
Application of the Hamburg Ship Evaluation Standard ........................................ 51
6.1
7.
Impacts of the HSES ........................................................................................... 52
Conclusion................................................................................................................... 55
II. List of abbreviations ............................................................................................................ III
III. Table of figures .................................................................................................................. IV
IV. Bibliography........................................................................................................................ V
V. Appendix ............................................................................................................................VII
Appendix 1 ........................................................................................................................ VII
Appendix 2 ..........................................................................................................................XI
Appendix 3 ........................................................................................................................ XII
Appendix 4 .......................................................................................................................XIII
Appendix 5 .......................................................................................................................XIII
Appendix 6 .......................................................................................................................XIV
II
1. Introduction
1.
Introduction
Ship appraisal is a vital service for a broad spectrum in the shipping and ship financing
industry. An accurate evaluation of the ship value is crucial for buyers, sellers, financing
institutions and ship owners. Value estimates of ships are traditionally based on recent
sales being concluded between a “willing buyer and [a] willing seller”. 1 Shipbrokers or
ship appraisers use the market price at the time of sale as an indication of the ship value.
So far this has been an adequate method of estimation.
However, the interplaying forces of the economic, financial and shipping crisis created a
market situation where ship appraisal was hardly feasible and the traditional way of ship
evaluation alone led to delusive and sometimes destructive results. During 2009, some
segments of the sale-and-purchase (S&P) market characterized a very small number of
transactions (e.g. the container market). One can find that some of these transactions were
realised under distress after insolvency, while others had prices heavily influenced by
financing conditions. These conditions on the S&P market can therefore be hardly defined
as representative samples in terms of traditional ship evaluation.
Yet, the price collapse in the S&P market has lead to a problem for banks, issuing houses
and ship owners who are not interested in selling their vessels. Banks need to assess ship
values in their books, and if they have to calculate with prices achieved in fire sales as
benchmark, this could result in major write-downs. In addition, banks have to allocate a
certain amount of equity for each shipping loan to comply with the mortgage backing
under the Basel II convention.
2
This is a heavy burden for the financing banks, which
again can lead to distress sales. These insufficiencies lead to the question of whether or not
the reference value method is adequate for the evaluation of vessels in distressed market
segments.
At the beginning of 2009, the “Vereinigung Hamburger Schiffsmakler und Schiffsagenten
e.V.” (VHSS) in co-operation with issuing houses, banks, shipbrokers and ship appraisers
came to the conclusion that an alternative method of ship evaluation – The “Hamburg Ship
evaluation Standard” (HSES) - should be established. However, the initial aim of the
HSES was not to replace the existing methods of evaluation but to offer an alternative for
times when there are only few sales to use as a benchmark.
1
Garfield, G., 2009. Move to uncover ‚real’ ship values: German banks and shipping bodies are working on a new way to assess vessel
values, Tradewinds.27 Feb.
2
Hagen, P., 2009. German ship valuation formula adds up, says PwC: Testing against over 2,000 historic ship values reveals accuracy in
92% of cases. Lloyd’s List. [Online] 23 Sept.,
Available at: http://www.lloydslist.com/ll/news/viewArticle.htm?articleId=1253563330332
[Access 4 Jan. 2010]
1
1. Introduction
Concentrating on the long-term and sustainable return of the investment and evaluating
independently from market turbulences, the HSES - also “Long Term Asset Value“
(LTAV) - makes a sharp distinction between the highly volatile average of current prices
and “intrinsic” or “lasting” values. This enables an accurate evaluation of ships during
normal shipping markets as well as during abnormal highs and lows.
The approach of the HSES is based on the earning potential of the appraised ship and
orientates itself by the appraisal procedure of the discounted cash flow. The appraisal by
the DCF-method is widely used in the assessment of corporations, and was modified to fit
the demands for ship appraisal. Therefore, the introduction of the Hamburg Ship
Evaluation Standard stipulates a shift from the traditional ship evaluation to a ship
evaluation adjusted to net present value.
2
2. The principles of ship appraisal
2.
The principles of ship appraisal
In order to obtain an introduction to the topic, section 2 will give an introductory overview
on the principles of ship appraisal.
The appraisement of vessels is a difficult task, which requires profound knowledge in a
variety of aspects. The expertise in shipping technology is as important as the accurate
knowledge of the individual operation costs and the regulations in place. Furthermore
information on the general charter market and sale-and-purchase market conditions is
essential. 3
The evaluation of a ships value is required by a wide variety of parties, such as
•
Banks for the assessment of the collateral value,
•
Insurance companies for the assessment of the insured value as well as for the
validation of the insured value in case of loss,
•
General average adjuster for the assessment and adjustment of average in case of
general average,
•
Ship owners in case of sale-and-purchase of vessels,
•
Ship owners and tax advisor in order to estimate the fraction value to calculate the
balance for the tonnage tax,
•
Investors for the calculation of their rate of return
•
Courts. 4
Yet due to their limited knowledge of the shipping market, none of the mentioned parties
is able to evaluate an accurate ship value on their own. Therefore the evaluation is
3
Holst, B., Bewertung von Schiffen, in: Winter, H., [et al.], 2008. Grundlagen der Schiffsfinanzierung. Frankfurt
School Verlag.
4
School Verlag., p. 298.
3
performed by ship brokers or ship valuators who are characterised by their sensitivity for
the market.
2.1 Influences on the ship value
However, before going into detail, one has to comprehend the factors and influences,
which affect the value of ships. Several factors have influence on the ship value. Therefore
this passage represents a summary of the general factors.
2.1.1 Economic and regional factors
An investment only has value if it satisfies a need or creates a benefit, but is not
unlimitedly readily available to everyone at the same time. This implies the concept that
the value of an asset is not an intrinsic or immanent quantity, but generates from the costbenefit ratio and the level of the supply and demand equilibrium.
The market value of an investment, such as a vessel, is formed when buyer and seller
agree on a price. This agreement on a price takes place on a free market at supply and
demand equilibrium. However, the price can increase or decrease depending on the
variance in supply and demand and on the sentiment of the market participants.
This sentiment is driven by different motivations. While some see the vessel as an asset,
which is characterised by its relative stable and intrinsic value, others evaluate the ship by
the future cash flow it is able to generate. These views are of vital difference, and lead to
different results concerning the value of the ship.
However, because vessels have a long but determinate lifespan, the evaluation usually
includes the prospect income or rate of return. In order to assure a positive rate of return
the capital expenditure must be in price-earning ratio to the expected revenue. The value
therefore represents the expected future cash flow, and does not necessarily mirror the
initial investment. 5 Nevertheless, the expectations depend on the rating of the future
development; hence they are able to influence the ship values. These expectations for the
future trends are stirred by a variety of causes.
Foremost reasons are economic fluctuations in the world economy or in specific shipping
sectors. These cyclical variances exist and have always existed, but can break through
onto the shipping economy and therefore on the value of ships.
5
„Die Secondhand-Preise beruhen in erster Linie auf den Erwartungen, während die Neubaupreise hauptsächlich
auf den Kosten für einen Neubau basieren“: Holst,B., 2008. Grundlagen der Schiffsfinanzierung. Frankfurt
4
Apart from that, the shipping economy acts independently from the economic trend. The
reason for this fluctuation in prices is the so called “Schweinezyklus am
Schifffahrtsmarkt”. 6 This cyclical describes the variations of prices as a result of the long
construction period for new-buildings. The market conditions at the time of delivery can
vary heavily from the expectations at time of signing the contract. Since the prices of the
vessels are strongly dependable on the fright rate mechanism, described by Stopford in
“Maritime Economics 3rd ed.”, 7 second-hand tonnage can become very attractive, as its
ready availability enables the fast realisation of revenue and a simplified prediction on
near future trends.
Typical for this “Schweinezyklus” is its wave shape. Periods of economics prosperity and
recessions take over from each other. The amplitudes in prices and the lengths of the
periods are very difficult to predict and can vary from cycle to cycle. This is the reason
why a constant observation of the market is of great importance for a correct appraisement
of the vessels.
Further, regional factors can have an effect on the price of a vessel. Even though vessels
are movable, their specification for special trades and areas (e.g. Ice Class or MPPvessels) can limit their application. A vessel with ice class E3 may be able to obtain higher
revenue if utilised in the Baltic Sea rather than the Mediterranean Sea.
Moreover, the flexibility in utilization of a vessel is quite limited. Although there are
vessels which are able to operate in different trades (e.g. OBO-carriers/MPP-vessels), a
homogeny shipping market does not exist. The segmentation of the shipping market into
different trades is the result. 8 These trades can be split again into sub-segments, which are
determined by the vessel size, or in case of tankers, by the products, which are transported
(e.g. crude, products, or chemicals). Those sub-segments all have a special trade in the
market with different market exposures, which again may result in different expectations
on the future revenue and therefore in a different rating of the value of the vessel.
2.1.2 Charter revenue
The appraisal of vessels principally takes place without factoring in the charter contract. 9
Nonetheless, the charter market has a substantial influence on the development of the
6
7
Cf. Stopford, M. 2008. Maritime Economics 3rd Edition, Routledge., p. 135 ff..
8
Major trades: Bulk-Carrier- , Tanker- , Container- and Multipurpose trade.
9
5
value of the ship. A firm charter market will lead to an increase in the ships value with a
delay of three to six months, whereas a negative development leads to a decrease in the
value. 10 However, one can only establish a temporal coherence between charter market
and secondhand prices, a conclusion cannot be drawn on the connection between the
amount of the value and the fluctuation of the level in the charter market.
Besides the increase or decrease of the level in charter revenue, determining factor for
newly built vessels are by material costs and labour costs. The level of the charter market
is not as important, since the shipyards level their prices to the economic situation of the
buyer. Once a fundamental decrease in charter revenue can be stipulated, prices for new
buildings drop, as owners decide not to invest into new vessels. But on the other hand
shipyards raise their prices, once the charter market rises and the new building capacities
are exhausted.
2.1.3 Operation expenses
The Operation expenses have an influence on the value of the vessel. However, this
influence depends on the charter market. While the effects are limited in a strong charter
market with high revenues, the operation expenses are of greater interest in a weak charter
market with low employment and little revenue. 11 Vessels with high operating costs will
have to lay-up earlier and cannot act on the market as long as vessels with lower operating
costs. They will simply get pushed out of the market due to their inability to react on
lower demand. 12 Hence, operation costs may have an influence on the ship value, as they
can lead to less employment of the vessel and thereof to less return on the investment
which decreases the value.
2.1.4 Age and condition
The age and the technical condition of a vessel both have influence on the ship value.
However, the condition will become of greater importance with growing age of the vessel,
meaning that the condition is expected to be satisfying at a lower age.13 The technical and
10
Holst, B., Bewertung von Schiffen, in: Winter, H., [et al.], 2008. Grundlagen der Schiffsfinanzierung.
Frankfurt School Verlag., p. 307.
11
Everling, O., 2009, LTAV zur Schiffsbewertung, Everling Advisory Sevices, [Online], 7 October.
Available at: http://www.everling.de/?p=1214 [Accessed 6 January 2010].
12
Stopford, M. 2008. Maritime Economics 3rd Edition, Taylor & Francis, 19. Dec..
13
6
overall condition of a ship can have negative effects on the operating expenses. Since
technical insufficiencies usually arise at a growing age, one may have to expect higher
maintenance and service expenses. These expenses have a direct effect on the operating
expenses, which, as explained above, may have a negative impact on the value of the
vessel.
Appraisements without vessel inspection assume that the vessel is in good condition, yet
vessels with an age of ten years and above should be inspected, since these vessels could
have condition which might severely affect their value. 14
2.2 The term value
In general, the term value represents an amount, as of goods, services, or money, which is
considered to be a fair and suitable equivalent.
This part will give a short overview on the termination of market value and collateral
value in order to present a brief introduction. However, for the sake of completeness the
terms fraction value and insured value shall be mentioned as well.
2.2.1 Market value
Prices for many goods traded on the markets are published in newspapers or specialised
journals. This makes it easier for citizens to evaluate the value of a similar good if traded
on a free market. 15 Hence, evaluating a value is an easy and direct assessment of the
average price which is usually paid on a free and unbiased market.
The “International Valuation Standards“ defines market value as "the estimated amount
for which a property [asset] should exchange on the date of valuation between a willing
buyer and a willing seller in an arm’s-length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently, and without compulsion”. 16 This
14
15
16
Definitions of International Valuation Standards Committee,2000, p. 96., [Online] 1 July, Available at:
http://www.romacor.ro/legislatie/07-ivs1.pdf [Accessed 7 January 2010].
7
definition is in line with the definition of § 16 II, 4 of the German Bond Certificate Act
(Pfandbriefgesetz). 17
It implies that the market value of a vessel reflects the average amount for which a ship
could be realised if sold on a free market. However, condition for the objective market
value is that both, buyer and seller, are not “over-eager” to buy or sell and that there is no
particular or special relationship between the parties which could make the price
uncharacteristic of the market. 18
Anyhow, the market value must be an average of many transactions of similar ships. The
price of a vessel realised on the market does not have to be equal to the market value, as it
represents an individual subjective price. Whereas the market price is the result of a single
individual transaction between willing buyer and willing seller, the market value
represents the objective average price buyer and seller agree on in a free and unbiased
market environment.
Yet, “in the absence of an [average] market price, it [the market value] is the estimated
highest price a buyer would be warranted in paying and a seller justified in accepting,
provided both parties were fully informed and acted intelligently and voluntarily.” 19
Concerning the accuracy, it must be mentioned that the market value of ships is not a
mathematical exact factor. Nonetheless, the estimation is of great importance, as it can
lead to different figures for the same good at the same date of evaluation. Generally has to
be said, that the degree of accuracy for the estimation of the value for vessels is +/- 10 per
cent. 20
2.2.2 Collateral value
The collateral value is an appraised value of an asset (i.e. ship), which is pledged as a
collateral in order to obtain a loan. Lending banks base the collateral value on the
liquidation value of the asset and not on the actual cost, book value or even the current
market value.
17
Cf. § 16 II, 4 of the German Bond Certificate Act, „Der Marktwert ist der geschätzte Betrag, für welchen ein
Beleihungsobjekt am Bewertungsstichtag zwischen einem verkaufsbereiten Verkäufer und einem kaufbereiten
Erwerber, nach angemessenem Vermarktungszeitraum, in einer Transaktion im gewöhnlichen Geschäftsverkehr
verkauft werden könnte, wobei jede Partei in Sachkenntnis, Umsicht und ohne Zwang handelt.“.
18
Cf. 2008, SchiffsBelWertV § 9, Bundesministerium der Justiz, 6 May.
19
Downes, J., Goodman, J.E., 2006. Dictionary of Finance and Investment Terms Seventh Edition, Barron’s
Financial Guides. P. 414.
20
8
In Germany, the collateral value is determined by reference to the § 24, 1-3 of the German
Bond
Certificate
Act
(“Pfandbriefbesetzes”)
in
“Schiffsbeleihungswertverordnung 21 ”and the market value.
connection
22
with
the
The current market value,
the price for an equivalent newbuilding and the average market value of the past ten years
are considered to be the maximum limit of the collateral value. 23
However, other than the market value, the collateral value is calculated by the financing
bank and has the purpose to hedge the risk exposition of the lending banks. Hence,
security needs and risk assessment are determining factors for the appraisal of the
collateral value, as this value represents the security for repayment of the loan in case of
insolvency of the ship owner. Thus, speculative elements should be detected and
eliminated in course of valuation.
The collateral value therefore requires a rating of the asset, including a careful assessment
of the future marketability of the ship under consideration of the normal market condition
in the current market. The definition of the collateral value implies a long-term
responsibility of the appraisal for the hypothecary value, and therefore requires a more
conservative and restrictive approach for the appraised value than for the market value.
However, the conservative approach of the collateral value practices the idea to leave a
financial range for future decreases in value resulting from fluctuations in the market
value. The permanent variances in price, which are typical for the shipping economy, are
levelled by the collateral value, and will only be taken into account if the price level has
permanently risen or fallen. This is the crucial element of evaluating the collateral value in
order to minimize the credit risks.
2.2.3 Fractional value
The evaluation of the fractional value takes place in connection with the German tax law
concerning the so called “Tonnagesteuer”. 24 For the evaluation the German Income Tax
Act 25 defines the fractional value by the amount, which a fictitious buyer of the entire
enterprise or ship would grant in the context of the total purchase price of the asset or the
respective economic goods, while an assumption of the continuation of the enterprise is
made upon valuation (continuation principle).
21
Cf. Regulation on collateral value - SchBelWertV.
Cf. Appendix 1: SchiffsBelWertV.
23
Cf. § 4, II,III, SchBelWertVo, 6. May 2008.
24
Cf. 1998, § 5a Einkommensteuergesetz (EStG), German Income Tax Act.
25
Cf. § 6 exp. 1 No. 1 P. 3 Einkommensteuergesetz (EStG), German Income Tax Act.
22
9
Internationally the fair value and the net realizable value are commonly used. They orient
themselves more at objective market values and permit less interpretation clearance.
The fractional value is consulted for the evaluation of the tax balance. If one talks about
the balance (Unterschiedsbetrag) in connection with the German “Tonnagesteuer”, one
imputes that it reflects the value of the ship. 26 However, other economic goods of the ship
owner shall not be disregarded in this context. De facto is the market value of the single
assets reproduced as fractional value. Hereby explicitly is a time charter contract to be
mentioned, as this has a lasting effect on the economic performance of the ship, which
again leads to an added value.
For a detailed list of the concrete factors for the assessment of the fractional value for
ships please see also the deliberations of Bernd Holst in Winter, H. [et al.], Grundlagen
der Schiffsfinanzierung 3rd ed., Frankfurt School Verlag., pp. 313-315.
2.2.4 Insured value
The term insured value of a ship is defined in § 6 and § 70 of the Allgemeine deutsche
Seeversicherungsbedingungen (ADS) 27 in connection with clause 3 of the DTVKaskoklauseln (Deutscher Transport Versicherungsverband). 28
The value of the insurable interest usually equals the insured value. The insured value is
not assessed by appraisers, but agreed upon by the parties of the insurance contract,
namely the insured (e.g. ship owner) and the underwriter. The value stipulated in the
insurance contract is the insured value.
The agreement on the insured value usually equals the current market value of the ship at
the time of signing the contract. However, the insured value is normally not adjusted to the
market fluctuations, which can cause a large difference between the market value and the
insured value.
2.3 Appraisal reports
After having introduced the general influences on the ship value and the termination, this
part shall give a briefly outline the appraisal reports prepared by ship appraisers.
26
27
German Standard Terms and Conditions for Maritime Insurance.
28
Clauses of the Union of German Transport Insurer.
10
Principally, there are three kinds of appraisal reports. 29 However, there is a large
difference between reports based on a survey of the vessel and reports that are produced
without a survey.
First to be mentioned are reports which include a survey of the vessel and are based on
both the technical condition of the vessel and the actual market data.
Secondly, reports produced upon the available information on the vessel including
technical data and market data have to be referred to. These reports assume that the vessel
is in condition according to the age. However, a plausibility check of the provided
information can not be conducted, since no survey is undertaken.
Finally, reports without any technical assessments, so called “Desk-Top-Appraisals”. 30
The evaluation of the vessel is undertaken without cross-checking its technical condition.
This report is solely based on the market data and therefore is the common ship evaluation
done by ship brokers.
However all the mentioned reports should consider:
•
the actual price of comparable vessels as a standard of comparison,
•
the respective specification of the vessel,
•
the ship value in US-dollar and Euro,
•
the immediate availability of charter-free vessels,
•
assumption of independent willing buyers and willing sellers,
•
regular condition of sale, cash payment,
•
the usual condition of the vessel according to the age.
2.4 Appraisal procedures
This section shall present a brief overview on appraisal procedures commonly used for
ship evaluation. In general there are three different appraisal procedures for vessels
applicable: the evaluation by the reference value, the material asset valuation and the
earning rate valuation.
29
Cf. Holst, B., Bewertung von Schiffen, in: Winter, H., [et al.], 2008. Grundlagen der Schiffsfinanzierung.
Frankfurt School Verlag., pp. 319
30
Cf. Holst, B., Bewertung von Schiffen, in: Winter, H., [et al.], 2008. Grundlagen der Schiffsfinanzierung.
Frankfurt School Verlag., p. 320
11
2.4.1 Reference value method
The reference value method is the traditional procedure for the evaluation of ship values.
The value results from the analysis of recent transactions being executed. The prices
realised in those sales give an indication upon the market value of similar vessels.
However, to compare the sales prices realised to the market value of the vessel, which is
being evaluated, certain criteria have to be considered.
Firstly, the reference vessels have to be “sufficiently consistent” with the valued vessel.
For this instance “sufficiently consistent” in particular implies that type, age, size,
equipment, construction and constitution of the ships have to be similar. 31 However, the
given reference price should not be accepted as ship value without a validation on the
actual shipping market. Still, due to the very individual characteristic of each vessel, a
complete consistence between valued vessel and reference vessels seldom occurs. These
discrepancies are corrected by deductions and appreciations in order to correctly display
the current value.
Further, the reference value method requires a minimum amount of transactions to assess
the correct market value. As these transactions found the base for the average market
value, a certain amount of vessels in the same segment have to be traded in order to enable
a comparability of the values. The reference value method is insufficient however, if few
or no sales are recorded on the market. Then, values have to be benchmarked against
single prices, which hardly can be seen as average for the market value, since prices are
influenced by individual circumstances (cf. 2.2.1).
Finally, this evaluation method requires a sufficient number of reference values within a
reasonable timeframe between the date of sale of the comparative vessel and the
evaluation date for the appraised vessel. This proximity of time is important because
market conditions are volatile and ship values heavily depend on the sentiment of the
market participants.
Yet, a flaw in the reference value method is its lack of transparency. It is difficult to
comprehend the way of calculation, since the ship brokers hardly explain their work.
Furthermore, different sales statistics as a basis of the assessment can alter the value,
which again makes a plausibility check hardly feasible.
31
Frankfurt School Verlag.,p. 321
12
2.4.2 Material asset valuation
As already mentioned above, vessels are very specific and individual assets, which may
differ in type, size, technical equipment or utilization. This makes it difficult to always
asses the value by the reference value method, and subsequently is the reason why some
vessels (i.e. specialised ships) are valued by their single material assets.
The material asset valuation is based on the market prices of the parts of the ship (e.g.
main engine, hull, equipment, etc.), as it is easier to assess the value of the parts. The sums
of the values compute to become the overall value of the vessel.
However, the material asset valuation does not reflect any future revenue of the vessel.
Moreover, this evaluation method is mainly in use for ships with hardly any market, or for
vessels which have extraordinary high assets (i.e. yards).
2.4.3 Earning rate valuation
A method, which is usually not being applied for the evaluation of vessels, but that is an
established method for the evaluation of corporate values and real estate, is the so-called
earning rate valuation. This method is based on the idea that an asset reflects the future
revenue discounted to the evaluation date. The assumption is made that a value originates
from the potential of future revenues.
One of the most common methods within the scope of the earning rate valuations is the so
called Discounted Cash Flow (DCF) method. 32 The DCF method ascertains the value of
future expected cash receipts and expenditures at a common date, which is calculated
using Net Present Value or Internal Rate of Return and is a factor in analysis of both
capital investments and securities investments. The net present value method (NPV)
applies a rate of discount (interest rate) based on the marginal costs of capital to future
cash flows to bring them back to the present. The internal rate of return (IRR) method
finds the average rate of return on the investment earned throughout the life of the
investment. It determines the discount rate that equates the present value of future cash
flows to the cost of the investment. 33
32
DISCOUNTED CASH FLOW accounting technique for estimating the present value (market value) of anticipated
future income and expenditures, such as earnings from loan principal and interest payments, and income from
investment securities.[…], Def. Fitch, T., 2006, Dictionary of Banking Terms, 5th Ed.,Barron’s Business Guides,
p. 149.
33
Downes, J., Goodman, J.E., 2006. Dictionary of Finance and Investment Terms Seventh Edition, Barron’s
Financial Guides. pp. 182-183.
13
In order to make a lucrative investment however, the price for the investment shall not be
higher than the expected revenue. Still, it is very difficult to make economic assumptions
on the potential of future revenues. The earning rate valuations are merely mechanical
valuation tools, which are subject to the axiom "garbage in, garbage out". Small changes
in inputs can result in large changes in the value of the asset. For this reason, it is
important that such appraisals should not be based solely on historic data, as these usually
differ from the future development. The shipping economy however, is well-known for its
shipping cycles. This is the reason, why one could question, if historic parameter could be
applied to project future developments.
14
3. The application of the traditional ship appraisal in the prevailing markets
3.
The application of the traditional ship appraisal in the prevailing
markets
“Estimating the value of a ship is often based on recent sales being concluded; or
discounted cash-flows; replacement cost and to a certain degree – gut feeling…”. 34
Accordingly, ship appraisal is traditionally conducted by the reference value method (or
mark-to-market), which is a suitable and accepted method. Yet, as indicated in the
introduction, the traditional way of ship evaluation alone can lead to “delusive and
sometimes destructive results”, if applied in dysfunctional markets where the criteria
described can not be assumed to be appropriately applied for the evaluation.
Having discussed the general practice for the appraisal of assets (e.g. ships), this section
shall comment on the application of ship appraisal in the prevailing markets and explain
what caused the demand and the development of the Hamburg Ship Evaluation Standard.
The year 2008 bookmarked the beginning of a fatal financial crisis. Deriving from a credit
crunch, the financial crisis soon developed to the extent of a global economic crisis. The
interrelation of the shipping market and the domestic global economy, described in 2.1,
created a market atmosphere of very low demand for the carriage of goods by sea.
However, the previous years had led to a boom in shipbuilding and many investors sought
investments with extraordinary high returns in shipping portfolios. These exceptional high
rates of return were often based on a prognosis of continuous growth in demand for
shipping and carriage of goods by sea. Hence, high expectations on the future freight rate
developments created a very optimistic market sentiment, which was reflected by a
notable high volume of orders.
The growing number of orders for new buildings and the high steel price led to an increase
of prices as the building facilities soon reached their occupancy rate. Port congestions and
a surplus in demand additionally tied tonnage and created a shortage, which led many
owners to buy second-hand tonnage, as these were readily available. Ship values therefore
increased, resulting in a boom on the new building and especially on the second-hand
market. The graphic below illustrates the amount of orders placed until mid-2008.
34
Svenning, S.B., Oct. 2009., What is She Worth?, Fearnleys Monthly by Fearnresearch.
15
Figure 1: World Fleets & Orderbooks 1
Source: Shipping Intelligence Weekly, 26 Sept., 2008, Claksons Research
Yet the above mentioned market atmosphere of low demand, derived from the high
volume of the orderbook in connection with the global economic downturn. On the one
hand, the economic crisis broke through onto the shipping economy resulting in extremely
low demand for carriage of goods by sea. However, on the other side, the - at times dramatic tumble on the freight markets was “homemade”, as very optimistic future
prospects for the shipping industry in the previous years led to an overpaid orderbook,
which tightened the freight rates on top of this.
This market condition, previously described as “Schweinezyklus”, alone could have led in
some segments to a drastic oversupply of tonnage, but was then raised to (even) higher
power by the additional low demand resulting from the global economic crisis. 35 As a
result, freight rates hit “rock bottom rates”. This being the case, values for ships dropped
as well, and led to a problem for many ship owners, issuing houses and eventually banks.
The prices at which they had bought the vessels made it very difficult to profitably operate
them in the prevailing charter markets.
35
At the start of 2009 the containership orderbook stood at 6.0 million TEU, almost 50% of the size of the
active fleet.Crowe,T., Liner Review – The Case Of The Missing Cargo, 2010 Clarksons research, [Online], 15
January, Available at:
http://www.clarksons.net/markets/feature_display.asp?section=&news_id=29659&title=Liner+Review++The+Case+Of+The+Missing+Cargo , [Accessed on 19 January 2010].
16
Figure 2: Sencond-hand Prices '00-'10
Shipping Intelligence Weekly, p. 8; 26 Feb., 2010
The diagram above reveals the decline of the ship values for bulker-carriers and tankers,
and likewise shows the impact the financial crisis on the shipping industry. The beginning
of Q3 2008 featured a sharp drop in the long-term price trend for ships. This goes in hand
with the insolvency of the investment bank Lehman Brothers, which stipulated the starting
point of the global economic crisis.
As already indicated, especially the container segment has been struck by the shipping
crisis. While the bulk and tanker trade, after a steep decline, showed signs of recovery by
2009, rates for containerships, not least due to the high number of newbuildings entering
the market and their dependability on the transportation of consumer goods, kept diving.
Consequently, the S&P markets experienced a year of low activity throughout the
container sector. 36 Accordingly, ship evaluation on basis of the reference value method
was hardly feasible, as a total of only 89 container vessels changed hands over the full
year 2009. However, only 24 of these vessels were below the age of 10 years. While 17 of
these ships were smaller than 2000 TEU, 7 of the 24 vessels were recorded to be above
2000 TEU. Looking at a total fleet of container ships of all ages of over 4650 ships, the
36
Appendix 2: Holst, B., 2010, Executed Sales of container ships 2009 – 02/2010, Ingenieurbüro Weselmann
GmbH, Hamburg, Germany.
17
question is whether these 89 sales executed in 2009 are representative for the market
value.
As mentioned, the TC- rates for container vessels showed a steep decline. The rates for
vessels below the size of 1700 TEU have dropped to as far as 35-40 % of the level mid2008. Vessels above the size of 1700 TEU contracted for even less and reflect a level of
20-25 % of mid-2008 charter rates. The graphic below displays the development of the
TC-rates and of the few executed sales in relation to the level of mid-2008.
Development from mid-2008 to 01/2010
(mid-2008 = 100%)
%
60
50
40
Sales
30
TC-rate
20
10
0
600
725
1000
1700
2750
4250
6000
6500
8500
12000
TEU
Figure 3: Development from mid-2008 to 01/2010
Source: Dipl.-Ing. Gerd Weselmann, Ingenieurbüro Weselmann GmbH, Hamburg.
Some of these executed sales can be referred to as “forced sales”, since no open market
between “willing buyer” and “willing seller” can be stipulated.
Further, the graphic reveals the behaviour mentioned in 2.1.2, and shows that the sales
executed correlate with the development of the TC-rates over the different size segments.
However, ships below the size of 1000 TEU did not register a decline in ship value and
TC-rates like the vessels in the larger size segments did. Consequently, in order to
establish a ship value based on the development of the TC-rates, the correlation between
the TC-rates and the ship values has to be examined.
18
Development of Time Charter Rates and Market Values
3 year-old vessels
1.000 TEU
1.700 TEU
2.750 TEU
TC-
Value
TC-
Value
TC-
Value
Rates $
$ m.
Rates $
$ m.
Rates $
$ m.
1985
21,3
2005
16.600
20,5
25.600
39,4
33.600
44,4
mid-2008
10.500
25,8
15.350
43,4
24.400
45,0
Jan. 2010
3.900
??
4.200
??
4.500
??
38%
9,8
27 %
11,7
18,5 %
10,7
6.150
18,8
14.750
27,25
21.200
37,9
% of mid2008
10-years
average
sales
13 -
16 –
24 -
15
18,5
25
Figure 4: Development of Time Charter Rates and Market Values
Source: Dipl.-Ing. Gerd Weselmann, Ingenieurbüro Weselmann GmbH, Hamburg.
The table above shows the development of the ship values and 12-months TC-rates until
2010. Yet, the table reflects that an evaluation of the ship value by reference to the change
in level of concluded charter parties, which was quite practicable throughout the past
years, is not possible, since this would form unrealistic low ship values, which are even
below the value of fire sales. A drop in TC-rates by 73 % to the level of 27 % of mid2008 for 1700 TEU vessel would result in a ship value of US$ 11,7 m.(Jan. 2010) , if the
depreciation of the ship value was undertaken equally. However, the few sales executed
were recorded at a level of US$ 16-18,5 m., while the 10-year-average for 1700 TEU
container vessels computes to US$ 27,25 m. . The table shows similar results for the size
segments of 1.000 TEU and 2.750 TEU vessels.
Consequently, an accurate ship evaluation on basis of the change in TC-rates is not
practicable. However, due to a very little number of sales an objective ship value by
reference to the market value can hardly be stipulated either.
19
3.1 Impacts of the traditional ship evaluation in dysfunctional markets
Until October 2008, active S&P markets enabled the ship evaluation by the reference
value method for almost all types of ships. However, the above mentioned turmoil in the
shipping industry led to a problem for ship appraisal, since variances in the charter level
with timely delay cause variation in ship values.
As of October 2008, especially for the container segment, the freight rates collapsed,
which subsequently led to a decline in demand for tonnage. As a consequence, less
activity on the S&P markets was recorded. However, few transactions made it very
difficult to assess the ship value by the traditional ship evaluation. This problem carried on
into the subsequent year, as 2009 also revealed extremely few sales which often were
identified as fire sales. Further, at the prevailing low market level no seller was “willing”,
and thus sold only if his cash flow forced him to sell.
If one studies the conditions of these sales one will find that often only cash buyers were
able to finance vessels, since banks did not deal in credits. However, if a financing or
employment was attached to a vessel, these ships were sold at a higher rate than ships
without financing and employment. 37 Yet, consequently the question is where exactly the
market value is? And how does the buyer of a financed ship have to evaluate the vessel in
the proceeding years if bankers asked him to evaluate on market value based on cash sale
and charter-free?
Ship appraisals are essential for the day-to-day business of banks, ship owners,
shipbrokers, expert auditors, issuing houses and ship appraisers. The values have to be
assessed, even if there is no intention of selling the ship.
Therefore, due to the uncertainty in the shipping community, the question was raised as to
what the exact value of a ship is in times of dysfunctional S&P markets? Some brokers
and consultants would readily reply that the value is equal to the market value, which
again reflects the price a “willing buyer” and a “willing seller” agree on in a free market. 38
No doubt, this is common practise and correct for a functioning market. These market
values, evaluated by the reference value method, are sufficient in order to appraise the
value of ships for the purpose of balance sheets, insurance values et cetera.
37
Cf. Dobert, J., Glaskugel Schiffswert, 2009, Hansa International Maritime Journal Nr. 10, p. 62.
Cf. Definitions of International Valuation Standards Committee, 2000, p. 96., [Online] 1 July, Available at:
http://www.romacor.ro/legislatie/07-ivs1.pdf , [Accessed 7 January 2010].
38
20
Yet the above mentioned position gives raise to the question whether market values,
achieved by benchmarking against fire sales in dysfunctional markets, are representative
for the value of a ship, if the owner has no intention of selling. Some brokers would agree
and state that current market prices precisely reflect the prevailing shipping markets, with
many ships being laid up. Consequently, every single transaction expresses a justified
price, which represents the value of the good.
However, at times of crisis with overcapacity of tonnage, charter rates on or even below
the level of the OPEX, and a low lending mentality of ship financing banks, result in a
lack of price formation for many sectors due to disproportional few transactions, which
could be an index of the market value. Hence, the question is to a greater degree whether
the fire sales, in absence of “normal” or unforced fixtures on the S&P and newbuilding
market, are sufficient to accurately represent the market value on the basis of the
traditional method for ship appraisal.
Since forced or fire sales do not reflect objective transactions between “willing buyer” and
“willing seller”, but merely a deal characterized by subjective motives where one party is
“over-eager” to sell, it can be assumed that these sales, in absence of regular sale and
purchase activity, are not useable in terms of assessing the market value. Thus, the
conventional method, in dysfunctional markets under consideration of forced sales, does
not necessarily correctly represent the market value of a ship, since an “arm’s length”
transaction can not be stipulated.
In addition, the traditional ship evaluation is characterised by a poor transparency, which
makes a plausibility check hardly feasible. Ship owners or banks often miss an
explanation on how the brokers approached to the ship value. Consequently, the validity
of the reference value method in dysfunctional markets can be questioned.
However, vessels are assets, and thus have to be appraised in order to display their value.
Therefore a great number of ship brokers and consultants commonly perform guidance on
values of standard vessel types through market reports and client circulars by reference to
the traditional ship evaluation. Yet, prolonged unavailability of market values led to a
suspension of ship appraisals. The well-established ship broker Clarksons, for example,
ceased to conduct evaluations by declaring “Because of current market instability we are
having difficulty in monitoring values. As a result we have suspended price guidance. If
21
you wish to discuss, please call Clarkson Valuation Limited.". 39 This created even more
constraints on the markets, as ship owners faced the evaluation of their vessels by loan-tovalue, while banks looked lost in their attempts to assess their assets.
Ship financing banks, for example, need accurate ship values for the evaluation of the
collateral value, thus for the internal rating of their assets. In Germany, banks that issue
ship mortgage bonds 40 are obliged, as of the “Pfandbriefgesetz”, to periodically assess the
collateral value of their assets. 41 The evaluation of the collateral ship value is regulated in
the German “Schiffsbeleihungswertverordnung” (SchiffsBelWertV). § 4, I of the
SchiffsBelWertV state that the collateral value is to be assessed by reference to either the
market value, the average market value of the past ten years, the price for a newbuilding or
by the contractual price.
Yet, as mentioned above, the ship values, assessed by application of the traditional ship
appraisal in malfunctioning markets, can turn out to be unrepresentatively low, since they
use fire sales as a benchmark and cover far to view transactions in order to be
representative for the market. Therefore, in times of malfunctioning markets, the
assessment of the collateral value on basis of the traditional ship evaluation can lead to
delusive and sometimes destructive results. The ship, as the borrower’s asset pledged
security to ensure the payment or performance of the obligation under the mortgage
agreement, could be of less value on the market as the registered collateral value. As a
result, increased interest rates could lead ship owners to be in breach of loan covenants.
Thus irretrievable write-offs and distress sales or insolvency can be the consequence.
Another requirement for banks to appraise ship values lies within the framework of the
Basel II convention. 42 The Basel II regulation dictates the capital adequacy. 43 This is the
39
Cf. Clarksons Valuation Ltd., [Online], Available at: http://www.shipvalue.net/guidance/default.asp [Accessed
26 January 2010].
40
Mortgage Bond:Bond issue secured by a mortgage on the issuer’s property, the lien on which is conveyed
to the bondholders by a deed of trust. A mortgage bond may be designated senior, underlying, first,
prior,overlying, junior, second, third, and so forth, depending on the priority of the lien. Most of those issued
by corporations are first mortgage bonds secured by specific real property and also representing unsecured
claims on the general assets of the firm. As such, these bonds enjoy a preferred position relative to unsecured
bonds of the issuing corporation., Def. Downes, J., Goodman, J.E., 2006. Dictionary of Finance and
Investment Terms Seventh Edition, Barron’s Financial Guides, p. 435.
41
Cf: §§ 6 and 28 of the German “Ptandbriefgesetz”
42
BASEL II CONVENTION: Effective by 2008, the International Capital Accord, as it is also called, is based on
three mutually supported pillars or concepts of capital adequacy. The first is a regulatory capital
requirement, a minimum capital-to-asset ratio equal to at least 8% of risk weighted assets. The second pillar
is that bank supervisory agencies have the authority to adjust capital levels for the individual banks above
the 8 % minimum when necessary. The third concept enhances provisions on transparency in order to
improve the market discipline. Def. Fitch, T., 2006, Dictionary of Banking Terms, 5th Ed.,Barron’s Business
Guides, p. 51.
22
amount of capital, which has to be deposited by the financing institution for loans or other
assets. The convention was designed to promote uniformity, to make regulatory capital
more risk sensitive, and to encourage enhanced risk management among large,
internationally active banking organisations. Basel II rules that a minimum 8% of the
loans have to be pledged as security for long-term loans by so called “Risk Weighted
Assets” (RWA).
44
The ship financing banks therefore need to appraise the ship values in
order to assess the amount of assets, which have to back the mortgages and bridge loans
granted to the ship owner. However, these loans become harder to justify, since ship
values are decreasing during the crisis, whereas the amount of the RWAs as to Basel II
increases. Dr. Klaus Stoltenberg, head of shipping and aviation at Nord/LB, ostensively
illustrated the effects of the asset backing according to the Basel II convention in relation
with the decline in ship values on the 13.Hansa-Forum 2009. 45
He gave the example of a 5,300 TEU containership ordered in 2006 and to be delivered in
2009. Under Basel II, the capital required in 2006 was € 481,000,-. Yet, supposing the
vessel would remain without employment after delivery, the RWAs would compute to €
12.600.000,- in mid 2010.
This sample calculation reveals the acute problem banks are facing. While trying to avoid
depreciations in order to keep bad loans alive and protect ship owners from insolvency,
banks have to rate their portfolio at least once a year to ensure a correct value. Moreover,
banks are obligated to act in compliance with the Basel II convention, which imposes a
heavy burden in terms of solvency and risk management. Yet, if ship values are solely
based on a limited number of distressed sales, owners may face the risk of breaching
covenants, forcing banks to demand increased collaterals, bar deposits or even partial
repayment of the credit. Forced ship sales may be the consequence, which additionally
speed up the downward spiral of falling asset values. 46
In addition, the assessment of ship values is of great importance for the balance sheets of
ship owners and KGs, as the values display reserves. The decline of values, resulting from
43
CAPITAL ADEQUACY amount of capital relative to a financial institution’s loans and other assets. Almost all
banking regulators require that banks hold a certain minimum of equity capital against their risk weighted
assets. […],Def. Fitch, T., 2006, Dictionary of Banking Terms, 5th Ed.,Barron’s Business Guides, p. 74.
44
Cf. Winter, H. [et al.], 2008. Grundlagen der Schiffsfinanzierung. Frankfurt School Verlag, pp. 708 f..
45
Appendix 3: in reference to: Statement of Dr. Klaus Stoltenberg, Nord/LB, at 13.Hansa-Forum 2009.
46
Porter,J.,Hagen,P., Hamburg brokers seek new standard for ship prices,2009 Lloydslist, [Online] Feb.20.,
Available at: http://www.lloydslist.com/ll/news/hamburg-brokers-seek-new-standard-for-shipprices/20017620612.htm , [Accessed on 18 January 2010].
23
the application of the traditional ship evaluation in absence of S&P fixtures, can lead to
excess of liabilities over assets, which inevitably leads to the question of insolvency.
However, while the past years were characterised by a market sentiment, where liquidity
was easy to obtain, issuing houses easily found investors for their shipping funds and
banks, inflicted by the glory prospects, financed ships by loan-to-value ratios (LTV ratio)
with up to 90 %, today, ship owners (including issuing houses and investors) face a dryout of their cash flow. They either have to remargin their household for the upcoming
period of unemployment by equity or by bond capital, or they sell their liabilities, to wit
their ships. Yet, injecting fresh capital by debt seems very difficult at the present, as the
capital market hit rock-bottom.
Therefore, an additional impact of the ship appraisal using the market value as a
benchmark, in times of dysfunctional markets, is that ship owners face loss of capital, and
in the worst case insolvency, if banks do not grant overdraw of credit.
This leads to another question concerning the applicability of the conventional evaluation
of ship values. As the purchase of a ship signifies an investment with a long lifespan, how
is the market sentiment reflected when evaluating the ship?
For the ship owner, the value of a ship is characterised by the added value, which it is able
to generate when utilised in the charter market. Yet the determinant for the appraisal of a
ship by the traditional ship evaluation is the market price at the date of purchase. In times
of market turmoil however, this price reflects the amount that permits to afford to run the
vessel below operating costs for a period of time, which is reasonably expected to
represent the market downturn before charter revenues would cover the OPEX and
CAPEX.
Hence, the values estimated by the traditional ship evaluation simply give reference to
market values, but do not necessarily reflect the intrinsic ship value, as the lifespan of a
ship, which customarily is characterised by several economic cycles, is only considered to
a certain degree. Yet, this bears the danger of boosting the ups and downs of the ship
values, since a reference value which is based on short-term market fluctuations (in good
and bad terms), and will reflect only short-minded investment opportunities. This shortminded outlook on the profitability of a ship therefore adds force to economic turbulences
and bull markets. The distinctive and typical intrinsic value of a ship, which is attributable
to the long lifespan and to the reoccurring (periodic) variations in demand, is not reflected.
Therefore, the traditional evaluation of the ship value in dysfunctional and heavily
distressed markets does not necessarily display the sustainable market value, but merely
24
reflects a market value relevant for the reference date and with short-sighted outlook.
Consequently, an evaluation of a ship in dysfunctional market solely based on the
reference value may reflect a faulty estimation of a durable economic good.
25
4. The Hamburg Ship Evaluation Standard
4.
The Hamburg Ship Evaluation Standard
4.1 Development and introduction of the HSES
As mentioned in the previous section, the global financial crisis caused a virtual standstill
in the main segments of the ship S&P markets. Thereupon, ship valuators and ship brokers
suspended the ship evaluation at the beginning of 2009, which led to constraints on the
shipping markets, as reliable data for ship values became more difficult to obtain and no
evaluation on basis of mark-to-market could be conducted.
This was the motivation for the Hamburg Shipbrokers Association (Vereinigung
Hamburger Schiffsmakler und Schiffsagenten e.V., VHSS) to promote the idea of a value
assessment, which, apart from short term market fluctuations, reflects the Long Term Asset
Value (LTAV) of a ship. Collaborating with ship appraisers, shipping banks, ship owners,
issuing houses and auditing companies, the Hamburg Shipbrokers Association (HSA),
hereinafter referred to as VHSS, created a valuation method, which is determined on the
grounds of vessels long term earnings potential. The approach of the newly developed
Hamburg Ship Evaluation Standard (HSES) deploys the present value 47 respectively
discounted cash flow method (DCF-method) 48 – WACC 49 approach -, and is customised
to meet the requirements of ship valuation.
Further, the Hamburg Ship Evaluation Standard, hereinafter referred to as HSES or
LTAV, uses a conservative, statistically proven and transparent approach in order to
incorporate the volatility of the shipping cycle. Apart from the traditional ship evaluation,
the LTAV rests upon the valuation by the earning rate. While considering the fluctuations
on the shipping markets, the LTAV allows factoring in future variances in earnings (markto-model).
47
Def. Cf. Fitch, T., 2006, Dictionary of Banking Terms, 5th Ed.,Barron’s Business Guides, p. 358.
accounting technique for estimating the present value (market value) of anticipated
future income and expenditures,[…], and income from investment securities. It is calculated as either net present
value, which expresses future cash flows in terms of current money by applying a discount rate to future receipts,
or internal rate of return, which figures the average annual yield or return on capital of an investment or a bank
loan over its expected lifetime. Def. Fitch, T., 2006, Dictionary of Banking Terms, 5th Ed.,Barron’s Business
Guides, p. 149.
49
WEIGHTED AVERAGE COSTS OF CAPITAL: A calculation of a company's cost of capital in which every source of
capital is weighted in proportion to how much capital it contributes to the company. For example, if 75% of a
company's capital comes from stock and 25% comes from debt, measuring the cost of capital weights these
accordingly. A high WACC indicates that a company is spending a comparatively large amount of money in
order to raise capital, which means that the company may be risky. On the other hand, a low WACC indicates
that the company acquires capital cheaply. Def. [Online], Available at: http://financialdictionary.thefreedictionary.com/WACC [Accessed on 03.02.2010].
48
DISCOUNTED CASH FLOW:
26
However, the VHSS did not intend to replace the traditional evaluation method by the
LTAV. The ship appraisal by the reference value is still a sufficient and valid method
during times of normal market activity. In fact the LTAV was introduced to establish an
alternative method, which is applicable during times of dysfunctional or irregular market
conditions, where a conservative, unbiased and statistically proven approach is needed.
Thus, in dysfunctional markets, may these be excessively high or low markets, the
evaluation by the LTAV can be used to obtain representative figures. 50
Yet, the mathematical structure of the LTAV had to be validated by an independent
auditor in order to guarantee applicability under the German commercial code. For this
reason, the VHSS consulted the auditor company PricewaterhouseCoopers (PWC).
By examining more than 2.700 ships and calculating over 135.000 ship values, the auditor
company validated the plausibility of the new standard. The validation performed by PWC
came to the finding that LTAV deviates in 92% of the tested values of the last 10 year by
less than 15% from the traditionally assessed values. 51 Claus Brandt Partner at
PricewaterhouseCoopers, Hamburg, mentioned that “The LTAV in future is standing on a
firm, finance mathematical sound foundation that concurs to the standard of the “Institut
der deutschen Wirtschaftsprüfer für Unternehmensbewertung” IDW-SI 52 (German
Institute of Auditors Standard for Corporate evaluation)”. 53 Brand and the VHSS believe
that this validation will help to enhance a wide acceptance of the LTAV in the shipping
community.
The enclosed graphic, 54 a scenario of 1700 TEU-container vessels of the years 2006-2008,
shows that, during the years 2006/07, the values estimated by the LTAV are in average
higher than the market values. However, to the end of 2007 and with progression of 2008
this proportion gradually changes and displays a tendency of values lower than market
value. Further, it is noticeable that to the end of 2008 ship values estimated by the
amended LTAV /PWC-version (light-blue) reflect remarkably lower values than the initial
LTAV (blue).
50
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: http://www.VHSS.de ,
[Accessed on 18.01.2010].
51
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: http://www.long-termasset-value.de , [Accessed on 22.02.2010].
52
IDW S 1 - Principles for the Performance of Business Valuations
53
Brandt, C., Shipvaluation on a new foundation Assessment of PricewaterhouseCoopers supports shipbrokers
Long term Asses Value now with the IDW-Valuationstandards, Vereinigung Hamburger Schiffsmakler und
Schiffsagenten e.V., [Online], Available at: http://www.long-term-asset-value.de/index.php [Accessed on
27.01.2010].
54
Appendix 4: Comparison between LTAV and Market value.
27
However, preceding in 2009/10 the diagram Comparison of Ship Values estimated by
LTAV and reference value 2009/2010 (Age 3 – 5) 55 displays that the value assessed by the
LTAV is significantly above the market value estimated by the brokerage house
Clarksons. Further, the recorded sales of ships between the age of 3 and 5 years reflect a
lower value than the LTAV. Yet, this statistic is based on individual sales, since only few
transactions were recorded. Hence theses values may not be convincing, as they may not
reflect an objective market value.
Consequently, the LTAV is in the average below the market prices estimated in 2007 to
2008, but above the prices of end-2008 till today. This variance in values compared to the
market value is the major point of criticism against the HSES, as this implies the danger of
whitewashing struggling ship values.
4.2
Principles of application
The above-mentioned lack of reliable ship values reveals a general flaw of the traditional
ship evaluation. The constraints on the shipping markets led to an imbalance between
willing seller and willing buyer, which caused that disproportional few transactions in
certain segments of the S&P market were concluded.
Some market players would like to make a bargain and buy a vessel, but lack the funds to
finance such, because the above mentioned reasons lead to the situation were financing via
bank loans is not viable. Others do not want to sell their ships to prices were they have to
realise losses and others again are busy enough with staying “alive” and resolving their
troubled financial situation. Hence, one can assume that the market situation for the
participants is everything else but ideal. Moreover, the market situation could be described
insofar as to call it irregular or even disturbed. For exactly this situation the VHSS
developed the Hamburg Ship Evaluation Standard.
However, in order to ensure a correct application of the LTAV, one has to determine the
principles of application. Thus the question, of when the LTAV should be applied, comes
to mind.
55
Appendix 5: Comparison of Ship Values estimated by LTAV and reference value 2009/2010 (Age 3 – 5).
28
As to the VHSS, a dysfunctional market, which makes traditional ship evaluation
impossible, enables the application of the LTAV. The VHSS states that dysfunctional
markets exist when at least two of the following scenarios apply: 56
a) An uncharacteristically low number of Sales candidates in comparison to the overall
fleet within a category of vessels, over a period of at least three months means that
there is a severe imbalance between willing sellers and willing buyers.
b) Transactions in which either the Seller or Buyer are knowingly under time pressure,
constraint or urgent need to conclude a deal, driven by personal or corporate
distress. Prices do not reflect vessels characteristics.
c) A difference of 30% between current transaction price and the “Long term Asset
Value” lasting for at least three months.
d) An uncharacteristically low number of market participants, based on total number of
parties, within a market over a three month period.
e) The absence of essential, regular market conditions (e.g. unavailability debt
financing for a large number of market participants).
The market conditions, described in section 3 reflect the scenarios a), e) and to some
extent b). Consequently, for the purpose of this thesis, the LTAV is considered to be
applicable.
However, as to the definition of the VHSS, besides periods characterised by
disproportional weak market conditions, dysfunctional markets can occur during periods
of extraordinary firm market conditions.
56
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: www.vhss.de,
29
4.3 Principles of calculation and definition of parameters
Yet the application of the LTAV requires the definition of the parameters. Therefore, this
section explains the principles of calculation and defines the parameters for the LTAV.
In support and for further illustrations please find an example of the LTAV in appendix 6.
For the computation of the Long Terms Asset Value (LTAV), the following formula has
been derived: 57
T
LTAV = ∑
t =1
(Ct − Bt )
RVT
+
t
(1 + idisc ) (1 + idisc )T
Figure 5: Formula of the Long Term Asset Value developed by VHSS
Ct = Current Net-TC-Rate in running year (Base: ConTex; Baltic Dry Index (BDI); other proven data etc.)
Bt = current OPEX per running year
idisc= Discount rate
t = period (t1: current year; t2-T: period end)
T= Remaining period until Age 20/25 Years (dependable on age of vessel)
RVT = Residual value, based on LDT, average USD scrap price/ldt, multiple and Iinfl
(ldt in long tons, 1t= 0.9842 lt)
4.3.1 Charter income
For the prognosis on the future charter income economical assumptions concerning
•
Future gross-charter rates,
•
Brokerage and Management fees, and
•
Occupancy rate
have to be made.
57
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: www.vhss.de,
30
¾
Future gross-charter rates
It has to be distinguished between a charter-free vessel and a vessel with existing charter
for the consideration of the gross-charter rates.
Charter-free vessel:
C = Using current indices (Base: ConTex; Baltic Dry Index (BDI); own date etc.).
t1−3
Ctt >3 = (10-year average charter rate/day)*occupancy rate*( 1 + i Infl ).
Existing Charter
C = With an existing charter fixed to a Charterer with a reliable credit rating, the existing charter should
t1−x
be considered until its completion.
C = After completion of the charter, the income for the remaining period should be calculated based on
tt >x
the 10 year average charter rate for the given vessel type. (e.g. (10-year average charter
rate/day*occupancy rate)*( 1 + i Infl )).
However, for the purpose of calculating the charter revenue of a charter-free vessel, the
derivative of the charter rate for the period of the first three years (t1-3) requires a reference
market rate. Freight indices (e.g. ConTEx, Baltic Dry Index) and sub-indices as well as
own data serve as reference values for these charter rates. Yet, beginning from the fourth
year (tt>3), the charter income is calculated on the basis of a sustainable charter rate, which
is derived from historical average rates of the past 10 years. Thus, the 10-year-average
charter rate/day is multiplied by the days of employment, which than has to be validated
by the rate of inflation (e.g. (10-year-average charter rate/day*occupancy rate)*( 1 + i Infl )).
Yet, if a vessel has a fixed charter, the existing rate should be used as basis for the
calculation until completion of the charter party. However, the charterer must have a
reliable credit rating, so that dependable future prospects are presumable. The income for
the period after completion of the charter shall be calculated based on the 10 year average
charter rate for a similar vessel.
The detailed period of consideration (first three years) assumes the inclusion of the
inflation rate into the charter rate. However, upon application of the 10-year-average in
charter rates, the rate of inflation ( 1 + i Infl ) has to be added as well.
31
¾
Brokerage and management fee
Additionally, brokerage and management fee accrue for the chartering of a vessel.
The amount of the applicable brokerage may be determined by the charter party or
respectively to the discretion of the user.
However, as to HSES an acceptable range for brokerage is between 1,25 % and 5 % of the
gross charter revenue, whereas the management fee is allowed to vary between 3 % and 5
% of the gross charter revenue (cf. TKL. Fonds (2009), guide to SFI TKL.Ship Fund
Index). The brokerage is to be deducted from the inflated gross revenue.
¾
Occupancy rate
Concerning the occupancy rate, the HSES calculates on 358 days, acknowledging an
unemployment rate of 1 % for technical issues. However, the years of class inspection (5
year period) allow only an occupancy rate of 343 years.
¾
Fusion rate
Additionally, the VHSS mentions that if a maximum lifetime of 25 years is assumed, an
individual fusion rate on the charter income is required. This fusion rate will apply for
ages 21-25. Thus, the charter rate for bulk carriers will be reduced by 30 %, while
Container vessels and Tankers require a reduction by 15 % for this period of time.
Consequently, the charter revenue (Ct) p.a. is calculated as follows:
Ct = [(actual and/or average charter rate/day)*occupancy rate*( 1 + iInfl )]
*(100% -
∑
brokerage)*(100% - poss. Fusion rate)
4.3.2 Operation costs
The operating costs Bt are calculated on the actual and individual operating expenses and
include a linear distribution of the regular expenses for class inspection and docking. Basis
for the operating expenses are prices assessed by experience or current market prices. The
daily operational expenses have to be multiplied by the occupancy rate and the inflation
rate ( iInfl ), in order to calculate the total operation costs.
Bt = daily OPEX * Occupancy rate * ( iInfl )
32
4.3.3 Discount rate
The evaluation of a ship by the Long term Asset Value demands to discount the future
net income by a suitable rate of interest to the date of evaluation. This capitalised rate
adjusts to the expected revenue and orientates itself by reference to adequate alternative
risks for the use of capital. Thus, the rate of interest displays the minimum interest, which
has to be obtained by the appraised object, in order to gain more return than an alternative
investment.
The discount rate of the LTAV as of the HSES results from the free cash flow discounted
by the weighted average cost of capital (WACC). The weighted average costs of capital,
however, depend on the amount of the equity and debt capital as well as on the debt-equity
ratio (measured by the market value of the equity and the market value of the debt).
rwacc = rE *
E
F
+ rD *
G
G
E:
Market value of the ship’s equity
F:
Market value of the ship’s debt
G:
Total market value of ship’s assets
rE:
Cost of equity capital
rD:
Cost of debt capital
a)
Cost of equity (r E ):
The costs of equity are calculated on the basis of a differentiation between risk free basic
rate of interest and a risk premium. Therefore, the costs of equity capital are determined
by the Capital Asset Pricing Model (CAPM) 58 , as indicated in the formula below. 59
r E =r Rf + MRP * β
rE:
cost of equity capital
r Rf :
risk free basic rate of interest
MRP:
market risk premium
β:
beta coefficient
58
Capital Asset Pricing Model independently developed by Sharpe (1964), Lintner (1965) and Mossin (1966).
Cf. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: www.vhss.de ,
59
33
¾
Risk free basic rate of interest (r Rf )
The (virtually) risk free basic rate of interest is calculated by reference to yield curves of
government loans for the previous three months. Yet, the duration of the yield curves has
to be congruent to the lifetime of the appraised object. 60
¾
Market risk premium (MRP)
For the calculation of the cost of equity on basis of the CAPM, a market risk premium
(MRP) has to be computed. This market risk premium displays the systematic risk 61
(market risk) of the ship that cannot be eliminated by diversification. 62
Resulting from the average long-term difference between the rate of return of a stock
index and the rate of return of risk-free governmental bond, the MRP expresses the
expected “excess return” of investments in risky, instead of risk-less, stocks. The MRP
derives from the empirical observation of the monetary markets, 63 where a range of 4 % 6 % appears to be suitable. However, the VHSS applies a statistically proven MRP of 5 %
for the US market. 64
¾
The beta coefficient ( β )
The beta coefficient 65 indicates the specific risk of an asset (i.e. a ship) in proportion to the
market risk. Hence, the beta coefficient displays the individual and specific risk of a ship.
A beta coefficient greater than one implies that the value of the equity of the appraised
60
Cf. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: www.vhss.de ,
61
SYSTEMATIC RISK: that part of a security’s risk that is common to all securities of the same general class
(stocks and bond) and thus cannot be eliminated by DIVERSIFICATION; also known as market risk. The measure of
systematic risk in stocks is the BETA COEFFICIENT. , Def. Downes, J., Goodman, J.E., 2006. Dictionary of Finance
and Investment Terms 7th ed., Barron’s Financial Guides, p. 702.
62
DIVERSIFICATION: 1. spreading of risk by putting assets in several categories of investements – stocks, bonds,
money market instruments, and precious metals, for instance, or several industries, or a mutual fund, whith its
broad range of stocks in one portfolio. […].,, Def. Downes, J., Goodman, J.E., 2006. Dictionary of Finance and
Investment Terms 7th ed., Barron’s Financial Guides, p. 185.
63
Cf. Dimson/Marsh/Staunton (2006), The Worldwide Equity Premium: A Smaller Puzzle; Welch (2008), The
Consensus Estimate for the Equity premium by Academic financial Economists.
64
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., [Online] Available at: www.vhss.de ,
65
BETA coefficient is the covariance of a stock or portfolio in relation to the rest of the stock market. The
Standard & Poor’s 500 Stock Index has beta coefficient of 1. Any stock portfolio with higher beta is more
volatile than the market, and any with a lower beta can be expected to rise and fall more slowly than the market.
A conservative investor whose main concern is preservation of capital should focus on stocks with low betas,
whereas one willing to take high risks in an effort to earn higher rewards should look for high-beta stocks. Def.
Downes, J., Goodman, J.E., 2006. Dictionary of Finance and Investment Terms 7th ed., Barron’s Financial
Guides, p. 61.
34
object in average reacts disproportional on fluctuations of the markets, however a beta
coefficient below one changes the value of the equity to a disproportional smaller extent.
For the purpose of the LTAV the beta coefficients are determined by peer groups. These
peer groups are formed by ship owners listed on the stock markets. However, in order to
enable comparability, these ship owners have to be specialised in similar shipping
segments (e.g. similar ship type, size??) as the ship of concern. Basis for a selection of
ship owners can be companies, which are listed in the below mentioned indices:
•
Bloomberg Dry Ship Index (Bulk Carrier)
•
Clarksons Liner Share Price Index (Container)
•
Clarksons Tanker Share Price Index (Tanker)
Yet, the VHSS states that the applicant of the LTAV may apply a different procedure to
identify the risk premium.
b)
Cost of debt (r D )
The financing of a ship is often based on variable interest rate agreements linked to the 3months-LIBOR. 66 Therefore, basis for the assessment for the costs of debt are interest rate
swaps curves. 67 These interest rate swaps display the expenses for hedging interest rate
risks by swapping fixed rate obligations against floating rates, provided that they have the
same duration. Consequently, the differences in life of the interest rate swaps and in the
residual economic life of the ship enable a detailed consideration on the reference date,
and provision for the floating rate risks.
Additionally, the VHSS mentions fictive and company individual bond yields 68 , as an
alternative basis for the derivation of cost of debt capital. 69 By enlisting of risk-less basic
66
LONDON INTERBANK OFFERED RATE, key rate in international bank lending. LIBOR is the rate at which major
banks in London are willing to lend Eurodollars to each other. It is used to determine the interest rate charged
to creditworthy borrowers […]., Def. Fitch, T., 2006. Dictionary of Banking Terms, 5th ed.,Barron’s Business
Guides, p. 281.
67
INTEREST RATE SWAP contract in which two counter-parties agree to exchange interest payments of different
character based on an underlying NOTIONAL PRINCIPLE amount that is never exchanged.[…] Typically, a swap
contract exchanges fixed rate obligations for a floating rate instrument in the same currency. […]., Def. Fitch,
T., 2006. Dictionary of Banking Terms, 5th ed.,Barron’s Business Guides, p. 248.
68
BOND EQUIVALENT YIELD investment yield of a bond purchased at discount from face value, such as a U.S.
Treasury bill or municipal bond, expressed as a percentage. […]Yield equals face value minus the purchase
price, divided by the purchase price; multiplied by the number of days to maturity., Def. Fitch, T., 2006.
Dictionary of Banking Terms, 5th ed., Barron’s Business Guides, p.62.
69
35
rates of interest, which are congruent to the lifespan of the ship, these can proximately be
ascertained by yield curves.
However, in any case, an appropriate credit spread 70 has to be added to the interest for the
debt capital. The amount of the credit spread is evaluated by the ship lending bank, and
depends on the securities of the financed vessel. For this, on basis of an equity-debt ration
of 30/70 % the, VHSS arrived at a credit spread of 1,375 %.
4.3.4 Inflation rate
The calculation of the LTAV as of the HSES contains an inflation rate ( iInfl ). This iInfl is
used, in order to effectively display rising expenses for charter revenue C, for operation
expenses B, or for the residual value RV.
The operator of the formula has the opportunity to adjust the iInfl to his own preferences.
Thus height and configuration of the inflation rate can be modified for each of the abovementioned parameters (C, B, RV).
However, the VHSS indicates an inflation rate of 2 % for each parameter. This rate of
inflation is derived from the stated inflation target of the European Central Bank (ECB). 71
4.3.5 Residual value
The residual value RVT is derivate by the current market value or by assessment of the
user. The selected residual value is to be multiplied by the inflation rate specified for the
residual value:
Scrap value in USD * (1+ iInfl )
However, two methods are offered to calculate the residual value. Up to a vessel’s age of
15 years method a) should be used, while for vessels older than 15 years method b) should
apply.
70
CREDIT SPREAD 1. yield difference between Treasury securities and comparable non-Treasury securities, such
as mortgage-backed bonds, expressed in basis points. Credit spreads widen in recessions and grow tighter in
economic expansions. 2. difference in value of two options on the same underlying security when the value of the
option written (or sold) exceeds the value of the one bought., Def. Fitch, T., 2006. Dictionary of Banking Terms,
5th ed., Barron’s Business Guides, p.123.
71
Cf. (2009), Hamburg Ship evaluation Standards (HSES), VHSS, Sept. 22, [Online] Available at:
http://www.vhss.de/ltav/Erlaeuterungen_LTAV_20091222.pdf [Accessed on 01.02.2010].
36
a)
20 Years Period:
Using an investment horizon until the vessel has reached 20 years of age, the residual
value (RV 20 ) of the relevant vessel shall be determined by the inflated scrap value per
´light-weight (ldt) multiplied by a coefficient.
RV 20 a = [Scrap value in USD *( 1 + i Infl )] * ldt * coefficient
The “scrap value surcharge coefficient” for different vessel types is based on proven
statistical data of market transactions for 20 year old vessels. It is calculated by putting
actual ship sales or appraisals in proportion to the scrap value of even-aged vessels.
The statistical data, currently allow the following coefficients
Container Ships
3.7
Bulk Carriers
3.45
Tankers
2.0
If no statistical data is available for specialised vessels, a conservative coefficient of 2
72
should be used. 73
b)
25 Years Consideration Period
Using an investment horizon until the vessel has reached 25 years of age, the residual
value (RV 25 ) of the relevant vessel should be evaluated by the inflated scrap value
multiplied by the light-weight (ldt).
RV 25 a = [Scrap value in USD *( 1 + i Infl )] * ldt
The VHSS recommends that a ship appraiser should use method a) for vessels up to the
age of 15 years. However, if best judgement and expertise of the user leads to a doubt in
the application of either method, the more plausible method, whichever provides more
reliable data, should be applied.
72
The residual value – coefficients are validated by PricewaterhouseCoopers (Feb. 2009) and base on data of the
VHSS.
73
Cf. (2009), Hamburg Ship evaluation Standards (HSES), VHSS, Sept. 22, [Online] Available at:
http://www.vhss.de/ltav/Erlaeuterungen_LTAV_20091222.pdf [Accessed on 01.02.2010].
37
5. Analysis of the parameters
5.
Analysis of the parameters
As described in 2.1.2, principally, the evaluation of ships takes place without factoring in
a charter income. However, the mathematical approach of the LTAV includes the
calculation of the charter revenue in order to assess ship values. This is a renunciation of
the traditional ship evaluation to a ship appraisal on the net present value.
Yet, indeed the evaluation of a vessel by the earning rate is typically undertaken in-house
prior to purchasing. The calculation on how much revenue an investment will generate is
the fundamental economic question of a willing buyer before investing in a ship. Further,
usually a risk-return analysis is undertaken, which reflects the risk structure of the
investment. A higher systematic risk and a greater specific risk of the investment, implies
that an investor would require a higher expected return to hold it, and vice versa.
Therefore, the approach by the earning rate principally reflects the value of a ship, since it
represents the amount, which an investment into a ship will gain in return under the
premises of stipulated market risks.
5.1 Charter income
Nonetheless, the assumptions on future return contain jeopardises of incorrect predictions.
However, as mentioned in 4.3.1, the LTAV makes a distinction between the calculation of
charter income of charter-free (a) vessels and of vessels, which are in an existing charter
contract (b). Further, the net charter income is calculated by considering the rate of
occupancy (c), and deducting the management fee and brokerage (d). If a fusion rate (e) is
applicable, this has to be taken into account as well.
a)
Charter-free vessels are calculated by using an index charter rate at time of
evaluation. This charter rate reflects the market sentiment and is assumed to prevail for the
proximate three years. Then the proceeding years, until the end of the life of the ship, are
simulated by the use of a 10-year average charter rate.
Initially, this is a sufficient approach, since the market sentiment of the charter market has
significant influence on the value of a ship. Furthermore, the evaluation on the basis of the
discounted cash flow is commonly used for the appraisal of real estate, and as such is in
line with IDW S1. However, the prospected earnings of the assessed vessel are subject to
38
change, and thus have to be regarded with a certain degree of wariness. These earnings are
only assumptions and require accurate predictions of the trend on the charter market.
Even though these predictions gain a higher dependability, due to the introduction of a
detailed planning phase of three years, multi-layered factors have to be regarded in order
to predict the trend.
The function of the future earning rate, for instance, includes the supply and demand ratio
of tonnage. While demand is driven by the global economy, seaborne commodity trades,
the average haul, random shocks and transport costs, the supply function is impelled by
the size of the world fleet, the fleet productivity, shipbuilding production, scrapping and
the fright revenue. 74 Hence, a wide variety of factors have to be predicted in order to
estimate a sound base for the future rate of return of a ship. The simplified shipping
market model illustrated below demonstrates how demand and supply affect the freight
rate.
Figure 6: Simplified shipping market model
Source: Referring to Tasto, M., 2009, Institute of Shipping Economics and Logistics (ISL), Bremen,
Based on: Stopford, M., 2009. Maritime Economics 3rd ed., Routledge, p. 137 ff..
However, whereas the supply side is assessable by looking at figures concerning the
existing fleet, the orderbook and the prospected scrapping rate, demand is much more
difficult to predict, as the development of the world economy and seaborne commodity
trades is dependable on the sentiment and conditions on the market, and requires a deep
knowledge on international economics. Changes in interest rate and economic growths
play a role as well as commodity prices and the accommodation of loans or letter of
credits by banks. Hence, the function for demand depends on various factors, which make
an explicit prognosis very difficult, and thus complicates the accurate prediction of charter
income. Although supply may adjust to the level in demand, it is to some extent
74
Cf. Stopford, M., 2009. Maritime Economics 3rd ed., Routledge, p. 137 ff.
39
constricted as shipbuilding requires certain time. Yet, adjustments of supply may also
include slow-steaming or lay up and are therefore comparatively fast.
Mr. Plankar uses the illustration below in order to explain the freight rate mechanism. The
charter rate results from the utilisation capacity of the fleet and thus from supply and
demand. 75
Supply for Transportation:
Existing fleet
Orders
- Capacity of the yards
- Prognosis on newbuildings
Fleet productivity
- Speed
- Laytime and idle time
Scrapping
- Age structure
- Statutory requirements
Demand for Transportation:
Economic growth
- Importregions
o Iron ore/ coking coal/ steal cons.
o consumption of energy
Crude oil, oil prodcts
Coal
Liquefied gas
- Minor Bulks
- Consumer products
Export/Routing
Degree of utilization
of the fleet
Charter Rate
Figure 7: Formation of charter rate resulting from supply and demand
Source: Referring to Plankar, M., Branchenrisikomanagement am Beispiel der Schifffahrtsbranche, in: Bankrisikomanagement:
Mindestanforderungen, Instrumente und Strategien für Banken , 2008, pp. 325-362.
This scheme appoints various factors for demand and supply of transportation, which
affect the degree of utilization and consequently have effect on the charter income. As a
result, conclusions on the future charter rate can be drawn by examining the individual
supply and demand drivers. Plankar confirms that the demand is affected by the world
economy, through business cycles and regional growths trends. Therefore, especially
commodity trades may modify the growth trends. Here in particular the development in
the steel industry or the consumption of energy is mentioned, since that may influence the
iron ore and crude oil trade.
Therefore, the predictions of the charter revenue have to be undertaken by reference to the
individual trade. While, some segments are more likely to be influenced by certain factors
(e.g. steel productions – iron ore), others may need different demand drivers.
75
Cf. Everling, O., [et al.], 2008, Bankrisikomanagement : Mindestanforderungen, Instrumente und Strategien
für Banken, Gabler.
40
However, in addition the relevant fixtures of freight future agreements (FFAs) can reflect
the future market trends. Consequently, these fixtures may be useful for the prediction of
the future level in charter rates, since, due to their nature, they are traded well in advanced.
Yet, on the other hand the application of a 10-year average rate after termination of the
initial charter contract is coined by uncertainty. Even though shipping cycles have always
existed and thus are reoccurring “events”, the amplitudes always changed and especially
the latest decline on the shipping markets showed how unpredictable and volatile the
shipping economy has become. Therefore, a 10-year average of the charter rates does not
necessarily reflect the future income.
b)
However, the calculation of the charter income for vessels, which are in a valid
charter agreement, seems to be more accurate, since these revenues are more probable.
The charter income can accurately be presumed for the period of the charter agreement,
which enables a precise estimation on the earning potential of the ship. Thus, inaccuracies
resulting from assumptions on the prospected supply and demand ratio occur to a lesser
extent. Yet, as mentioned in 4.3.1, the charterer must have a reliable credit rating in order
to accept the charter contract as a valid piece of evidence.
Further, the application of the 10-year average, after completion of the opening charter, is
containing the same weaknesses in the calculation of the charter income as mentioned in
(a). The question of whether or not historical charter levels enable a conclusion on future
earning potentials of ships remains in force. This may be especially challenged if one took
a look at the charter level of the past 5 years in contrast to the last 50 years. Especially the
container segment and to some extent the bulker segment have seen an unprecedented
boom throughout the past years, which could pervert the 10-year average rate. However, if
one alleges that the current crisis is nothing but a dent, and charter revenues will
eventually prosper as they did before the economic crisis, the 10-year average of the
charter rates appears suitable to display future earning potentials.
c)
The LTAV divides the rate of occupancy into two parts. On the one hand, allowing
a 1 % rate of unemployment resulting from technical issues, 358 days per year are taken as
a basis for the calculation of the charter revenue. This deduction by 1 % properly reflects
the frequency of loss of hire resulting from technical insufficiencies. Yet, on the other
41
hand the years of class inspection acknowledge a rate of occupancy of only 343 days per
annum. This subdivision also seems to be suitable, as the years of class inspections
notably permit less employment of the vessel.
d)
The management fee and brokerage are reflected adequately by the formula of the
LTAV. This thesis orientates towards the data of the Leitfaden zum SFI TKL.Ship Fund
Index by TKL Fonds Gesellschaft für Fondsconception und –Analyse MBH in cooperation
with Prof. Dr. Wolfgang Drobetz 76 , and therefore considers the range of 3 % to 5 % for
management fee and 1.25 % to 5 % for brokerage as marketable.
e)
Furthermore, for vessels with a period under consideration of 25 years, the
mentioned fusion rate has to be applied. This fusion rate accommodates the circumstance
that vessels, after having exceeded the economic life of 20 years, obtain significantly
lower charter rates. That is because of the fact that these ships are more likely to have
technical insufficiencies, usually have higher operating costs, and are often below the
technical standard, which causes negative effects on the charter rate. Consequently, the
average charter rate Ctt >3 is reduced by 30 % for bulk-carriers, as well as by 15 % for
containerships and tankers for the purpose of the calculation of the charter income in the
years of age 21 – 25. 77
In fact, the size of the vessel is not as relevant and consequently is not as important for the
fusion rate. Moreover, the fusion rate is determined by the experiences of the members of
the VHSS. Upon maturity, Bulk carriers are often in a worse condition than container
ships or tankers at the same age, as they carry a choice of cargo, which has a higher
potential to inflict damage to the ship (e.g. scrap). Hence, their average charter income has
to be reduced to a higher degree, since their condition may limit their ability to operate on
the market.
5.2 Operation costs
The calculation of the operation costs is a determining factor for the calculation of the
LTAV of a ship. Principally, the expenses originate in costs for personnel, consumable
76
CF. TKL Fonds Gesellschaft für Fondsconception und –Analyse MBH, Drobetz, W., Leitfaden zum SFI
TKL.Ship Fund Index, [Online] Available at: http://www.hamburgmaritime.de/Leitfaden_SFI.pdf?PHPSESSID=gdhvmqxe , [Accessed on 16.02.2010].
77
42
goods (e.g. oil, bunker, gas, etc.), spare parts, insurance, maintenance, repair, routine
docking and class renewal. The variety of cost positions lead to very individual operation
expenses for every ship. This is the reason why the operation costs are assessed by
experience of the ship owner, and cannot be assessed by average.
However, by factoring in the operation costs, the LTAV reflects the expenses, which are
deducted from the charter income in order to calculate the net charter. Consequently, the
LTAV reflects the idea mentioned in 2.1.3. The effect of high operation expenses is more
relevant in a low charter market, whereas the OPEX are of minor relevance when high
charter revenues are achievable. Thus, the evaluation as to the LTAV correctly displays
the idea of Stopford that, in a weak charter market, vessels with higher operating costs will
simply get pushed out of the market earlier, while vessels with low operation expenses are
able to operate longer, since they are able to realise a positive net charter income due to
less operation expenses. 78 Subsequently, the LTAV comprises the importance of the
OPEX in the calculation of the charter revenue and consequently for the achievable
internal rate of return of the investment. Hence, the ship-specific risk of high operation
costs is reflected in the ship value. A ship, which is only able to operate on high expenses,
does not achieve as much return as a ship with lower OPEX. Consequently, the ship value
of a ship with higher OPEX has to be less than the value of the same ship with less OPEX.
5.3 Discount rate
The evaluation of the discounted cash flow (WACC approach) is a common attempt for
the appraisal of assets (e.g. property/real estate). Therefore, ship appraisal by the Hamburg
Ship Evaluation Standard concurs to the standard of the Institut der deutschen
Wirtschaftsprüfer für Unternehmensbewertung (IDW S1). 79 Further, the application of a
discount rate enables an accurate consideration of the ship values to the date of reference.
As referred to in 4.3.3, the LTAV is based on the WACC approach and relies on the costs
of equity capital, the costs of debt capital, and the dept-equity ratio.
The LTAV utilises the Capital Asset Pricing Model for the calculation of the cost of
equity capital. The CAPM is an established and the predominant model for the capital
market-oriented derivation of costs of equity capital, and suitably reflects the value of the
78
79
Cf. Stopford, M., 2009. Maritime Economics 3rd ed., Routledge, p. 160 ff..
German Institute of Auditors Standard for Corporate Evaluation.
43
cost of equity on the target date. Specifically, the utilisation of current yield curves for the
calculation of the risk free basic rate of interest ensures an appraisal to a reference date,
because the yield curves 80 reflect the current basic market risk.
However, apart from the (virtually) risk free basic rate of interest, the costs of equity
capital are also depending on risk premiums. While the unsystematic risks are not
remunerated for by the interest rate, as they can be eliminated by diversification, the
systematic risk is reflected by the market risk premium. Hence, the discount rate considers
the amount of interest which reflects the risk of the investment.
The CAPM determines the market risk premium by ascertaining the market value for the
acceptance of a risk (MRP) based on data of the capital markets. Hence, the MRP is the
expected return subtracted by the (virtually) risk free rate of interest. In other words, the
MRP expresses the expected “excess return” of investments in risky instead of risk less
stocks. Reason for the dependence on data of the US monetary markets, mentioned in
4.3.3 a), is the equivalence to the discounted cash flows, which in shipping are usually
generated in USD. 81
Additionally, the MRP is multiplied by the specific risk (β -coefficient). The thereof
resulting risk add-on is customised for the individual project, and considers the projectspecific risk structures. Still, as mentioned in 4.3.3, the individual beta coefficient for the
assessment of ship values by the LTAV are determined by peer groups listed on the stock
markets, and accordingly relate to indebted companies.
Apart from the operational risk, they depict also the risk of the capital structure of the
respective shipping companies in the peer group. Therefore, the beta coefficients have to
be unlevered in order to illustrate the beta of the shipping company without any debt (so
called raw beta).
⎧
⎩
βUnlevered = β Levered / ⎨1 +
D⎫
⎬
E⎭
By unlevering the beta any beneficial effects gained by adding debt to the firm's capital
structure are removed. A comparison of the companies’ unlevered betas therefore gives an
overview on the risks of the individual company irrespective to the liabilities.
80
There are three main economic theories attempting to explain how yield curves develop over time. However,
explaining these theories would exceed the scope of this thesis. Yet, they have to be mentioned for the sake of
completeness. There is the market expectations (pure expectations) hypothesis, the liquidity preference theory,
and the market segmentation theory.
81
i.e. charter rate and operation costs are manly calculated in USD
44
In conclusion, the unindebted median of the peer group’s beta coefficients is ascertained,
and again has to be adjusted to the alleged capital structure of the appraised ship. Usually,
the above mentioned formula is inverted in order to enable an utilisation for the
conversion. Consequently, β Levered of a ship appraised by the LTAV is calculated as
follows:
β Levered = βUnlevered
*
⎧ D⎫
⎨1 + ⎬
⎩ E⎭
However, as mentioned the beta coefficient quantifies the MRP, whereby the beta
coefficient of the investment is measured by the covariance between specific and
systematic risk of shipping.
Consequently, variances in the project specific risk structures can lead to a change in the
coefficient. As a result, a change may cause either lower (β<1), equal (β=1), or higher
(β>1) cost of equity capital. Therefore, a variation of the beta coefficient results in a
change of the interest of principal for the equity. While higher risks lead to a higher
discount rate, a low risk of the investment is reflected by a lower discount rate.
Accordingly, on the fundamental of an equal net income, the LTAV can result in different
ship values. If the LTAV of a vessel was calculated on basis of an increased systematic
risk, the LTAV would lead to a lower ship value. Yet, on the contrary low systematic risks
result in a higher ship value, as the lower costs of equity capital would allow a smaller
discount rate and therefore lead to a higher net present value.
However, an alteration of the beta coefficient can be induced by a variance in the specific
risk of the shipping company. Since the beta coefficient depicts the covariance between
the ship-specific risk and the systematic or market risk of shipping in general, a variety of
economy-wide risk factors can lead to a change in the beta coefficient.
Yet, in spite of the economic importance of the shipping sector, related analyses were
hardly undertaken until Grammenos and Markoulis (1996). By using stock market beta
and firm-specific factors they explained the cross section of shipping returns and in
conclusion reported a market beta below one for the sample of 11 shipping companies in
the timeframe of 1989 to 1993. Analogously, Kavussanos and Markoulis (1997/1)
investigated the market risk on firm level and tried to detect a coherence between the
average beta in shipping and the overall US-stock market (S&P 500) during 1985-1995. In
conclusion they were not able to establish a significant difference. In an additional study,
45
Kavussanos and Markoulis (1997/2) compared the return structure of water transportation
and other transport industries. They recorded a market beta lower than unity in the water
transportation sector.
However, Grammenos and Arkoulis (2002), for the first time, 82 demonstrated a
relationship between international shipping stock returns and macroeconomic variables,
while Kavussanos et al. (2002) investigated sources of risk factors in different
international industries. Both articles argue that global risk factors are crucial for an
investment decision. Additionally, they proved that, due to the international nature of
shipping, these macroeconomic factors are consistent throughout various companies in the
shipping industry. Yet not until Kavussanos et al. (2003) a comparison between stock
returns of shipping-related industries has been undertaken. This study revealed to which
extent systematic risk, defined as market beta, differed between segments. 83 For this
reason, they used the single-factored approach of the CAPM and estimated market betas
for each shipping segment using regression analysis. The result revealed shipping
segments react differently to systematic risk. Finally, Kavussanos and Marcoulis (2005)
underlined this thesis, and the current consensus concerning the shipping stock returns,
confirms a relation between both firm-specific and common macroeconomic factors.
Hence the LTAV is in consensus with the predominant opinion, as the beta coefficient
distinguishes between the three major shipping segments (cf. 4.3.3). However, it was not
until Westgaard et al. (2007) that stock returns in a defined shipping segment (tankers)
were explained by introducing a set of various macroeconomic risk factors. 84
Yet, their work neglected the bulk and container trade, as they focussed on the risk factors
in tanker shipping. Eventually, Drobetz, Schilling and Tegtmeier explored “Common Risk
Factors In The Return Of Shipping Stocks” in 2009. 85 Their empirical findings followed
the pattern of the previous studies investigating on the risk of shipping sectors. For this,
the shipping sector displays lower risk in terms of beta than the overall stock market (a
beta lower than one) and a high ratio of systematic risk. 86 Yet, their findings included also
that risk in the shipping sector is multi-dimensional, as market risk alone is not sufficient
to price an equity universe that includes shipping stocks. 87 Thus, a break down of the risk
82
Westgaard, S. [et al.], 2007, Economic and Financial Risk Factors and Tanker Shipping Stock Returns.
Westgaard, S. [et al.], 2007, Economic and Financial Risk Factors and Tanker Shipping Stock Returns.
84
Cf. Westgaard, S. [et al.], 2007, Economic and Financial Risk Factors and Tanker Shipping Stock Returns.
85
Cf. Drobetz, W. [et al.], 2009, Common Risk Factors In The Returns Of Shipping Stocks., March.
86
Drobetz, W. [et al.], 2009, Common Risk Factors In The Returns Of Shipping Stocks., March. p.17.
87
Drobetz, W. [et al.], 2009, Common Risk Factors In The Returns Of Shipping Stocks., March. p.17.
83
46
structure in a shipping segment requires fundamental analysis, since the risks are multilayered.
However, even though shipping segments are highly specialised and experience great
differences with regards to the exposure to various risk elements; several comprehensive
risks affecting all shipping segments can be defined. Among others, there are changes in
interest rates, changes in the oil price and the supply-demand-ratio. Drobetz, Schilling and
Tegtmeier also included a change in the industrial production and the change of the tradeweighted value of the US-$ into their multifactor model to establish a comparison of the
risk profile in the shipping sector.
By using the median of the beta coefficients gathered from the peer groups determined by
the indices mentioned in 4.3.3 a), the approach of the Hamburg Ship Evaluation Standard
displays and includes the risk factors in shipping into the appraisal. Due to their permanent
accessibility, shipping stocks properly reflect the prices to which investors appreciate the
systematic risk and specific risks of shipping. Hence, the beta coefficients gathered from
the peer groups suitably reflect the risk structures in the overall markets of tanker,
container and dry bulk shipping.
However, a break down of the sub segments in terms of size and, or cargo (i.e. tanker:
product or dirty) is not undertaken. For example, the portfolio of the average small
container feeder shipping company from the German river Elbe is usually not included
into the peer group (or at least not suitably reflected), and consequently their specific risk
structure cannot be taken into account. Nonetheless an average amount is considered, and
this is as close as it gets to a universal approach of a definition of shipping risk structures.
As mentioned the WACC includes also the cost of debt. These costs of debt capital
likewise depend on the aforesaid economic risks.
While the 3-months-LIBOR is not affected by the specific risk structure of the appraised
ship, the credit spread applied by the ship lending banks certainly depends on the risk
concerning the financed object.
Yet, the estimation of a general credit spread of 1.375 % may not be appropriate. The cash
flow, which is generated by the vessel, as well as the performance of the ship owners or
the security of lasting charter agreements have a significant influence on the amount of the
credit spread. Furthermore, the amount of the credit spread depends on an internal rating
of the lending institutions and thus varies. A change in the market fundamentals may lead
to a shift in the banks risk rating and consequently change the amount of the credit spread.
47
As a result, the project specific circumstances under consideration of current market
conditions determine the amount of the credit spread. This is the reason why a general
credit spread may inadequately reflect the given risk structures, in terms of risk-return
estimation.
5.4 Inflation rate
Including an inflation rate enables the adjustment of the parameters. Charter revenue,
Opex or the residual value may increase or decrease over the years. The monetary
phenomenon of the inflation rate therefore incorporates the economic condition
characterised by an increase of prices and wages, and declining purchase power into the
calculation of the LTAV. 88 Consequently, comprising the inflation rate improves the
accuracy of the LTAV of a ship, and enables a calculation with reference to the effective
date.
5.5 Residual value
The residual value reflects the value of a ship at determination of its lifespan. It is
calculated by multiplying the light-weight (ltd) of the ship with the scrap price.
The Hamburg Ship Evaluation Standard uses two options (asset depreciation range of 20
and 25 years) for the determination of the residual value at the end of the economic life of
a ship. The age of the ship is decisive for the selection of the respective option. Vessels
below the age of 15 years are assumed to have an economic life of 20 years (method a)),
whereas ships above the age of 15 years are supposed to have an asset depreciation range
of 25 years (method b)).
For vessels which fall under the regulation of method a), a “scrap value surcharge
coefficient” has been calculated. This “scrap value surcharge coefficient” displays the
proportion between the actual ship prices and the scrap value (ltd. x scrap price/ltd.).
88
Fitch, T., 2006. Dictionary of Banking Terms, 5th ed.,Barron’s Business Guides, p. 241.
48
However, the coefficients mentioned in 4.3.5 generate from the quotient of the average in
executed sales or ship appraisals and the average in scrap value. 89
While the actual ship sales and ship evaluations were figured by statistics and data
resource, the average scrap value is the product of the scrap price per light-weight.
Yet, as mentioned in 4.3.5, each ship type (e.g. tanker, container, bulk-carrier) has its
“own” “scrap value surcharge coefficient”. This is owed to the fact that each of the
mentioned segments has different levels in value once they approach the end of their
economic life. Tankers for example, will hardly find employment above the age of 20
years, as these old vessels are usually not fitted to meet the requirements of OPA 90, and
consequently are often rejected at the charter market.
90
Therefore, tanker values rapidly
decline at the end of their lifespan, whereas containerships, due to their acceptance on the
charter market and their overall better condition, are able to achieve higher prices at the
same age.
However, the proportion between the actual ship prices and the scrap value has to be
calculated for each sub segment of the individual ship types 91 , in order to display an
absolute “scrap value surcharge coefficient”. The individual average of these coefficients
then represents the “scrap value surcharge coefficients” for the ship type displayed in
4.3.5.
Yet, the coefficients are subject to change and therefore have to be permanently verified.
Volatile market conditions may lead to variances in market values, which then would alter
the proportion between the actual ship prices and the scrap value. This would lead to
different coefficients and in consequence results in higher or lower residual values.
Yet, if the method b) is applied, and a period under consideration of 25 years is taken as
basis, the LTAV does not provide the application of a “scrap value surcharge coefficient”.
The reason is that for these ships only the scrap value is taken into account. A hypothetical
factor, displaying the potential market value of the ship in contrast to the scrap value, shall
not be calculated as the LTAV constitutes the economic life of a ship to be terminated by
attaining the 25th year of age.
89
Scrap value surcharge coefficient = (Executed sales or ship appraisals) / average scrap value
90
Cf. Oil Pollution Act of 1990 (OPA 90).
e.g. Container: 0-500 TEU, 500-999 TEU, 1000-1499 TEU, 2000-2299 TEU, 2300-3399 TEU, 3400-3999
TEU, 4000-4999 TEU, etc. .
91
49
Accordingly, if an existing market for ships of 25 years and above can be stipulated, the
difference in the market value and the scrap value reflect hidden reserves and is not
considered by the LTAV.
50
6. Application of the Hamburg Ship Evaluation Standard
After introducing the Hamburg Ship Evaluation Standard and having discussed the
impacts of the traditional ship evaluation in disrupted markets, this paragraph shall outline
the impacts of the HSES on ship appraisal.
As mentioned above, the LTAV assess the value by the capitalised income. This present
value has to be distinguished from the market value assessed by the reference value
method. While the reference value displays the current average market value of the ship,
the LTAV calculates the future cash flows and discounts them to the date of appraisal.
Hence, a net present value is calculated, which, as such, reflects the value of the
investment autonomously from current market fluctuations. This is the reason why the
LTAV became so attractive for banks, issuing houses, and ship owners.
The effects of the shipping crisis, described in section 3., led to the problem of finding a
suitable approach for the estimation of ship values. Especially for the container segment,
market values were difficult to obtain, as few transactions led to a difficulty in assessing
representative reference values.
The Long Term Asset Value however, features a transparent and plausible estimation of a
ship value, as it is based on a mathematical formula and allows a preview on prospected
revenues. Furthermore, the LTAV enables an appraisal even in disrupted markets, since
the evaluation is based on the present value, and a reference value is not needed. Thus,
benchmarking against fire sales does not come into question, as values are not based on
recent sales, but on the future income. Consequently, the question of availability of willing
buyer and willing seller is not required. Additionally, ship values calculated, using the
LTAV, are not as volatile as if estimated by the reference value, since they are not
influenced by subjective conditions of sale. On the contrary, the estimations by the LTAV
are based on the principle that a ship is a sustainable and lasting asset, which is
represented by the amount of the internal rate of return, rather than the liquidation price.
Hence, it reflects long-term prospects and cushions periods of bull markets and economic
downturns, since it does not represent a short-minded outlook in profitability, but in fact
rests upon the 10-year-average in charter rates. In consequence, the LTAV does not “live”
the heights and lows of the market cycles as much as the reference value does.
51
6.1 Impacts of the HSES
While the evaluation of ship values in active S&P markets is correctly undertaken by the
reference value method, the LTAV can alternatively be used for the appraisal in
dysfunctional markets. But, when applied, what exactly are the impacts of the Long Term
Asset Value on the ship evaluation in disrupted markets (certain segments)?
As described in section 3., several parties face problems when the traditional ship
evaluation is to be undertaken in dysfunctional markets for the appraisal of ship values.
The necessity of ship values, even if there is no intention of selling the ship, clearly
indicates the dependence on a well-performing method for ship appraisal during any kind
of market condition. Fortunately, the LTAV is an instrument, which enables a plausible
approach to ship values, even if no reliable data on the S&P market is available or if there
is no intention of selling the ship.
However, it [the LTAV] is not directly used as a book value but rather as an useful
addition in the determination of valuations for, amongst others covenant assessment,
especially in illiquid markets. 92
Hence, the LTAV provides an addition for the periodical estimation of the collateral value
of ship mortgages by banks. By applying the LTAV in disturbed shipping markets, the
thereof resulting ship values may cause proportionally higher collateral values, as opposed
to the collateral values being assessed on foundation of the reference value including fire
sales as a benchmark. However, this has the effect that ship owners are not threatened by
increased cost of the mortgage, resulting from additional mortgage insurance to protect the
lender from credit default. Thus, in disrupted or weak markets, using a mark-to-model
procedure like the LTAV could prevent ship owners from performing distress sales and
therefore stabilises the ailing ship values, as borrowers or ship owners would not face cash
flow problems resulting from debt capital. Yet, in periods of boom conditions, where ship
values may be unrepresentatively high, the LTAV caps the ship values to a reasonable
level, since it reflects the long term prospects and is not solely based on extraordinary high
short-term revenues. Consequently, banks assessing the collateral value would find a more
conservative foundation in the LTAV as opposed to the traditional ship evaluation.
As a result, the proposed market-to-model-driven valuation methodology in the prevailing
troubled markets assists the banks in preserving the collateral values, and in return
92
Cf. Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. , [Online], Available at:
http://www.vhss.de/ltav/press_release_engl.pdf , [Accessed on 16.02.2010].
52
stabilises the position of the debtors, that is ship owners and issuing houses i.e., as the
banks are not forced to ask for additional mortgage obligations or increased interest rates.
Digression on application of the LTAV in the SchiffsBelWertV:
However, before using the LTAV as starting point for the assessment of the collateral value,
it has to be questioned whether the SchiffsBelWertV permits the valuation on basis of a
mathematical formula, which includes the prospected earning rate of the asset.
§ 3, I of the SchiffBelWertV stipulates that the underlying value for the collateral value shall
be free from any “speculative elements”. Thus the question is, whether the assumption of
prospected revenue and the future market situation, such as in the calculation of the LTAV,
comprise these “speculative elements”, or whether the LTAV is in line with the policy of §
3, I SchiffBelWertV.
Yet, the same paragraph states that the value which forms the basis for the evaluation of the
collateral value, shall foot on empirical data, which, independently from economic market
fluctuations, can be assumed as the market value. As the idea of the LTAV is to calculate
ship values isolated from the cyclical volatility, and since the parameters rest upon empirical
statistical proven data, one could conclude that the LTAV is in line with § 3, I,2
SchiffsBelWertV.
However, as mentioned in 3.2, the central provision on the evaluation of the collateral value
of ships is outlined in § 4 of the SchiffBelWertV. The directive of § 4, I states the
constitutional parameters for the evaluation of the collateral value. For this purpose, the
market value, the 10-year-average market value, and the price for a newbuilding or – for
second-hand vessels - the contractual price determines the upper limit of the collateral value.
However, by appointing these values solely as upper limit (cf. § 4, II, III SchiffBelWertV),
the mortgage lending institutions (Pfandbriefbank) are not committed to the exact method on
the evaluation of the collateral value. This is essential, because – unlike for the evaluation of
real estate – a specific method for ship appraisal does not exist. Moreover, § 4, IV urges the
mortgage lending institutions to apply another adequate method, if neither a current market
value nor a average market value can be assessed.
Consequently, even though the LTAV does not comply in all respects with the provisions of
§9 and § 3,I SchiffBelWertV, it is worth it to consider the accreditation of its application in
distressed markets, where a ship appraisal on basis of the traditional method is not possible.
Furthermore, the introduction of the LTAV has an effect on the risk management of ship
lending banks. As described, Basel II comprises a heavy burden for banks. The example of
Mr. Stoltenberg in 3.2 indicated the high ratio of banks equity requirements. The capital
resource rules of Basel II display how the capital-intensive financial operations affect the
capital key ratio. 93 As a result, the lending institutions may be restricted in their core
business, to wit lending capital to debtors, as they have to increase the equity for the
RWAs.
Yet by introducing the LTAV, loans could be kept “alive”, since ship values would not
decrease as much during the crisis, and asset backing would not absorb as much equity.
Consequently, banks do not have to ask ship owners for increased collaterals, bar deposits
93
CAPITAL RATIO: key financial ratio measuring a bank’s CAPITAL ADEQUACY or financial stability. As a general
rule, the higher the ratio the more sound the bank. A bank with high capital-to-asset ratio is protected against
operating loss more than a bank with lower ratio, although this depends on the relative risk of loss of each bank.
[…]., Def. Fitch, T., 2006. Dictionary of Banking Terms, 5th ed., Barron’s Business Guides, p. 75.
53
or even partial repayment of the credit in order to cope with higher risk premiums. Thus,
owners do not face the risk of breaching loan covenants or additional cash-flow problems,
and the danger of forced sales could be prevented. Banks on the other hand are able to
continue to provide loans, as their capital adequacy permits to do so. Additionally, the
LTAV would spare the ship lending banks to realise value adjustments on collaterals, as
the valuation by the LTAV counters the decadence of ship values in weak markets.
Further, assessed ship values calculated by the LTAV could keep the balance sheets of
ship owners and KGs even balance, since the values often represent reserves. Therefore,
the mentioned hazard of excess of liabilities over assets could be avoided.
However, the instrument of the LTAV is by far not able to bring about a miracle. The
values of badly calculated ships, which exist in heaps especially in the container segment,
cannot be forged, as their economic viability in the long run prohibits the calculation of a
positive profitability by the LTAV. These ship values face the extended risk of loss of
capital, resulting from excessive soft costs and too optimistic future prospects.
This is the reason, why the LTAV also bears the danger of manipulation. As a matter of
fact, it has to be stressed that the Long Term Asset Value, unlike the market value, is
calculated on basis of ratings. The parameters concerning future prospects and risk
structure (i.e. discount rate) may vary with regard to the rating of the individual user.
Consequently, the perils of faulty input parameters (“garbage in garbage out” mentioned
in 2.4.3) can result in inaccurate ship values, and therefore could lead to a misuse in terms
of rigging.
54
7. Conclusion
7.
Conclusion
The problematic situation of ship appraisal in dysfunctional markets consists upon the
fact, that an uncharacteristically low number of ship sales were performed in comparison
to the overall fleet within a category of vessels over a relative long period (year 2009).
The reason for this is the absence of regular market conditions (e.g. unavailability of debt
financing for a large number of market participants) and to a certain degree a
disproportional ratio between willing buyer and willing seller resulting in a lack of price
formation.
Therefore, this thesis comes to the conclusion that the applicability of a ship evaluation
based on the reference value is restricted by the market conditions. Ship values solely
based on fire sales as benchmark pervert the market value of ships. In a market
atmosphere with limited access to fresh capital, this may consequently cause an
acceleration of the downward spiral of falling asset values. Yet, if the contrary is the case,
and the shipping market is reflected by boom conditions, bull speculations may be
enforced and ship values may be overrated.
Therefore, ship appraisals based on the Long Term Asset Value can be a suitable
alternative. The ability of the Hamburg Ship Evaluation Standard to appraise vessels
separate from current market fluctuations, avoids the problematic situation resulting from
the dysfunctional markets stated at the beginning of this bachelor thesis.
Though the marketability of this calculated ship value is questionable, the LTAV correctly
represents the added value for the ship owner. Hence, the LTAV reflects the intrinsic
value of the durable asset “ship”, because the historical and periodical variations of the
shipping cycles allow the anticipation of positive future revenues.
Yet, the “lasting” value calculated by the LTAV may be a double-edged sword, as the
LTAV is no market value and therefore does not represent a liquidation price.
Furthermore, as mentioned in 5.1 the prediction of future market developments is difficult,
and may lead to wrongful ship values. Therefore the critique mentioned in 4.1 is justified
to a certain degree, as a model usually does not reflect the diversity of the market. In fact,
the approach of the LTAV provides much more an approximate value, which by
specification of the parameters may gain higher accuracy.
Therefore the applicability of the LTAV for the assessment of the collateral value is
debatable. Unfortunately, within the scope of this thesis only a marginal discussion
concerning application of the LTAV in the SchiffsBelWertV could be accomplished.
55
7. Conclusion
Yet, an approval of application of the LTAV for the evaluation of the collateral value
would equip banks with an additional tool to assess their risk exposure resulting from
long-term liabilities.
However, in contrast to the traditional ship evaluation, the appraisal by the HSES requires
a detailed risk-return analysis. For this, the explorations in section 5 represent an analysis
of the input parameters. While OPEX and charter revenue seem to be available parameters
for the calculation of each segment, the risk structure of the appraised ship reflected by the
parameter “discount rate” reveals segment specific inaccuracies. As ascertained by
numerous dissertations, the general problem of the approach by the Capital Asset Pricing
Model is the difficulty in defining the input parameters and the dependability of the beta
coefficient over time. This thesis agrees with the results revealed by previous researches,
since the risks in shipping are multi-layered and consequently an evaluation of the risks in
shipping requires a more exact diversification of the single risk factors. Although the
common risk factors have been stipulated and in the LTAV are reflected by the CAPM,
the beta coefficient derives from representative peer groups, an evaluation of the sub
segments (e.g. container < 1000) or of specialised vessels ( offshore supply, heavy-lift,
etc.) would require a specification of the peer groups. Since the peer groups are made up
by shipping companies listed on the stock markets, an individual and ship specific beta
coefficient cannot be stipulated. Although a break down into the three major divisions
containership, tanker and bulk carrier has been made, the portfolio size of the companies
comprised by the peer groups prevent an accurate estimation of the specific risk. This is
because the portfolios of the companies included into the peer group usually contain a
wide range of different ship types or size segments and consequently reflect a broad range
of specific risk factors. Hence the portfolios do not necessarily display the risk structure of
the appraised ship, as the ship of concern may differ in size (sometimes even purpose e.g.
MPP, tanker), or trades in a different region than the main part of the peer group’s
portfolio.
However, for the purpose of analysing the LTAV, this thesis concludes that the common
risk factors introduced by Drobetz, Schilling and Tegtmeier among others are sufficiently
reflected by the peer groups. Further, the permanent accessibility of shipping stocks
enables continuous adjustment of the beta coefficient, and therefore enhances the
dependability over time.
Yet, a more profound examination of the systematic and specific risk structures of the
different subsegments would enable a more detailed appraisal by the LTAV. Therefore,
56
7. Conclusion
subject for further research may be the definition of specific risks in specified shipping
segments. Additionally, the question on how shipping companies, which are not listed on
the stock market, may be reflected can be subject of further studies. Hence, in order to
enable the evaluation of risk and to facilitate a down or upgrading of the beta coefficient,
gathered from the peer group used as basis for the LTAV, a regression analysis may be
conducted.
All things considered, the LTAV seems adequate in appraising a ship value to a reference
date. The approach of the LTAV is an attempt to uncover the unknown factors in the
traditional ship evaluation and plausibilizes the rule of thumb, which is often used by ship
brokers and appraisers in dysfunctional or nebulous markets. Therefore the attempt of the
LTAV to deliver a more transparent method of estimation of ship values is helpful for the
whole shipping industry.
57
II. List of abbreviations
II. List of abbreviations
abt.
BDI
CAPEX
CAPM
Cf.
ConTex
DCF
Dwt
E3
ed.
e.g.
et al.
FFA
HSES
i.e.
IDW S1
IRR
KG
Ldt.
LGD
LTAV
MPP
NPV
OBO-carrier
OPA 90
OPEX
PfandbriefG
Pub.
PWC
RWA
SchiffsBelWertV
S&P
TC-rates
TEU
USD
VHSS
VLCC
WACC
About
Baltic Dry Index
Capital expenses
Capital Asset Pricing Model
Confer / compare
Container Ship Time Charter Assessment Index of the VHSS
Discounted Cash Flow
Deadweight tons
Arctic class
Edition
Example given
Et aliae
Freight Forward Agreement
Hamburg Ship Evaluation Standard
In example
Principles for the Performance of Business Valuations established by
the German Institute of Auditors Standard for Corporate Evaluation
Internal Rate of Return
The Kommanditgesellschaft is a limited commercial partnership
Light weight
Loss Given Default
Long Term Asset Value
Multipurpose
Net Present Value
Ore-Bulk-Oil - carrier
Oil Pollution Act of 1990
Operation Expenses
German Bond Certificate Act
Publisher
PricewaterhouseCoopers (Auditor company)
Risk Weighted Assets
Schiffsbeleihungswertverordnung
Sales and purchase
Time Charter rates
Twenty-foot Equivalent Unit
US Dollar
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V Hamburg Shipbrokers Accosiation
Very Large Crude Carrier
Weighted average costs of capital
III
III. Table of Figures
III. Table of figures
Figure 1:
World Fleets & Orderbooks
16
Figure 2:
Second-hand Prices '00-'10
17
Figure 3:
Development from mid-2008 to 01/2010
18
Figure 4:
Development of Time Charter Rates and Market Values
19
Figure 5:
Formula of the Long Term Asset Value developed by VHSS
30
Figure 6:
Simplified shipping market model
39
Figure 7:
Formation of charter rate resulting from supply and demand
40
IV
IV. Bibliography
IV. Bibliography
Clarksons Valuation Ltd., [Online], http://www.shipvalue.net/guidance/default.asp
[Accessed 26 January 2010].
Crowe,T., 2010, Liner Review – The Case Of The Missing Cargo, Clarksons research,
[Online], 15 January,
http://www.clarksons.net/markets/feature_display.asp?section=&news_id=29659&title=Li
ner+Review+-+The+Case+Of+The+Missing+Cargo , [Accessed 04.03.2010].
Definitions of International Valuation Standards Committee, 2000, p. 96., [Online] 1 July,
http://www.romacor.ro/legislatie/07-ivs1.pdf [Accessed 7 January 2010].
Dimson, E., Marsh, P., Staunton, M., 2007, The Word Equity Premium: A Smaller Puzzle.
In Handbook of the Equity Risk Premium.
Dipl.-Ing. Gerd Weselmann, 2010, Ingenieurbüro Weselmann GmbH, Hamburg,
Development of Time Charter Rates and Market Values.
Dipl.-Ing. Gerd Weselmann, 2010, Ingenieurbüro Weselmann GmbH, Hamburg,
Development from mid-2008 to 01/2010.
Dobert, J., 2009, Glaskugel Schiffswert, Hansa International Maritime Journal Nr. 10, p.
62.
Downes, J., Goodman, J.E., 2006. Dictionary of Finance and Investment Terms 7th ed.,
Barron’s Financial Guides.
Drobetz, W., Schilling, D., Tegtmeier, L., 2009, Common Risk Factors In The Returns Of
Shipping Stocks.
Everling, O., 2009, LTAV zur Schiffsbewertung, Everling Advisory Sevices, [Online], 7
October. http://www.everling.de/?p=1214 [Accessed 6 January 2010].
Everling, O., Theodore, S., 2008, Bankrisikomanagement: Mindestanforderungen,
Instrumente und Strategien für Banken, Gabler.
Fitch, T., 2006, Dictionary of Banking Terms, 5th ed., Barron’s Business Guides.
Garfield, G., 2009, Move to uncover ‚real’ ship values: German banks and shipping
bodies are working on a new way to assess vessel values, Tradewinds, Feb. 27.
Hagen, P., 2009, German ship valuation formula adds up, says PwC: Testing against over
2,000 historic ship values reveals accuracy in 92% of cases. Lloyd’s List. [Online], 23
Sept., http://www.lloydslist.com/ll/news/viewArticle.htm?articleId=1253563330332 ,
[Accessed 04.03.2010].
V
IV. Bibliography
Kavussanos, M.G., Marcoulis, S., 1997/1, Risk and Return of U.S. Water Transportation
Stocks over Time and over Bull and Bear Market Conditions. Maritime Policy &
Management, Vol. 24.
Kavussanos, M., Marcoulis, S., 1997/2, The Stock Market Perception of Industry Risk and
Macroeconomic Factors: the case of US Water Transportation Industry versus other
Transportation industries., Logistic and Transpot Review, Vol 33.
Kavussanos, M.G., Juell-Skielse, A., Forrest, M., 2003, International Comparison of
Market Risks across Shipping-Related Industries. Maritime Policy & Management.
Küster Simic, A., Thönnessen, R., 2008, Working Paper No.:03/2008, Geschlossene
Schifffonds – Portfolio- und Marktrisiken- Eine empirische Untersuchung anhand von
Zweitmarktkursdaten, HSBA.
Shipping Intelligence Weekly, 2008, Claksons Research, 26 Sept..
Shipping Intelligence Weekly, 2010, Clarksons Research, p. 8; 26 Feb..
Stopford, M., 2009, Maritime Economic. 3rd Edition, Routledge.
Svenning, S., 2009, What is She Worth?, Fearnleys Monthly, Fearnresearch, Oct.
Porter, J.,Hagen, P., 2009, Hamburg brokers seek new standard for ship prices, Lloyd’s
List, [Online], Feb. 20., http://www.lloydslist.com/ll/news/hamburg-brokers-seek-newstandard-for-ship-prices/20017620612.htm., [Accessed on 04.03.2010].
TKL Fonds Gesellschaft für Fondsconception und –Analyse MBH, Drobetz, W., Leitfaden
zum SFI TKL.Ship Fund Index, [Online], http://www.hamburgmaritime.de/Leitfaden_SFI.pdf?PHPSESSID=gdhvmqxe , [Accessed on 16.02.2010].
Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V., http://www.vhss.de .
Welch, I., 2008, The Consensus Estimate for the Equity premium by Academic financial
Economists., Brown University.
Westgaard, S., Frydenberg, S., Mitter, K., Jensen, E., 2007, Economic and Financial Risk
Factors and Tanker Shipping Stock Return.
Winter, H., Henning, C., Gerhard, M.,[pub.], 2008. Grundlagen der Schiffsfinanzierung.,
Frankfurt School Verlag.
VI
V. Appendix
V. Appendix
Appendix 1:
9
Source: www.juris.de
Verordnung über die Ermittlung der Beleihungswerte von Schiffen und
Schiffsbauwerken nach § 24 Abs. 1 bis 3 des Pfandbriefgesetzes
(Schiffsbeleihungswertermittlungsverordnung - SchiffsBelWertV)
Ausfertigungsdatum: 06.05.2008
Vollzitat: "Schiffsbeleihungswertermittlungsverordnung vom 6. Mai 2008 (BGBl. I S.
851)"
Eingangsformel
Auf Grund des § 24 Abs. 5 Satz 1 und 2 des Pfandbriefgesetzes vom 22. Mai 2005 (BGBl. I
S. 1373) in Verbindung mit § 1 Nr. 4 der Verordnung zur Übertragung von Befugnissen zum
Erlass von Rechtsverordnungen auf die Bundesanstalt für Finanzdienstleistungsaufsicht
vom 13. Dezember 2002 (BGBl. 2003 I S. 3), § 1 Nr. 4 zuletzt geändert durch Artikel 7
Nr. 1 des Gesetzes vom 22. Juni 2005 (BGBl. I S. 1698), verordnet die Bundesanstalt für
Finanzdienstleistungsaufsicht im Einvernehmen mit dem Bundesministerium der Justiz nach
Anhörung der Spitzenverbände der Kreditwirtschaft:
Teil 1
Allgemeine Bestimmungen und Verfahrensgrundsätze
§ 1 Anwendungsbereich
Bei der Ermittlung der Schiffsbeleihungswerte nach § 24 Abs. 1 bis 3 des
Pfandbriefgesetzes und bei der Erhebung der für die Wertermittlung erforderlichen Daten
sind die Vorschriften dieser Verordnung anzuwenden.
§ 2 Gegenstand der Wertermittlung
Gegenstand der Schiffsbeleihungswertermittlung sind Schiffe und Schiffsbauwerke, die in
einem öffentlichen Register eingetragen sind.
§ 3 Grundsatz der Schiffsbeleihungswertermittlung
(1) Der Wert, der der Beleihung zugrunde gelegt wird (Schiffsbeleihungswert), ist
der Wert des Schiffes oder Schiffsbauwerks, der erfahrungsgemäß unabhängig von
vorübergehenden, etwa konjunkturell bedingten Wertschwankungen am maßgeblichen Markt
und unter Ausschaltung von spekulativen Elementen bei einer Veräußerung voraussichtlich
erzielt werden kann.
(2) Bei der Ermittlung des Schiffsbeleihungswerts sind die dauernden Eigenschaften des
Schiffes, sein Alter und seine Einsatzmöglichkeiten zu berücksichtigen.
§ 4 Verfahren zur Ermittlung von Beleihungswerten für Schiffe und
Schiffsbauwerke
(1) Zur Ermittlung des Schiffsbeleihungswerts für ein Schiff sind der aktuelle
Marktwert (§ 9), der durchschnittliche Marktwert der letzten zehn Jahre (§ 10) und der
Neubaupreis (§ 11) oder Kaufpreis (§ 12) des zu bewertenden Schiffes zu ermitteln.
(2) Der Schiffsbeleihungswert darf weder den aktuellen Marktwert des Schiffes noch
den durchschnittlichen Marktwert der letzten zehn Jahre übersteigen. Sind Marktwerte
nur für einen kürzeren Zeitraum als zehn Jahre verfügbar, ist der durchschnittliche
Marktwert für diesen kürzeren Zeitraum zu ermitteln; in diesen Fällen ist Satz 1 mit
der Maßgabe anzuwenden, dass der aktuelle Marktwert um 15 Prozent zu mindern ist; lässt
sich der durchschnittliche Marktwert nur für drei oder weniger Jahre ermitteln, beträgt
dieser Abschlag mindestens 25 Prozent.
(3) Bei Schiffsneubauten stellt der Neubaupreis eine weitere Obergrenze für den
VII
V. Appendix
Schiffsbeleihungswert dar. Bei Schiffsankäufen darf der Schiffsbeleihungswert den
Kaufpreis nicht übersteigen.
(4) Ist ein aktueller Marktwert nicht verfügbar oder ist ein durchschnittlicher
Marktwert eines gleichartigen Schiffes nicht zu ermitteln, ist ein anderes angemessenes
Verfahren anzuwenden. In diesen Fällen darf der Schiffsbeleihungswert nicht den
um mindestens 25 Prozent geminderten Neubaupreis oder ebenso geminderten Kaufpreis
überschreiten.
(5) Die Ermittlung des Schiffsbeleihungswerts für ein Schiffsbauwerk hat nach Maßgabe
des § 13 zu erfolgen.
Teil 2
Gutachten und Gutachter
§ 5 Gutachten
(1) Der Schiffsbeleihungswert ist mittels eines Gutachtens zu ermitteln.
(2) Das Gutachten muss durch einen oder mehrere Gutachter erstellt werden, die von
der Pfandbriefbank allgemein oder von Fall zu Fall bestimmt werden. In besonderen
Fällen, etwa im Rahmen von Kooperationen oder bei Portfoliokäufen, können für andere
Kreditinstitute erstellte Gutachten zugrunde gelegt werden, wenn
1. diese Gutachten den Bestimmungen dieser Verordnung entsprechen,
2. ein nicht mit der Kreditentscheidung befasster, fachlich kundiger Mitarbeiter
der Pfandbriefbank eine Plausibilitätsprüfung, auch im Hinblick auf die einzelnen
angesetzten Bewertungsparameter, durchführt und
3. das Ergebnis der Plausibilitätsprüfung dokumentiert wird.
Gutachten, die vom Darlehensnehmer oder Schiffseigentümer vorgelegt oder in Auftrag
gegeben worden sind, dürfen nicht zugrunde gelegt werden.
(3) Im Gutachten ist auf die in § 4 genannten Parameter einzugehen.
(4) Im Gutachten sind der Schiffstyp und seine praktische Verwendbarkeit, insbesondere
hinsichtlich Fahrtbereich, Einsatzmöglichkeit und Ladefähigkeit, unter Berücksichtigung
der vorhandenen Ausrüstung, insbesondere in Bezug auf Lade- und Löscheinrichtungen,
darzustellen. Auf Vorzüge und Mängel des Schiffes ist hinzuweisen.
(5) Bei der Ermittlung des aktuellen Marktwerts und des durchschnittlichen Marktwerts
der letzten zehn Jahre kann das Gutachten auf die Schätzung eines im Bereich der
Schiffswertermittlung tätigen und anerkannten Brokers oder Schätzers Bezug nehmen.
Falls eine Besichtigung durch einen anerkannten technischen Sachverständigen
vorgenommen worden ist, kann das Gutachten auch auf den Besichtigungsbericht Bezug
nehmen.
§ 6 Besichtigung
(1) Das zu bewertende Schiff ist im Rahmen der Wertermittlung zu besichtigen.
Dabei sind sämtliche an Bord befindliche Schiffspapiere einzusehen. Hierbei sind
die Klassifikationen von Schiffskörper und Maschinenanlage zu ermitteln; die
Gültigkeitsdauer der Klassifikationszertifikate ist festzustellen. Die Besichtigung
kann auch durch einen anerkannten technischen Sachverständigen erfolgen.
(2) Auf eine Besichtigung kann verzichtet werden, wenn
1. der Pfandbriefbank von dem Schiffseigentümer die Klassifikationsunterlagen einer
anerkannten Klassifikationsgesellschaft vorgelegt werden und sich hieraus ergibt,
dass das Schiff von der Klassifikationsgesellschaft innerhalb der letzten 15 Monate
besichtigt worden ist,
2. das Schiff nicht älter als drei Jahre ist und das Klassifikationszertifikat bei
Ablieferung vorgelegt wird, oder
3. das Schiff nicht älter als fünf Jahre ist und neben dem Klassifikationszertifikat
bei Ablieferung das Zertifikat über die Interimsklasse vorgelegt wird.
Die Pfandbriefbank hat die Klassifikationsunterlagen auf Echtheit zu überprüfen.
§ 7 Gutachter
(1) Der Gutachter muss nach seiner Ausbildung und beruflichen Tätigkeit über besondere
Kenntnisse und Erfahrungen auf dem Gebiet der Bewertung von Schiffen verfügen. Bei
der Auswahl des Gutachters hat sich die Pfandbriefbank davon zu überzeugen, dass der
Gutachter neben langjähriger Berufserfahrung in der Bewertung von Schiffen speziell
über die zur Erstellung von Schiffsbeleihungswert-Gutachten notwendigen Kenntnisse,
insbesondere bezüglich des Schiffsmarkts, verfügt.
VIII
V. Appendix
(2) Wenn der Gutachter die Besichtigung nicht selbst vornimmt, ist eine technische oder
ingenieurmäßige Berufsausbildung nicht erforderlich.
§ 8 Unabhängigkeit des Gutachters
(1) Der Gutachter muss sowohl vom Kreditakquisitions- und Kreditentscheidungsprozess
als auch von Vermittlung, Verkauf, Vermietung und Vercharterung des zu bewertenden
Schiffes unabhängig sein. Er darf nicht in einem verwandtschaftlichen, sonstigen
rechtlichen oder wirtschaftlichen Verhältnis zum Darlehensnehmer stehen und darf kein
eigenes Interesse am Ergebnis des Gutachtens haben. Der Gutachter darf auch nicht den
Beleihungswert festsetzen oder den Kredit bearbeiten. Die Sätze 1 bis 3 gelten auch für
anerkannte Schätzer, Broker oder technische Sachverständige, auf deren Schätzung oder
Besichtigungsbericht im Gutachten Bezug genommen wird.
(2) Gutachten von bei der Pfandbriefbank angestellten Gutachtern dürfen nur dann
der Schiffsbeleihungswertermittlung zugrunde gelegt werden, wenn die betreffenden
Gutachter im Rahmen der Aufbauorganisation der Pfandbriefbank nur der Geschäftsleitung
verantwortlich sind oder ausschließlich Teil einer Gutachtereinheit sind, die
unmittelbar der Geschäftsleitung unterstellt ist, oder Teil einer alle betreffenden
Gutachter zusammenfassenden Einheit und auch im Übrigen bis einschließlich der Ebene
der Geschäftsleitung nicht einem Bereich der Pfandbriefbank zugeordnet sind, in dem
Schiffskreditgeschäfte entweder angebahnt oder zum Gegenstand des einzigen Votums
gemacht werden.
Teil 3
Wertermittlungsverfahren
§ 9 Aktueller Marktwert
(1) Der aktuelle Marktwert ist der geschätzte Betrag, für welchen ein Schiff am
Bewertungsstichtag zwischen einem verkaufsbereiten Verkäufer und einem kaufbereiten
Erwerber, nach angemessenem Vermarktungszeitraum, in einer Transaktion im gewöhnlichen
Geschäftsverkehr verkauft werden könnte, wobei jede Partei mit Sachkenntnis, Umsicht
und ohne Zwang handelt.
(2) Für die Ermittlung des aktuellen Marktwerts ist von einem charterfreien Schiff
auszugehen. Wenn aus den Verkäufen gleichartiger Schiffe ein Basispreis abgeleitet
worden ist, ist dieser den Besonderheiten des zu bewertenden Schiffes anzupassen.
§ 10 Durchschnittlicher Marktwert
Der durchschnittliche Marktwert ist der Durchschnittsbetrag der Marktwerte eines
gleichartigen Schiffes für die zugrunde zu legenden letzten Kalenderjahre vor dem Jahr
der Wertermittlung.
§ 11 Neubaupreis
Der Neubaupreis ist der mit der Werft vertraglich vereinbarte Baupreis zuzüglich
Nebenkosten wie Bauzeitenzinsen, Kosten der Bauaufsicht sowie der Erstausrüstung,
sofern die Nebenkosten angemessen und üblich sind.
§ 12 Kaufpreis
Der Kaufpreis ist der vertraglich vereinbarte Preis für den Erwerb des zu bewertenden
Schiffes. Kaufpreis ist auch der Preis, der für den Erwerb eines Bauvertrags über ein
Schiffsbauwerk oder ein in Zukunft zu bauendes Schiff vereinbart wird.
§ 13 Wertermittlung bei Schiffsbauwerken
Bei Schiffsbauwerken ist als Schiffsbeleihungswert der Zustandswert zu ermitteln. Der
Zustandswert entspricht dem Bautenstand, der durch einen technischen Sachverständigen
oder die Werft schriftlich zu bestätigen ist. Im Rahmen der Beleihungswertermittlung
sind die Baubeschreibungen, die Bauzeichnungen und die mit der Werft geschlossenen
Verträge einzusehen.
Teil 4
Überprüfung der Schiffsbeleihungswertermittlung und
Inkrafttreten
§ 14 Überprüfung der Grundlagen der Schiffsbeleihungswertermittlung
IX
V. Appendix
(1) Bestehen Anhaltspunkte, dass sich die Grundlagen der
Schiffsbeleihungswertermittlung nicht nur unerheblich verschlechtert haben, sind diese
zu überprüfen. Dies gilt insbesondere dann, wenn das allgemeine Preisniveau auf dem
jeweiligen Schiffsmarkt in einem die Sicherheit der Beleihung gefährdenden Umfang
gesunken ist. Der Schiffsbeleihungswert ist bei Bedarf zu mindern.
(2) Soweit nach anderen Vorschriften eine weitergehende Verpflichtung zur Überprüfung
des Schiffsbeleihungswerts besteht, bleibt diese unberührt.
§ 15 Inkrafttreten
Diese Verordnung tritt am 1. Juli 2008 in Kraft.
X
V. Appendix
Appendix 2:
17
Executed sales of container ships 2009 – 02/2010
200 - 499 TEU
Name
IMO
Baltic Tern
Ute Johanna
Van Phuc
8714114 1989 Daedong Shipb.
9118355 1995 Kröger Werft
9131008 1996 Dae Sun Shipb.
Blt.
Yard
Korea
Deutschland
Korea
Country
IMO
Country
TEU
357
366
404
TEU
14 t
220
Reef cranes Sales - date Price US-$ Source
48
0 19.06.2009
0 04.12.2009
0 15.01.2010
1,2 Clarkson
1,625 Clarkson
2,8 Clarkson
500 - 999 TEU
Name
Blt.
Yard
TEU
CMA CGM North Africa 2 8403595 1984 Sietas
Deutschland
Tugela
8405921 1985 Sietas
Deutschland
CMA CGM North Africa 1 8411281 1985 Sietas
Deutschland
Believer
9031454 1992 Sietas
Deutschland
Cape Horn I
9004229 1992 MTW Schiffswerft Deutschland
Caravel Pride
9037264 1994 Fosen Mek Verkste Norwegen
Cocopalm Isle
9103154 1994 Shin Kurushima
Japan
856
754
856
510
923
585
662
Hibiscus Isle
9088641 1994 Shin Kurushima
662
Rio Bogota
ID Tuxpan
MOL Ambition
West Scent
Leo Island
Glenmoor
Sky Bright
Hannes C
Sky Light
Bright Gold
K-Wind
9100243
9065297
9077202
9132703
9146792
9118575
9141089
9138666
9129457
9154830
9160944
Agaman
Kaido
9212448 1999 Yichang Shipyard
9209908 1999 Murakami
China
Japan
1994
1994
1994
1995
1996
1996
1996
1996
1996
1997
1999
Japan
Orskov Yard
Dänemark
Orskov Yard
Dänemark
Iwagi Zosen
Japan
Iwagi Zosen
Japan
Murakami
Japan
Singmarine
Singapur
Neue Brand Werft Deutschland
Mawei Shipyard
China
Husumer Schiffswe Deutschland
Kyokuyo Shipyard Japan
Qingshan
China
703
703
818
954
500
605
724
740
746
848
518
518
566
Shimanami
9196345 1999 Murakami
Japan
580
Resolution
9202780 1999 Hakata Zosen
Japan
855
The Alder
9200031 2000 Celik Tekne
Türkei
797
TEU Reef cranes Sales - date Price US-$ Source
14 t
2x80
629
27.11.2009
1,7 Clarkson
80 2x40
532
12.06.2009
2,1 Clarkson
50 2x80
629
03.11.2009
1,5 Zachariassen
50
0 30.10.2009
335
1,5 Clarkson
635 204 2x40
27.11.2009
2 Clarkson
408
75 2x35
08.01.2010
4,25 Clarkson
520 150 2x40
02.10.2009
6,5 Clarkson
06.10.2009
5 Zachariassen
520 150 2x40
02.10.2009
6,5 Clarkson
06.10.2009
5 Zachariassen
432 120 2x40
28.08.2009
2,5 Clarkson
432 120 2x40
08.01.2010
2,25 Compass
100 2x35
22.05.2009
5,25 Clarkson
744 100 2x35
27.03.2009
6,4 Clarkson
100 2x36
06.03.2009
5,75 Clarkson
425
50 2x40
15.01.2010
5,5 Clarkson
465
70 2x40
20.11.2009
4,5 Compass aber
60 2x40
430
27.02.2009
6,4 Compass
514
65
0 20.11.2009
4,5 Compass aber
50 2x36
06.02.2009
7 Clarkson
84 2x40
280
30.10.2009
4 Compass
03.11.2009
3 Zachariassen
2x40
270
05.10.2009
5 THB
100 2x36
17.04.2009
7 Compass
27.03.2009
6,75 Clarkson
396 100 2x36
17.04.2009
7 Compass
650
13.05.2009
4
104 2x40
Clarkson
505
23.10.2009
2,5
157 2x40
Compass
1000 - 1999 TEU
Name
IMO
Blt.
Yard
Marcommander
Seven Seas Aurora
Scio Star
Ocean Hope
2 GO 1
Cape Town Bridge
Cape Arago
Durban Bridge
Anna E
Albedo
Kapitan Byankin
Marcatania
SITC Hakata
Sunman
Danu Bhum
Bani Bhum
Montania
OOCL Ability
Crillon
Yuriy Ostrovskiy
MOL Bright
Fremantle Bridge
Java Bridge
ACX Dahlia
8203581
8417211
8513819
8717518
8908521
9014107
9041174
9014080
9007518
9041162
9088902
9070046
9104990
9104512
9112698
9106895
9117181
9159842
9159854
9101792
9162423
9181730
9181754
9167473
1983
1985
1987
1989
1990
1991
1992
1992
1992
1993
1994
1994
1995
1995
1996
1996
1996
1997
1997
1994
1998
1998
1998
1998
HDW
Deutschland
Flender
Deutschland
Bremer Vulkan
Deutschland
Bremer Vulkan
Deutschland
Sietas
Deutschland
Shin Kurushima
Japan
MTW Schiffswerft Deutschland
Shin Kurushima
Japan
Warnow Werft
Deutschland
MTW Schiffswerft Deutschland
Szczecinska ShipyaPolen
Schichau Seebeck Deutschland
Shin Kurushima
Japan
Singapore Shipb. Singapur
Singapore Shipb. Singapur
Lenina Stocnia GdaPolen
Imabari
Japan
Imabari
Japan
Imabari
Japan
Naikai Zosen
Japan
Naikai Zosen
Japan
Kanasashi H.I.
Japan
Country
TEU
1.033
1.190
1.586
1.799
1.048
1.380
1.066
1.380
1.452
1.066
1.012
1.687
1.012
1.613
1.018
1.018
1.504
1.560
1.560
1.012
1.032
1.064
1.064
1.675
ACX Magnolia
Ocean Prosper
Ocean Progress I
Sunrise Express
Fesco Ayon
Fesco Aleut
Johanna Russ
Martha Russ
HS Schubert
Viking Eagle
MSC Singapore
Fesco Agun
X-Press Annapurna
9167461
9152923
9289051
9330769
9334966
9324954
9346574
9346562
9337597
9312640
9324978
9406831
9357535
1998
1998
2004
2006
2006
2006
2006
2006
2006
2006
2007
2008
2008
Kanasashi H.I.
Japan
Guangzhou Wench China
Dae Sun Shipb.
Korea
Jinling Shipyard
China
Jinling Shipyard
China
Jiangdong ChangjiaChina
Jiangdong ChangjiaChina
Jinling Shipyard
China
Jinling Shipyard
China
CSBC
Taiwan
1.675
1.684
1.740
1.043
1.102
1.102
1.118
1.118
1.740
1.740
1.118
1.080
1.700
X-Press Dhaulagiri
Cynthia
9357547 2008 CSBC
9348182 2009 Wadan Yards
Taiwan
Deutschland
1.700
1.698
Driever
9354648 2009 Wadan Yards
Deutschland
1.698
Wan Hai 172
Wan Hai 171
9380269 2009 CSBC
9380257 2009 CSBC
Taiwan
Taiwan
1.800
1.800
TEU Reef cranes Sales - date Price US-$ Source
14 t
75 2x40
700
30.10.2009
2,7 Clarkson
75
0 20.02.2009
954
1,8 Clarkson
70 3x40
1.128
13.11.2009
2,7 Compass
70 3x40
1.353
03.07.2009
2,3 Clarkson
750 100 1x50, 1 03.11.2009
3,1 Zachariassen
0 27.03.2009
1.182 200
3,75 Clarkson
0 06.10.2009
755 100
3 Zachariassen
0 27.03.2009
1.182 200
3,75 Clarkson
75
0 31.08.2009
1.000
3 THB
0 06.10.2009
755 100
3 Zachariassen
640
90
0 08.01.2010
3,25 Clarkson
1.191 152
0 06.11.2009
4 - 4,5 Clarkson Auktio
640
90
0 08.01.2010
4 Clarkson
1.258 206 2x40, 1 15.01.2010
6,6 Compass
100 2x40
23.01.2009
5,9 Zachariassen
100 2x40
30.01.2009
5,9 Compass
0 27.11.2009
1.180 200
6 Clarkson
0 21.08.2009
1.218 200
6,5 Clarkson
0 12.06.2009
1.218 200
6 Clarkson
640
90
0 08.01.2010
3,25 Clarkson
900 100
0 08.01.2010
6,8 Clarkson
960 150
03.11.2009
6,5 Zachariassen
0 08.05.2009
960 150
7,3 Clarkson
100
0 25.09.2009
6,5 Clarkson
08.05.2009
7 Compass
100
15.01.2010
7,75 Clarkson
1.079 160 3x45
25.09.2009
7,5 Clarkson
1.300 300 2x45
25.09.2009
13,25 Clarkson
0 14.07.2009
655 180
14 Zachariassen
698 220 2x45
06.02.2009
15 Bruhn
700 220 2x45
08.01.2010
13,25 Clarkson
692 220 2x45
15.01.2010
13 Clarkson
692 220 2x45
15.01.2010
13 Clarkson
1.295 300 2x45
02.01.2009
18,5 Clarkson
1.295 300 2x45
20.11.2009
15,5 Platou incl. TC
700 220 2x45
26.01.2010
13,5 Clarkson
700 220 2x45
21.07.2009
14,5 Clarkson
2x40
1.100
30.06.2009
20 Platou
11.08.2009
17,25 Zachariassen
2x40
1.100
26.06.2009
20 Clarkson
0 31.07.2009
1.230 330
22 Platou
02.10.2009
€ 15,00 Clarkson
0 02.10.2009
€ 15,00 Clarkson
1.230 330
30.04.2009
20
0
Platou
0 31.01.2009
20 Barry Rogliano
XI
V. Appendix
Fehler! Keine gültige Verknüpfung.
Source: Holst, B.,2010, Ingeneurbüro Weselmann, Hamburg , Germany
23
Appendix 3:
Source: in reference to: Statement of Dr. Klaus Stoltenberg, Nord/LB, at 13.Hansa-Forum
2009: Example of Containership 5.300 TEU, Delivery 2009, amounbt of credit USD 62 m.
Oktober
2006
Juni 2008
April 2009
August
2009
Juni 2010
Ship Value in
USD
80,5 m.
90 m.
50 m.
56,5 m.
?
Charter level
(market)
39.000
39.000
30.225
7.300
Auflieger
Rating
1(AA+)
2
10
12
15
LGD
19,1%
45,6%
48,3%
48,3%
48,3%
Asset
backing
(as of SolvV.)
481.000 €
1.160.000 €
5.400.000 €
7.600.000 €
12.600.000 €
XII
V. Appendix
27
Appendix 4:
Comparison of deviation from market value
(initial HSES / HSES-PWC Version)
Source: 2009, Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V.
(Hamburg Shipbrokers Association)
Appendix 5:
Comparison of Ship Values estimated by LTAV and reference value 2009/2010
28
XIII
V. Appendix
$ m.
Comparison of Ship Values estimated by LTAV and
reference value 2009/2010
Age 3 - 5
100
90
80
70
LTAV
60
Clarson
estimates
50
Sales
40
30
20
10
0
725
1000
1700
2750
4250
6500
TEU
Source: 2010, Data: Ingenieurbüro Weselmann GmbH, Hamburg, Germany
Appendix 6:
Example of a Long Term Asset Value by Ingenieurbüro Weselmann
30
XIV
V. Appendix
XV

Hochschule Bremen

Transcription

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