Ship operators worldwide face “significant” refinancing and default risks, driven by tight bank funding, industry overcapacity, depressed trading conditions, high operating costs and declining ship charter rates, according to a report by Standard & Poor’s Ratings Services, “Global Ship Operators Scramble for Liquidity to Stay Afloat.”
The report found that ship operators are finding it increasingly difficult to raise capital for new ships and to refinance existing loans, while banks, faced with their own financial difficulties and a riskier shipping market, are imposing tougher conditions for lending and charging higher premiums.
“We expect asset values and the performance and credit quality of shipping companies to remain weak in the coming quarters, which will further exacerbate banks’ reluctance to lend,” said Izabela Listowska, Standard & Poor’s credit analyst, in a written statement. “As a result, we think shipping company defaults and financial restructurings are likely over the next few quarters.”
“A company’s ability to maintain adequate liquidity will be critical to withstanding the difficult industry challenges,” Listowska added.