#118: Braxton Gann; Containerships; Shipping; Distressed Mortgage Notes

Subscribe

If you like The Intelligent Investing Podcast, please consider
subscribing on:


Apple Podcasts

YouTube

Stitcher

TuneIn

Spotify

Podbean

iHeart Radio

  Summary After global merchandise trade dropped ~20% in
the wake of the Covid-19 policy response, shares of shipping
companies collapsed, underperforming even the airline ETF. The
industry now trades cheaper than at any time on this side of the
millennium - less than 25% of liquidation value for some companies.
Braxton believes this is unwarranted. Even during the seasonally
weakest month of year, tanker earnings are still covering operating
costs. In spite of analyst downgrades and widespread panic, tanker
companies have used hefty profits from storing excess oil to
rapidly deleverage.   Structural Balance Although ULCV
containerships are currently garnering far better rates than
tankers, Braxton feels that this masks a precarious structural
balance between supply and demand. Containership demand has
actually plummeted, and rates are only being propped up by an ad
hoc cartel of dubious legality. Whereas ample tanker demolition
candidates provide a cushion, a young fleet severely limits
scrapping potential for ULCVs. Worse, new capacity to the tune of
24% of the existing ULCV fleet is set to hit the water over the
coming years.   International Seaways Braxton discusses
corporate governance in the industry and shares a favorite current
tanker pick - International Seaways. INSW trades at half of
liquidation value, with its strong balance sheet further fortified
by an FSO joint venture with Euronav that generates consistent
contracted cash flow. The company is repurchasing shares.  
Distressed Mortgage Notes Braxton outlines his investment in the
Navios Maritime Acquisition Corporation First Priority Ship
Mortgage Notes due 2021. The bonds trade at a highly distressed
valuation, despite solid covenants and a short time to maturity.
Braxton says that the value of the underlying fleet and NWC fully
covers the bonds and implies a positive value for the equity.
  NMAC is now aggressively repurchasing bonds out of cash flow
(most of which is contracted). While the embezzlement ratio is on
the high side even for the shipping industry, Braxton feels that
management incentives are likely to favor noteholders.   Show
Links

Never Navios (blog post)

Navios Bonds (SEC Filing)



 
Staying In Touch With Braxton Gann

Twitter

Blog



 
Staying In Touch With Eric Schleien

Facebook

YouTube

LinkedIn

Twitter

Instagram

GSCM