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lloydslist.com | No. 60,958 | Wednesday July 3rd, 2013 Leading maritime commerce since 1734

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02/01/2013

02/07/2013

Source: Baltic Exchange

Silent crisis grips Dutch single-ship funds

EXCLUSIVE

NEWS HIGHLIGHTS

Netherlands-based funds declared insolvent and banks force many others to restructure
DAVID OSLER

THE Netherlands single-ship companies are facing a silent crisis that has similar proportions to that affecting the German KGs on which they are modelled, with local shipping sources reporting tens of insolvencies already and expecting many more over the remainder of this year. The development has attracted relatively little publicity so far, however, as those in the firing line tend to be professional investors rather than the middle-class professionals seeking retirement income who form the mass base of the KG market. Nevertheless, recent Dutch shipping bankruptcies include several limited partnerships, known as commanditaire vennootschappen or CVs, associated with the likes of JR Shipping, Reider Shipping and Navigia. The main Dutch banks are also understood to have exposure to the situation, albeit largely through their retail networks and not through their investment arms. In addition to insolvencies already in the public domain, many more are in restructuring talks with their banks, according to Carel van Lynden, a shipping partner with prominent Rotterdam law firm AKD. There are no official figures for the number of ships owned in the Netherlands through CVs, which are similar in concept to the German Kommanditgesellschaft system and similar partnership set-ups in Scandinavian countries.

Experts estimate that some 10%-15% of Dutch single-ship companies have folded.

Mr van Lynden estimates that there are probably 150-200, which is only about a 10th of the total believed to exist in Germany. Although the overall number is far smaller, however, the proportion of funds that have gone under is likely to be similar, at around 10%-15%. Mr van Lynden said the system had not taken off to the degree that it had in Germany for two main reasons. First, the Dutch shipping community is smaller than the German shipping community in absolute terms. Second, the Dutch government abolished many of the associated tax advantages some years ago, making such funds much less attractive to small investors. Dutch companies have also tended to use CVs to finance vessels for their own purposes, rather than

own them with a view to putting them on long-term time charter contracts across the globe. The upshot is that the link with myriad middle-class small investors in shipping who in Germany typically invest 5,000-10,000 in a KG partnership, expecting solid returns on a safe asset has not been so pronounced. However, the structure has proved appealing to master-owners with just one or two ships, often engaged in the shortsea trades, several of them badly hurt by the shipping downturn. Meanwhile, some larger Dutch companies have chosen to own their entire fleet through CVs and some of these have had to undergo restructuring. In some instances it works, like in Germany. But there have been some bankruptcies as well, and more are to

be expected, Mr van Lynden warned. Some of those CVs could not be saved, and there are many restructurings going on. Of course we cant mention names, as we are involved in some of them. A finance source familiar with both the Netherlands and Germany confirmed that there were problems with CVs, although they have not hit the headlines, as the funds were not marketed to doctors and dentists, as the popular stereotype brands KG investors. Tens of thousands of such investors piled into shipping in recent decades, seeking above-average returns on a seemingly safe assetbased play, he said. Many have seen their investment wiped out, as hundreds of KGs folded due to the poor state of shipping in recent years, putting the issue very much on the political agenda. The [Dutch] investors generally tend to be professional investors rather than people just looking for the tax breaks, the finance source said. Youll probably find that a lot of the CVs are tied in to the shipping companies themselves, and because of that there is a bit more hope. German KGs have a ship on the water with no employment, where the Dutch CVs, because they have been instituted by the companies, can be put into their own trades. They are losing money today of course they are but they can keep going as long as the banks are willing to be patient and are seeing interest covered. Another good portent is that because the Dutch shipping scene is structurally centred on shortsea trades, comprising general cargoships and smaller boxships deployed on intra-European feeder runs, it enjoys sounder short- and medium-term prospects. n
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