Thursday, October 15, 2009

Bankers Fear Shipping and Trucking Foreclosures Worldwide

Softly, Softly Approach Taken by Logistic Industries Creditors
Shipping News Feature

GLOBAL NEWS – A review of how banks are handling outstanding debt in the shipping and freight transport industries generally reveal that they are showing great reluctance to seize assets and foreclose even when customers credit limits are exceeded. Banks, who have been reviled of late as most ordinary citizens and business leaders blame them for the parlous state of the world’s economies, are having to take a more measured view of the debt levels incurred by some of their customers.

Smaller businesses are not immune of course when bankers know they can be first to help themselves to a company’s assets, the larger companies and corporations however offer an entirely different prospect.

The simple fact is that for a bank to claim a fleet of trucks or ships and close down the operator is potentially disastrous. Creditors can only sell on assets if there is a market for them and buyers of this size are always shrewd enough to calculate the lowest possible bid. Taken to extremes this is why we have seen a rush by governments to support the key transport groups around the world, SNCF in France receiving €12 billion in aid, Hapag Lloyd from Germany, CMA CGM cap in hand in France again, the list goes on and on.

The irony of this situation is of course that in many countries, Britain and the US being prime examples, the banks offered the same conundrum to the authorities themselves when they were forced to accept the consequences of disastrous lending policies. In Britain several of the larger banks are now effectively state controlled thus producing an unwitting, if indirect route, to what is effectively nationalisation of larger transport groups who accept aid for outstanding debts. In the natural order of things these are the very groups that, under a free market system, would normally be allowed to go to the wall.

Companies who have run tight efficient organisations will be naturally aggrieved that they will not reap the rewards of their good management as compared to their inefficient competitors. Rail and multi modal freight groups are beginning to complain bitterly that the reluctance to take action against truck companies with large outstanding debts is unfair competition.

A CSX executive said yesterday the rail and intermodal operator was being affected adversely by support given by the lenders of road operators. Although not mentioned by name YRC Worldwide Inc have been able to extend credit again recently to the chagrin of other truck and rail groups who feel that overcapacity in the haulage market is adversely affecting them just as on the high seas container ships lay idle awaiting cargo that no longer exists.