Restructuring and the Shipping Industry, Never a Pleasant Combination
Earlier in the week, Basil Karatzas presented at the Tugs, Towboats, Barges (TTB) Virtual Conference hosted by MarineLog magazine. The topic of the presentation was titled "What to Do When the Bottom Falls Out: Everything You Hope You’ll Never Need to Know about Restructuring", inspired by the current restructuring / bankruptcy case of a 1918-establisshed Jones Act tank barge company. The presentation was intended to draw lesson from a very high profile and highly visible bankruptcy case rather than criticize or second-guess management decisions.
This has been the second time at MarineLog hosts the TTB Conference, in both cases virtually, but with plans to be "real-time" next year. The conference hosted a high caliber list of guests and speakers, staring with Ms Jennifer Carpenter, CEO and President, American Waterways Operators (AWO). The conference had been very well attended and commented on. Full agenda and presentations and audio can be accessed on demand by clicking here..
On Restructuring and the Marine Industry, the main points of the presentation are as follows:
- Stay alert, stay prepared, be pro-active to avoid getting the Company in a situation that will result into a Financial Restructuriing
Shipping is a risky business (that is high volatility market) and "accidents" happen, and shipping companies can be found in dire situations. In such an unfortunate event, the guiding principles for action to be taken:
- Things will never be the same again (at least reputationally)
- There is a good chance that things will much uglier very easily, and do not underestimate the gravity of the situation
- Be prepared to make tough decisions under tight deadlines
- Hire early the the best professional advise and expertise money can buy
- Be transparent and forthcoming with all stakeholders, especially with employees, vendors, charterers and regulators; make sure to live up or expected promises and expectations
- "A crisis is a terrible thing too waste" as they say; make sure that the restructuring is an opportunity to put the company on the right course (patently the old course was not working)
- Effectively, most boils down to money and proper financial management: proper financial controls in order not to fall in bad times in the first place, money to de-risk the company as much as possible (i.e. properly insure all insurable risks, etc), money to hire and maintain a most competent work force, , money to hire best professional advice to keep a company out of trouble, to get rid of trouble, to turn the company around.
In short, it's optimal to work hard and be proactive and stay out of restructuring situations. However, if things go wrong, please do not make the mistake to assume that problems will solve themselves: hope is not a strategy. Presume the worst and act fast. And, lots will boil down to financial issues and decisions, and none will be inexpensive.
Our presentation can be found online at both the conference website and also by clicking here!
To read more on the subject, please see "The Marine Industry: Rich in Reorganization Opportunities but Short on Cash" by Basil M Karatzas published in May 2020 at the Turnaround Management Association Journal. The article in pdf can be accessed by clicking here!