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SEASPAN
Riding shipping's new wave
VANCOUVER — Gerry Wang
likes to take his clothes apart. Not literally; the 46-year-old shipping
magnate and chief executive officer of Seaspan Corp. wears a
conservative dark suit and sports the white collar and cuffs of the ship's
captain he once aspired to be.
He uses the suit as a symbol.
The buttons might be from India, he says during an
interview in his Vancouver office, which provides a view of container ships
in Burrard Inlet. The wool might be Australian, the fabric might cut and
sewn in Quebec. His suit, like a staggering amount of what the world uses,
wears and buys, would not exist in its current form without those ships he
can see from his window.
"Through globalization, through taking
advantage of comparative advantages of different places in the world, we are
making the whole thing work," Mr. Wang says.
That "thing" is the movement of
everything from DVD players to lawn chairs to toothbrushes around the world
in metal containers, a system that's transformed global trade over the past
50 years, and that Mr. Wang considers the underpinnings of an empire.
Seaspan is a brash new player on the global
shipping scene, where it's sailed from nowhere to a multibillion-dollar
operation that counts some of the biggest shipping lines in the world as its
customers.
Borrowing from an airline industry model, Seaspan
leases container ships to shipping lines, generating steady cash flow
through long-term leasing deals while insulating itself from nasty headaches
like rising fuel costs. It's focused on standardizing container ship design,
ensuring that the mechanical systems and fixtures are consistent in ships,
regardless of size.
That makes it more feasible for shipping lines to
forge alliances like those in the airline sector, because ships become
interchangeable.
Mr. Wang wants to build a fleet of more than 100
ships, collectively worth between $7-billion and $10-billion (U.S.), by
2010.
Seaspan is incorporated in the Marshall Islands
and has executive offices in Hong Kong and Vancouver.
The only North American-listed company to turn a
container-ship leasing business into a publicly traded, dividend-paying
vehicle, Seaspan has shown a nearly piratical talent for finance, raising
about $5-billion in debt and equity since going public in 2005.
The company, which is scheduled to release
first-quarter results today, this month launched a nearly $200-million
public offering, the proceeds of which will pay down debt and fuel its
expansion plan. That foray comes as several would-be competitors, including
Seacastle Inc., a division of New York-based Fortress Investment Group
LLC, have cancelled or delayed financings as a result of market
conditions.
Mr. Wang sees the rough financial seas as an
opportunity for Seaspan to make "opportunistic" acquisitions when
competitors start taking on water.
Similar to a real estate or other income trust,
Seaspan focuses on cash flow and dividends, generating income through
long-term lease agreements with shipping lines.
Parts such as engines, boilers and even door
fixtures are uniform on each ship, allowing Seaspan to wring discounts from
its suppliers through bulk purchases and making it easier for crews to be
swapped from one route to another.
As Seaspan has built its fleet - it now has 29
ships on the water with another 39 on order for delivery over the next four
years - sales have grown, but some of the company's financial engineering
has made for choppy results.
In 2007, citing interest rate swap agreements that
went the wrong direction, Seaspan reported a loss of $10.4-million or 20
cents a share on sales of $199.2-million. That compared with a profit of
$37-million or 98 cents a share on sales of $118.5-million the previous
year.
The company reported "normalized"
earnings (excluding the swap agreements but not other items), of
$62.6-million or $1.18 a share for 2007, compared with $38-million or $1.01
in 2006.
Seaspan Corp. is the product of an unlikely match
between the shipping savvy and connections of Mr. Wang - who was born in
China and was a rising star in its shipping sector before moving to
Vancouver in 1990 -and the financial muscle of Montana billionaire Dennis
Washington, who has interests in mining, real estate and aviation.
Mr. Wang was working for Seaspan International
Ltd. - an unrelated company controlled by the Washington family - and was a
consultant to Chinese clients when the Asian financial crisis hit in the
late 1990s.
One of Mr. Wang's clients, a state-owned Chinese
shipping line, wanted to snap up some South Korean ships being sold at
fire-sale prices. But financing for such a deal was not readily available.
Mr. Wang came up with the notion of buying the
ships and then leasing them to the client, using capital put up by Mr.
Washington. An IPO followed in 2005.
A whirlwind of ship orders last year has raised
worries of a possible glut.
Such questions have loomed even larger as
financial woes in the United States have worsened.
There may be bumps, even crashes, Mr. Wang
concedes. But he argues that the demand for more, bigger, container ships is
not going away.
Consumers still want their cheap shoes. And
Seaspan is poised to help deliver them.
"I believe globalization will not stop. I use
the expression - you're used to watching HDTV - and someone wants to bring
you black and white. You'd say no. We will have ups and downs.
"But the overall trend of globalization is
unstoppable."
Ship shapes
Leasing is becoming more common in the shipping
sector, in part because new ships are getting bigger, and cost upward of
$150-million to build.
Post-Panamax ships - those too big to fit through
the Panama Canal - have become commonplace on many routes. And those ships,
which have a capacity of 6,000-plus TEUs (twenty-foot equivalent units, the
volume measurement for a standard-sized shipping container) are pipsqueaks
compared with the Emma Maersk, which was launched in 2006 and has a capacity
of at least 11,000 TEUs. The Emma Maersk is nearly 400 metres long and 56
metres wide.
There are more than 100, 10,000-plus TEU ships on
order. The appeal? Lower costs. Some studies suggest bigger ships can shave
between 10 and 15 per cent from sea transport costs.
- 2008 April 28
GLOBE
& MAIL by Wendy Stueck
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