The Rise and Rise of VesselsValue

Five years ago, ship brokers were introduced to a scary new phrase, which was to forever disrupt the cozy and somewhat Delphic world of desktop ship valuations. That phrase was “quantitative analyst1”, which first appeared in a Tradewinds article describing the launch of the mapping, ship search and valuation provider, VesselsValue in May 2011. Today, most shipping people are familiar with work of “quants”, and their role in the examination of big data to produce meaningful and useful information, but five years ago, the launch of VesselsValue was nothing short of a revolution.

Behind that revolution was years of hard work. Indeed, the origins can be traced back to 1976, when VesselsValue CEO, Richard Rivlin, joined Clarksons as a trainee ship broker and helped set up a computer system for the Sale and Purchase department. Innovation is a theme throughout Richard’s career. He was a founding member of Braemar Shipbroking in 1983. In 1993, he formed Seasure Shipbroking and it was then that the outline for VesselsValue began to take shape.

The catalyst was the 2008 financial crisis, when a slump in ship sales forced ship brokers to declare that with no “last done” ship sale, the market was illiquid, and therefore ship values could no longer be given.

“This was exactly the time when banks required values,” says Richard. “It was then I decided to activate my plan for VesselsValue.” Together with his brother, Christopher, a professor of mathematics, they built the first version of VesselsValue in Excel. However, the complex multi-regression analysis needed a new approach. Ben Durber and BB Solutions were brought in to develop the model and the website, which went live on Friday 13th May 2011.

Looking back on the last five years, Richard feels the hardest part was building the ship database. “The database had to be in a particular format and structure to ensure high-speed access. We decided to build our own database, which is why we built up a large team of researchers and analysts,” he said.

Ship finance providers, with their familiarity with the role of “quants” and regression models were the first to subscribe to VesselsValue. For them it ticked the boxes of transparency and accuracy. The methodology also satisfied the rigorous requirements of the risk analysis and compliance departments.

The shipping industry was a bit slower to recognize the ascendancy of VesselsValue, but in September 2012, VesselsValue was awarded “Highly Commended” at the Lloyd’s List Global Awards for Business Innovation. Since then VesselsValue has continued to grow and add new features:

  • Friday 13th May 2011: VesselsValue goes live
  • October 2012: Daily historical values added back to 2007
  • November 2012: VV+ search tool added
  • February 2013: LNG and LPG added
  • November 2013: Small tankers added
  • September 2014: Isle of Wight office opened, led by Simon Hastain
  • May 2015: One million valuations!
  • June 2015: London team says goodbye Chiswick, hello Hammersmith
  • June 2015: Discounted Cash Flow (DCF) added to VV$ module
  • July 2015: Adrian Economakis and Georgina Gavin ring the Nasdaq closing bell during MarineMoney week
  • September 2015: VV opens SE Asia representative office in Singapore
  • May 2016: The launch of VV Offshore

The shipping banks have been the driving force behind demands for the valuation of offshore vessels. This sector is currently going through its worst slump in living memory, and the launch of VV Offshore is timely, and mirrors the launch of the original modules of VesselsValue.

Looking ahead, Richard sees the continuing growth of transparency of shipping information for all in the industry. “In shipping, the increasing automation of services will be applied to processes and business sectors, which many previously thought to be impossible to automate,” says Richard.

The VesselsValue state of play in May 2016:

  • Four offices (Isle of Wight, London, Singapore, Stoke)
  • 66 employees and growing fast
  • Cargo Shipping, Offshore, and other departments established
  • 20 languages spoken across the company
  • 300 current clients including the world’s leading banks, funds, ship owners, and others
  • 2,260 total mentions in the press, across 37 countries, ranging from Greece to Fiji
  • Richard Rivlins’s 40th year in shipping!

We’ll leave you with one final thought…

  • The largest taxi operation in the world owns no cars – Uber
  • The largest property rental company in the world owns no property – Airbnb
  • The largest music distribution company in the world owns no music – Spotify
  • The largest shipping valuation company in the world owns no ships – VesselsValue


Notes: 1 According to a search of the Tradewinds archive, the phrase “quantitative analyst” was first used in May 2011, in an interview with Alex Adamou, the quantitative analyst at VesselsValue.


VesselsValue Offshore Featured in Tradewinds

VesselsValue has spent five years honing its skill in general shipping and now turns its hand to offshore

Darrin Griggs Oslo (

London-based VesselsValue has today rolled out a new online service aimed at the daunting task of giving accurate values, with daily updates, for the world’s entire fleet of offshore support vessels (OSVs).

While asset values are the core of the service, it also includes live, interactive maps of OSVs with a wealth of data per ship. A unique feature is that the OSVs can be overlaid on detailed maps of the infrastructure they serve, such as wells, rigs, pipelines, platforms and licence blocks around the world (see story, right).

Using statistical regressions to achieve a “bell-shaped curve” of results, the company is able to crunch big data via an algorithm to peg OSV values within an accuracy of 10%, indicates VesselsValue offshore manager Miles Cole.

And the service already has plenty of data to crunch. Cole says he and his team, including more than 40 analysts, have spent the past 15 months gathering 96 separate lines of data per ship for a whopping 7,200 offshore ships.

Of the total database, about 6,000 of those are platform supply vessels (PSVs) and anchor handling tug supply (AHTS) vessels, while the other 1,200 are fast support vessels (FSV), emergency response and rescue vessels (ERRVs) and oceangoing tugs.

Cole says VesselsValue has approached some large OSV fleet owners who have expressed “shock” at the sheer amount and detail of data it has collected on these ships.

“If a vessel is sold the night the before, we look to be within 10% on either side of the valuation accuracy on that bell-shaped curve. In terms of accuracy for anchor handlers and PSVs, we are in that region now,” Cole told TradeWinds, adding that the service is set to improve as the data grows.

As proof, Cole points to the historical sale of a Solstad vessel. Working from the data today, VesselsValue’s algorithm predicted a price of $18.66m for the sale of the 10,880-bhp AHTS vessel Nor Captain (built 2007), which went for $19m in June 2012.

Cole uses the example of the past sale because so few sales are happening now. With the help of brokers and owners, his team has registered about 660 trading sales from 1990 to 2016.

Broker valuations are the next best thing to trading sales, in terms of the way they feed data into the algorithm to develop accuracy and make comparisons, says Cole. So they also compare the algorithm’s results to 3,000 to 4,000 vessel valuations from offshore brokers.

VesselsValue is entering offshore at a critical time for valuations. Just about everyone in the industry knows OSV values are way down from book values and most owners, if not all, have been forced into large write-downs.

As these assets are connected to loan covenants, values are one of the most watched data points. And in today’s market, producing valuations is no mean feat, because of the severe downturn, lost charters and hundreds of layups, not to mention an extreme lack of trading sales, especially for newer ships.

Pegging asset values, with accuracy, for thousands upon thousands of individual OSVs is a “big data” promise that is certain to meet a wall of scepticism in the offshore sector — but it will not be the first such wall VesselsValue has encountered.

VesselsValue has spent the past five years building up in general shipping, for tankers, bulkers and the like. As a spin-off of Richard Rivlin’s sale-and-purchase specialist Seasure Shipbroking, the company entered general shipping back in May 2011.

It was also at a low point in the cycle and the company encountered its share of sceptics, says VesselsValue communications manager Claudia Norrgren.

“It has taken awhile but people are seeing the value of having this type of data instantly and in having the level of transparency that the market just never was provided before,” said Norrgren.

Today, it generates in the region of 50,000 live valuations daily and also counts about 80% of the world’s shipping banks among its customers, which includes also lawyers and finance houses.

TradeWinds cites VesselsValue on a regular basis in its stories. Some users say its values are “extremely close” in markets with a high volume of trading sales, such as tankers and bulkers, and show “good accuracy”, around 10% deviance in other markets with fewer trading sales, such as LNG and LPG.

Now, the aim is to duplicate the success for vessels in the oil-and-gas industry but the valuation algorithm is especially tailored for offshore vessels, and it is much more complex than many sceptics may first believe.

For the 96 rows of data per ship for the 7,200 OSVs, VesselsValue has detailed all the points that offshore brokers tend take into account for valuations, based on help from unnamed offshore brokers in seven global regions and shipowners, as well.

Along with obvious capacities like dwt, bollard pull and so on, the 96 separate data rows range from the ship design, to the engine type, to the under-deck tanks, to the generators, to winches, to navigation and communications systems. A value weight is given for the country of the equipment’s origin, the yard that built the ship and for the owner that ordered it, or for the owner that sold it.

In addition to these many features, Cole says VesselsValue has also found a high correlation with the oil price, which influences the predicted value by about 80%.

But why go into offshore?

“All of our clients have been asking for it,” said Norrgren.

“When you see values falling and no one can give an answer about where values actually are, then there is a huge gap in the market. There is a gap for clear, transparent valuations for people who have lots of different vessels on their portfolios and orderbooks. We see huge demand from existing and potential clients.”

Shipping Calendar ( Update – May 2014

Shipping Calendar Update – May 2014


I have been updating the Shipping Calendar, and I have been trying to expand the coverage to include commodities events with a significant shipping element. Below is a summary of the forthcoming conferences, including the conferences I hope to attend.


May 2014

Recent additions to the Shipping Calendar include a rice conference in Africa rice-AFRICA conference on Rice for Food, Market and Development, and a wood and paper pulp conference in Brazil – Paper and Wood Pulp Conference. The later takes place in the middle of May, about a month before the FIFA World Cup starts. I have also included a sugar conference, Africa Sugar Outlook, but I am not sure if there is a significant shipping element. The trade in sugar has expanded enormously in the last few years, and requires specialist shipping knowledge. Bulk and bagged sugar shipping and handling might be an interesting one-day conference, and I can help with ideas and speakers if any of the specialist shipping conference organisers are interested.


June 2014

It’s an even year so June means Posidonia, which lasts from Monday 2 June to the Thursday afternoon. I personally am not so fond of the new location, and prefer the shabby but more convenient location of the customs shed of years gone by. If you haven’t been, you should go to at least one Posidonia and crash as many parties as possible. A tempting alternative would be the giant 2000+ delegates Coaltrans Asia event in Bali. Having been to the Coaltrans event in Goa, India, this year, I can say that Coaltrans’ organisation is first-class, with excellent networking opportunities. There was even a special purpose event app so you were always up to speed on when and where to go. After Posidonia, the shipping finance portion of the shipping party moves onto New York, and the Marine Money New York Week from Monday 16 June. Perhaps not as rock ‘n roll as New York but free to attend is Ro-Ro 2014  in the ExCel centre in the east end of London from 24 June.



Not much happening. If you have had your fill of shipping conferences, how about the European International Submarine Races !



The northern hemisphere will be on holiday, but Down Under there is Coaltrans Australia, taking place in Brisbane.



The Autumn conference season begins with SMM  the giant shipping exhibition in Hamburg, Germany. This has a German shipping finance conference on the first day. I have also included Metal Bulletin’s Steel Scrap Conference, which takes place in Rotterdam on the 22 September, but looking at the agenda is may be a bit light on the shipping of scrap – let’s wait and see. One event I may be attending is the The Red Sea and Gulf Bunkering Conference, but the link for the 2014 flutters in and out of view, so I am not sure if this event is on or not.



Following on from German shipping finance conference at SMM, there is a Greek shipping finance conference in Athens organised by Marine Money, plus one on the same day in Brazil. Maybe we can have a live Skype link up and debate? One event I have been to in the past is the Mare Forum event in Amsterdam, Mare Forum Shipowners vs. Capital Providers . I enjoy the format and the informality of the Dutch set-up, ad hope to be there again this year.



A new event to me is Global Shipping Trends & Trade Patterns. With a title like that I don’t know why I haven’t heard of it before, and I will be making an effort to attend this event on Wednesday 5 November in London. At the moment, there does not appear to be a clash between the Informa 27th International Ship Finance & Investment Conference in London on the Wednesday 12 November, and the equivalent Marine Money in New York, and / or the Hansa event in Germany, as was the case last year. However, these other two events has not yet been listed on the respective websites yet. They have already lost the Friday 14 November, as this is taken up with the Tradewinds Dry Cargo Charterers Forum in Geneva, which I did not attend but heard good things about last year.

The following week is a new wet conference, the Tanker Shipping & Trade Conference organised by Riviera, publishers of the magazine of the same title. This starts in London on Wednesday 19 November, and I hope to be there.



Into December, and the Middle East Iron & Steel conference in Dubai starting on the Monday 8 December. This is unlikely to be the last trade conference of the year, but that is as far as I have got at the moment.

If your event is not on the Shipping Calendar and you feel it should be, then send an email to with the details.


Bunker Credit – Right or Privilege?


Ship & Bunker Magazine have given me permission to reproduce this interesting Inside Opinion article.

Inside Opinion is an op-ed industry blog by Ship & Bunker’s anonymous maritime expert. With well over a decade of experience working in world’s biggest bunker markets, our industry insider offers an alternative view on the maritime industry’s talking points of today and tomorrow. Views expressed do not necessarily reflect those of Ship & Bunker, or any companies connected with the Inside Opinion blog.

Industry talking heads have been talking for a few years about a tightening in the credit insurance market. Most bunker companies (with a few notable exceptions, the world’s largest bunker company being one that springs to mind) insure their credit risk and it is mostly done via household name credit insurers you will very likely know the names of.

For some time now cover has been dropping and premiums have been going up. Credit is therefore more expensive to give out. Where there is any realistic possibility of a default or loss, the insurers will not even entertain the possibility of cover.

Increasingly the only accounts you are likely to get insurance cover on are the ones you will never need it on. Bunker companies are under pressure from their banks and trade creditors to have as high as percentage of credit insured as possible, so as cover levels drop the credit managers are under more and more pressure to push the levels up. It isn’t easy.

Typically, as a broad (and slightly irresponsible generalisation), accounts where it is not possible to obtain financials mean no cover or cover at levels so far below what you are trading at it is barely worth the bother.

The insurance companies will not typically look at fleet, deployment or freight CoAs in lieu of financials, so for example great swathes of household name Greek shipping companies have cover levels way, way below where you might expect. Yes, even the really huge ones.


Credit is a Right not a Privilege

There has been a feeling amongst some sections of the market generally that credit for bunkers is a right not a privilege, and that there is no need to work hard for it. Because bunker suppliers are in some instances desperate enough for volume that they are tragically willing to forgo proper due diligence for credit, the bunker companies who do do things properly and do request financials are at a disadvantage. So a lot of companies have a policy not to reveal financial information because there is little compelling them to do so.

It is the equivalent of demanding to borrow a million dollars from the bank at a ludicrously low interest rate for a short period of time but then getting uppity and insulted because the bank want access to your credit record information.

It is ridiculous of course, but it is merely an unpleasant by-product of the super-competitive markets we work in.

To carry on the metaphor, it is the further equivalent of leaving the bank who wanted access to your credit record in a huff, going next door to a different bank who will give you an even dafter rate, take you out for dinner and drinks somewhere obnoxiously expensive, complement you on your tie and not ask a single question about your credit record. You cannot blame anyone for “going next door”.


No Assets, No Owned Vessels

It happened to me just this week. A company approached us for credit for a stem – no assets, no owned vessels, a pure charterer only been trading for a couple of years. Offshore holding company owned, Hong Kong office, Chinese backed, request right out of the box apropos of nothing for three quarters of a million US$ credit on 45DD terms. I asked for some financials, and information about the fleet and employment of the tonnage, plus some indication of the level of cargo contract cover. They refused outright citing company policy.

Someone else fixed it later the same day for $2 margin per tonne. Mindblowing isn’t it?

The only ones who benefit really are the law firms who end up arresting the vessels because “the guys next door” had a stupid credit policy that played second fiddle to commercial ambition. We can only hope that in the future this sort of irresponsible credit policy is finally put out to pasture as expensive lessons are learned, re-learned and learned again for good measure, and the markets finally wake up to the fact that if you want credit for your bunkers you have to have some sort of transparency. Let’s just say I’m not holding my breath.


Reproduced with kind permission of Ship & Bunker (


VesselsValue Does it Again!

I admit back when VesselsValue was launched I was one of the sceptics. How was a tiny ship-broker going to deliver a reliable and consistent service to rival that of the bigger brokers. But I, like many others, were looking through the wrong end of the telescope. It is not the broking side that is the driving force, it’s the technology and ability to manipulate algorithms. Today VesselsValue is a tool used by nearly 75% of the currently active banks, according to Paddy Stern, the Director of UK sales.

“Business Model Changer” is one way to describe the new VesselsValue product, which is launched today. VV@ ( is a mapping tool. So what, you say? That’s nothing new – there’s lots of AIS based ship tracking websites. But combined with ship specifications and values? With VV@ you can track ships, see if they are laden or in ballast, and see the ship specifications. There is full integration with the portfolios already created on VesselsValue. Still waiting for your broker to send you the latest position lists? Create your own. Want to know where you rivals ships are loading? These are the obvious uses.

What about bunker sales? You could track vessels calling at the bunkering anchorages in Singapore, then track their voyages. VV@ has the speed and consumption, and from this you could see when the vessels might be requiring the next stem.

The part that really excites me, is that this is clearly just the start of what can be done with the VV@ mapping tool. As VesselsValue apply their undoubted technical ability this map tool is going to develop functions we can only dream about. In my case I dream of mapping cargo demand using vessel movements, creating what-ifs and scenarios, which sounds like the confessions of a shipping geek. I think VV@ will make my dreams come true.

Some Shipping Finance Conference Themes 2013 / 2014

Some Shipping Finance Conference Themes 2013 / 2014

The 6th International Shipping Marine ServicesCapital Link Forum event in London kicks off the shipping finance conference season. The Capital Link Forum event itself on Thursday 25 September was a slick affair, carefully managed by Nicolas Bornozis and his team. As usual, the event was held at the London Stock Exchange and takes the formula of a panel and a moderator for each section. Below are a selection of themes from the Capital Link Forum that are likely to come up throughout the coming 2013 / 2014 shipping finance conference season.

‘Amend and Pretend’

Amend and Pretend’ is a funky phrase mentioned by Elinor Dautlich (Holman Fenwick Willan LLP) which sums up neatly what the banks have been doing since 2008. The overall view is that amending and extending loan agreements is the default setting for many banks that did not make large enough provisions at the start of the Financial Crisis. Summarising comments from the panel at the Capital Link Forum, today, there are less banks in shipping finance, and the volume of lending is down 30% or more on 2008. On the sale of portfolios, which is the area of expertise of Mr Bart Veldhuizen, most of the available portfolios have been examined. The issue holding up further sales is documentation, in particular transfer restrictions. But restructuring loans will not last for ever. The question is; where is shipping finance in the debt cycle? Is is still ‘Amend and Pretend’ or foreclosures or is there a recovery taking place?

Regulation, Regulation, Regulation

Christopher Conway of Citibank noted that a large amount of management time is now spent of understanding and complying with regulations. This will be the main focus of banks going forward. This is something that shipowners are going to have to get their heads around in order to be able to present projects that meet the regulations. Is the newbuilding order a genuine business proposition, or it is a way of parking money away from the government? This is a great opportunity for conference organisers to find a regulator or a lawyer who can break the regulations and the consequences down into easily understood chunks.

Due Diligence

Due diligence and compliance are the growth areas in shipping finance. The deals done in 2007 and 2008 would struggle to meet the new internal and external regulations. As Christopher Conway of Citibank put it at the Capital Link Forum “…if the client is not willing discuss (due diligence issues) before the money goes out of the door, what will it be like when there is a problem.” It is vital to your business you know who your ultimate counterparty is, and what assets (if any) can be attached when things go wrong. Of course, Infospectrum Ltd can help here.

Private Equity

Private Equity (PE) has spent two to three years understanding shipping, and is now ready to make a move. Are the expectations of returns too high? Is the shipping cycle time horizon is too long for PE?

Maybe shipping is not distressed enough yet. As Martin Stopford pointed out, we have not seen anything like the low prices (inflation adjusted or not) that shipping encountered in the 1980 recession. Another problem for PE is the business model. PE works best when adding value to the management – hacking out the deadwood, asset stripping and re-packaging a company. Doing all the painful things the original team failed to do. It is very difficult to add any management value in shipping where management teams have traditional been small and there is little excess.

Family and Friends

Who are the banks willing to finance? When asked who are the banks financing, the reply is now quite familiar. The lucky few are the core clients who kept the bank informed during the crisis, behaved transparently and in good faith. Newbuilding finance is restricted to projects with long term charters – no more deals centred around a two or three year timecharter then the vessel taking a chance on the spot market. Cash-flow and a conservative debt repayment profile are the key features. The number of banks remaining in shipping plus the new entrants is only between eight and twelve active participants.

Competition among Banks.

Having said there are fewer banks and fewer achievable projects, why is competition increasing among the banks? In the last six months pricing has fallen, with margins shrinking, leverage increasing, and tenors are getting longer. One reason is there are fewer clients who fit the required regulatory profile, and projects with realistic cash-flow and debt repayment profiles.

ECO-ships or Ego-ships.

ECO-ships have to make an appearance in any conference. The banking view was that the ECO label helps, and is even required on a newbuilding. Ship design is evolutionary, so a 2012-built ship is going to be more efficient than a 2000-built ship, but that doesn’t make it an ECO-ship. So what is a ECO-ship today. Is it just a modern ship, or are there distinct features that define an ECO-ship? What is the legal position if the ECO-ship fails to meet the criteria once it’s in the water?

What ships would you finance today?

This is always a good question to throw at a panel or an audience vote. At the Capital Link Forum the Capesize market was having a rally, with earnings reaching $40,000/day. Some participants saw this as a signal to order Capes. Are they mad or visionary?

Where would you build?

The LNG panel thought there were only eight yards capable of building a US$ 200m LNG carrier. How many “good” yards are there when it comes to ordering bulk ships? Is a multi-tier second-hand market developing?

Low Sulphur

According to Dr Martin Stopford, of the current fleet of 86,000 vessels, only ten are fitted with scrubbers. Will the industry be ready for 2015?

Oslo OTC Market

A hot theme at the moment is what is happening in Oslo, where US$3-400m can be raised in a few weeks. The key is short documentation (about ten pages), a pool of mainly US-based investors, but also locals looking for higher returns. It has mainly been an offshore play, but shipping is having a firm run at the Oslo OTC market, too. But what is actually going on here? Is this development an alternative for investing in shipping with a long horizon, or is it short term money looking for a fast return? What happens if (when) it goes wrong? Is this another one-night stand for shipping? We need a dispassionate explanation of the ABCs of the Oslo OTC market and what the dangers are (if any).


Is LNG being oversold or is it the lack of viable of suitable projects in mainstream shipping that is making this sector attractive? At the Capital Link Forum the panel produced some interesting numbers. Apparently every increase in production has been absorbed by the fleet. A 100m tonne/year increase in LNG production needs approximately two ships for the Middle East to Japan route. Other issues are how will new production affect tonne-mile demand and what is the size of the spot orderbook versus the timecharter fleet. What is the size of the independent fleet versus the cargo owners fleets?

Copyright: Craig Jallal, 2013

Why do we need ship valuations?

Why do we need ship valuations? A summary of the discussion so far on the LinkedIn “Ship Valuation” group.

My experience of valuations is mainly the first three situations, when a bank is serious about providing finance for the purchase (or re-finance) of a ship and negotiating the terms of the loan, when the loan is about to be drawn down (shipowner gets access to the funds) and as part of the ongoing assessment of the collateral used as security for the loans and client facilities.

In each of the three instances, the bank is testing its security of the loan through the Minimum Value Covenant (MVC). This harks back to the first rule one of banking – don’t lose money. If the owner can’t pay back the bank, the bank can legally take over the ship and other ships put up as collateral for the loan. The MVC is a ratio of the value of the ship to the loan outstanding, expressed as a percentage. That is, an MVC of 135% means if the loan is for $100 million, the ship must be valued at $135 million or more. As the loan matures and repayments made, the ship value limit should become easier to reach. But as we know, the shipping cycle isn’t always that generous.

1. Banking – Independent appraisal for loan application.

The term sheet lays out the terms of the loan, and terms are negotiable. The Relationship Manager (RM) needs an independent value for the ship the bank is considering financing. This could be a formal certified valuation or a phone call to a broker for an opinion of the value. From this the RM and from current market practice, the RM can judge the level of MVC to pitch on the indicative term sheet. In times of easy credit in the run up to October 2008, banks competed hard on MVC. Rumour has it some loans were negotiated down to 100% MVC. In eras of tighter credit, like at the moment, a bank is likely to stipulate the MVC to be 135%. In the 1990’s the MVC was regularly 150% and 200% for mezzanine finance.

At this stage a formal certificate is not always required, and unless the RM is very sure the deal is going ahead, it is a wasted expense. This is where the online tools are very useful. The oldest is Price Guidance, which is part of from Clarksons Valuation Services, which first appeared as part of the original SIN (Shipping Intelligence Network). This allows a quick search of the ship and a current value. New entrant VesselsValue is targeting this aspect of the loan appraisal process, too. VesselsValue’s USP is that certificates are issued online, too.

2. Banking – Loan drawdown.

Once the loan is agreed the MVC is tested again at drawdown, the time when the funds are released by the bank. If it is a secondhand purchase weeks or months could have passed between the signing of the loan and the release of the funds. In the case of a newbuilding it could be years. If the value of the ship has fallen and MVC cannot be met, the loan terms will have to be renegotiated. The bank will usually know up to two weeks in advance the actual delivery date, and that is when to let the valuers know a valuation is needed. A panicked phone call from bank to valuer on the eve of delivery helps no one, especially if the market is moving fast.

3. Independent Appraisal during the loan review.

Every loan facility is subject to an annual or twice yearly review. Those facilities on “Special Watch” may be subject to quarterly or even shorter review periods. The MVC is tested during the review. The loan documentation will state the borrower must provide two certified valuations from a panel of six (the number depends on the ship type) shipbrokers or valuers. The two valuations must be within 10% of each other. If not, another valuation from another member of the panel is required. The average of the two valuations is used to test the MVC.

It will also state in the documentation that the client must pay for the valuation. This gives rise to an interesting situation. It is the client that instructs the valuer, signs the service contract and pays. The relationship is between the borrower and the valuer. However, the borrower will almost certainly have another relationship with a broker or brokers within the same shop, and will try to apply pressure for the value to be the “correct” one. Valuers need to have strong personalities to withstand these internal and external forces, and give the valuation they can prove through methodology and due diligence. The test is who has signed the valuation. Is there more than one signature, has a company Director put his name and reputation to the valuation?

Another interesting facet is the contract between client and valuer. This usually states the certificate is for the private use of the client. But everyone knows this is being passed onto the bank for the use of the bank.

Because loans have started on different dates in the year these valuations are not ideal for checking the quality of security in the bank’s shipping portfolio. Most banks arrange to have the whole portfolio valued as at the start of the year and at the mid-point. The introduction of online services like and have made this process quicker and cheaper.

4. Creditors

A valuation is needed to give an indication of the likely amount the ship will raise in an auction sale. The valuer will be asked to give a reserve price. The creditors, which includes the port whose berth the vessel is occupying, will want a quick sale, so the reserve price must not be too high. Here the valuer needs to have specialist knowledge of the auction process and costs, and be aware of rate of deterioration of value a ship no longer active suffers. Payment for the valuation comes out the proceeds from the sale.

5. Insurance or general average.

I have no direct experience of valuations for insurance purposes, so I reached via LinkedIn for some expert advice on why the marine insurance industry needs ship valuations. The reply I received is; “We insure ships on an agreed value basis. This means what the underwriter insures the ship for is what he pays in the event of a total loss whatever the market value of the ship. Therefore the underwriter needs to appraise the insured value in relation to the market value. If it is too low then the probability of constructive total loss is greater, however if it is insured too high the moral hazard increases. Although the owner puts forward a value often reflecting the earning capacity and the residual value, the owner is often pushed by the bank. In the loan covenant it may stipulate the minimum sum insured. On top of the standard hull policy there is an “increased value” policy which only pays out in the event of a total loss. This value is generally limited to 25% of the hull value. So if the hull value is usd20m the increased value would be usdusd5m. Obviously the rate on the increased value is lower because it is only covering the total loss risk. Basically the logic goes along that if the vessel loss reaches say, usd20m then the vessel will be a total loss.” I would like to thank Jon Chaplin of Tradewinds for sourcing this explanation.

6. Investment prospectus: valuation of assets for ipo or for bond issues.

In most shipping companies the only assets are the ships. Therefore, to float part or all of a shipping company on a stock exchange the investors need to know the value of the assets they are “buying”. Shipbrokers are very aware of the pitfalls of dealing with financial investors. First, they are not shipping people, and expect to be able to apply the same criteria used to value any other enterprise to a shipping company and its ships. Therefore, a lot of management time is spent in education and marketing. Second, the rewards are relatively small. Although a premium is placed on the service to cover the costs, it is nothing compared to the rewards of the banks and lawyers running the ipo process. Third, and most importantly, the risks are huge. When the shipping cycle turns downwards (as it always will at some point), investors will look to get their money out, and maximise the cents on the dollar. These can be mitigated by showing the methodology and due diligence paper trial, but lawsuits do occur. After the boom in shipping junk bonds several brokers were hauled into court. Some cases were settled out of court, but there was considerably reputation damage. Damages in a US court could wipe out profits, or even bankrupt a small broking house. It begs the question; is it worthwhile providing valuations for raising finance?

7. Annual accounts and audits.

This is fairly straightforward, and the annual accounts of public shipping companies often list the brokers providing the valuation of the vessels at fair market value.

8. Accounting for vessels under shared or family ownership.

Many shipping companies are family owned, but not all of the family will be active in the day to day running of the company. Nonetheless, they need to know return on their investment in the business and the current value of their share of the assets. Shared ownership is more common than supposed. For example, three owners may feel strongly that the timing is right to invest in a particular sector. All three focus on one ship, and risk driving bidding beyond what the see as a reasonable level. They agree to co-invest in the ship, through the single purpose company that owns the ship. No one outside the agreement will be aware of the arrangement, and the registries will record the vessel as being operated and beneficially owned by one party. Therefore, the co-investors will require independent valuations of the current market value of the ship. But on an operational level all three co-investors are rivals and compete for business.

9. Legal disputes

Legal disputes over valuations are not uncommon, and many valuers also work as expert witness in court. In the 1990s shipping companies issued a series of junk bonds, of which around 90% defaulted. There have also been court cases where valuations have been a feature, but not the main issue. These go to show that a clear paper and electronic trial must be kept of all valuations.

10.Government regulations.

So far the only specific government regulation I have come across is a German regulation detailing how ships are to be valued. Under Section 24, paragraph 1 to 3 of the Pfandbrief Act there are exact rules for the determination of the Mortgage Lending Value of Ships (MLV). This entered force in July 2008, and upon examination is essentially “Last Done”. This will be discussed under when we look at how valuations are made.

Size of the Valuation Market?

Given that there are ten possible instances for the need for valuations, this gives rise to the question of what is the size of the valuation market? There is no central register of valuations completed, or the billings. To estimate demand I use a proxy of the number of deliveries combined with the number of ships sales each year. In 2012 there were 4325 deliveries and sales. Each certified valuation costs $1500, giving a potential market of just under $6.5 million. Although this sounds a lot, it is less than 0.01% of the value of ship sales in 2012 ($84.7 billion – source: CRS).

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