Maritime Practice 2019 Year in Review
2018 was another busy year for Seward & Kissel, and we are thankful for the continued support we received from our clients and friends.
The year began with a major tax legislation passed here in the U.S., the effects of which are still being ascertained, as the IRS continues to finalize regulations and issue guidance. Of particular interest to the shipowners are the GILTI tax and the modification of the deemed dividend rule. Another noteworthy regulatory development is the impending implementation of the IMO 2020 sulphur limitation regulation. As the deadline looms large, shipowners have begun to consider whether to install scrubbers and how to finance them. Across the Atlantic, British regulators’ decision to cease requiring quotes from LIBOR panel banks will mean the demise of LIBOR as we know it, and the financing industry participants have begun to address this likely change.
On the transactional side, industry consolidation continued (perhaps accelerated) in 2018. Seward & Kissel was involved in many of the significant shipping M&A transactions in 2018, which often involved publicly listed companies. A public company merger can differ significantly in approach and structure, compared to a private company transaction, and appreciating those differences may be crucial in ensuring success.
On the financing side, traditional shipping banks have continued their withdrawal from the sector, but alternative lenders and several new entrants (as well as the continued leasing activities from Asia) have filled the gap. The shipping IPO market remained shut for the third consecutive year and existing public shipping stocks generally fared poorly despite improving charter rates and strengthening balance sheets in certain segments of the market. These improved balance sheets have resulted in more aggressive returns to shareholders through share buybacks, dividends and other balance sheet uses.
On the dispute resolution and regulatory side, Seward & Kissel obtained major wins and other favorable results, including a number of precedent-setting decisions in the OW Bunker cases and our representations in the Toisa bankruptcy case, all of which will provide helpful guidance for future cases. The firm also provided thought leadership on emerging issues in maritime law and counseled numerous companies in the maritime sector on international sanctions compliance in 2018.
As we look forward and ponder what 2019 will hold for us and our clients, many of the questions we asked ourselves last year still seem salient: Will traditional lenders continue their retreat from shipping? Will China’s One Belt and One Road Initiative continue its expansion in shipping finance? Will private equity funds accelerate the harvest of their equity investments in shipping and will this lead to new investment and further consolidation? Will United States public equity markets recover from their recent downturn and will this lead to an improved public appetite for shipping equities? Will oil prices recover enough to bring badly needed stability to the offshore drilling and services sectors? Will new environmental requirements lead to increases in investment, scrapping, and newbuild orders? Will continuing uncertainty over Brexit affect London’s position as a major shipping finance and insurance center? Will the opening of new areas for offshore drilling in the United States have any effect on the beleaguered offshore drilling and services sectors in the United States? Will populist concerns over free trade and globalization continue to affect policy, or be assuaged, and what will be the effect on international shipping?
We here at Seward & Kissel are here to help guide our clients through these tumultuous times. Our unique insight and capabilities have been honed through decades of experience and as a result of our being involved in all facets of the maritime industry, including shipping finance, public offerings and private placements, private equity investments, restructurings, litigation and bankruptcy, purchase and sale transactions, mergers and acquisitions, and from our having acted in varied capacities in each of these types of transactions. We look forward to continuing to assist our clients as the maritime industry finds its bearings and charts its course for 2019 and beyond.