FEBRUARY 7, 2017— Drewry Financial Research Services Ltd., the investment research arm of shipping consultancy Drewry, is launching a new credit research service.
Through this extension to its established maritime equity research offering, Drewry says that it is now able to provide a full investment research service that includes in-depth analysis of the credit instruments that underpin corporate capital structure.
Debt capital is a key source of funding for the maritime sector and as regulatory burdens restrict capital availability more companies are expected to tap the debt capital markets in coming years.
"We believe there is a growing need for objective, independent credit research on the highly complex bond structures within the maritime sector," says Rahul Kapoor, Head - Drewry Financial Research Services Ltd. "The new offering provides an impartial view of both global maritime bonds and listed credit instruments and will help market participants analyze their investments as well as monitor the creditworthiness of counterparties. We aim to provide our clients with comprehensive solutions that combine industry-leading insight with independent equity, credit and bespoke maritime research of the highest quality."
Launching with an analysis of the listed bonds of the three major container shipping companies, A.P. Moller Maersk, CMA CGM and Hapag Lloyd AG the service offering will expand to cover other maritime sectors including port operators, dry bulk, tanker and gas shipping.
In the current interest rate environment, Drewry favors bond issues that lie higher on the risk spectrum with a short duration. Both CMA CGM's and Hapag Lloyd's bonds satisfy its bond picking criteria and have notes outstanding in the high-yield segment with low duration risk in many instances.
"However," says Drewry, "the notes on many occasions trade above par and we do not believe the risk return profile is attractive based on the credit outlook for the issuers. We believe the rally since the third quarter of 2016 is stretched and recovery is largely priced in. Therefore we see downside risk for bonds from the current levels as credit metrics are about to worsen in full-year results and the probability of a rating downgrade is significant as highlighted by the rating agencies."