Shipping stocks are falling on the threat of a Greek debt default, but some commentators claim industry impact will be immaterial.
The government of Greece placed capital controls on the banking system on 28 June. Greece faces a USD1.8 payment deadline on an International Monetary Fund on 30 June. Major global exchanges were down sharply on 29 June, with US-listed shipping shares declining in the low single digits in early trading.
However, the implied connection between Greek’s sovereign debt crisis and the shipping industry, given that so many shipping companies are run by Greeks, may be overstated.
“We believe the Greek crisis has no direct impact on shipping companies,” said Morgan Stanley analyst Fotis Giannakoulis in a new research note.
According to Giannakoulis, all Greek-controlled shipping companies are incorporated in the Marshall Islands, Bermuda and other offshore jurisdictions. “From our extensive discussions with several management teams during the last few years, we understand that all shipping companies keep their cash deposits in international banks, facing effectively no risk from capital controls,” said Giannakoulis.
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“The exposure of the shipping industry to the Greek banking system is nearly zero. Furthermore, publicly-listed companies have easier access to financing and have traditionally relied on international banks for their funding needs, suggesting that the direct exposure of our universe to the Greek banking system is not material,” he continued.
Giannakoulis believes that a Greek exit from the Eurozone “would result in a reduction of that portion of operating expenses associated with salaries of domestic personnel, a minor benefit”. He added that “if it is considered necessary to transfer the management of the vessels out of another country, we believe it could be implemented within a few days without any noticeable disruption in operations”.
Earlier this month, Greek ship owner Michael Bodouroglou called the sovereign debt crisis a “non-event” from the prospective of his companies Paragon Shipping and Box Ships.
Longer term, he said that a shift in currency from the euro would be a positive, noting that for a shipping company headquartered in Greece, “if your fixed cost is paid in a softer currency”, administrative costs would be reduced versus the US dollar.