Fri Jun 15, 2012
By Silvia Antonioli and Jonathan Saul
LONDON, June 15 (Reuters) - Swiss steel and coal trader Carbofer General Trading (CGT) was declared bankrupt last month, officials in its home town Lugano said on Friday, shortly after its shipping branch Carbofer Maritime.
CGT, once a large player in the spot coal and steel trade, was declared bankrupt on May 16, the bankruptcy office of Lugano told Reuters, as market conditions worsened and financing froze up.
Its Copenhagen-based shipping branch Carbofer Maritime Trading (CMT) was declared bankrupt about a month earlier, the Danish Sea and Maritime court said.
"If the market conditions were better and the banking sector leverage was similar to what it was before the financial crisis, maybe the company could have been saved, as it had good traders," a steel trader said.
"The management took some risky, aggressive decisions at the wrong time and this also weighed. Maybe they should have been a bit less exuberant at a moment where neither the market nor banks would allow that."
Carbofer grew rapidly from its start up 2004 to generate revenue of $4 billion in 2008 during the commodity boom year, but a mixture of tight credit conditions and unsuccessful deals had shrunk the company over the past two years.
After an unsuccessful attempt to recapitalize the company through the sale of a substantial stake to an Indian investor last year, its financial situation deteriorated.
Creditors of both the trading and the shipping arm had started to move to recover hefty debts from the Russian-owned firm.
"We are still actively chasing our claims, pursuing any possible legal avenue to try and get to these guys," said an executive at Norwegian shipping firm Western Bulk, which is bringing a UK High Court claim over a broken a long-term charter contract. "We are not giving up yet."
Worsening conditions in both the shipping and metals markets are straining the financial situation of others firms operating in Europe. "I believe the only target for trading companies is survival at the moment," the trader said.
DRY FREIGHT TURMOIL
Conditions in the dry freight market have worsened in recent months as a glut of ships, ordered when times were good, has combined with slowing economies around the world.
"The freight markets are really tough at the moment, so if you are caught out with a few time-charters done at two to three times current market levels you are bleeding heavily every day. Not many companies are able to go on losing millions of dollars every day," said Peter Sand, chief shipping analyst with trade association BIMCO.
"Companies have not be able to save up for this downturn and therefore trouble moves in fast."
The growing crisis has claimed casualties including Italy's Deiulemar Compagnia di Navigazione, once one of Europe's biggest dry bulk operators, which was declared bankrupt in May.
"In the shipping industry we haven't seen a very large number of defaults yet, but many owners and charters have cash-flow problems and we expect more defaults going forward," a second source at a shipping company said.
"The way the market looks now, it is an issue when you have defaults like this (CMT). Very often it creates implications down the charter chain."
Average daily earnings for capesize vessels, which usually transport 150,000 tonne cargoes such as iron ore and coal, have slumped to $3,471 this week, a level not seen since November 2008.
In a sign of worsening market conditions, Mitsui O.S.K. Lines, one of Japan's biggest shipping groups, said this week it planned to scrap or lay-up up to 10 or 20 of its capesizes.
(Editing by David Holmes)
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