“But, I…”
“Do you know what will happen if I have to repossess the entire fleet of Viking Tankers, because no one will charter them from Coco?”
“No.”
“Then let me tell you. My bank is leveraged twenty-to-one and that means if I write off half that $1 billion loan my bank will lose $20 billion of economic capital. Do you happen to know what the market capitalization of my bank is?”
“Less than $20 billion,” Robert said in a small voice.
“Substantially less,” he said, lowering his voice to a muffled shout. “I will be nationalized!”
“But those ships are cougars,” Robert said. “They are beautiful and nicely-maintained.”
“Who told you that?” he laughed bitterly.
“A Chief Engineer,” Robert replied in a small voice.
“Trust me, nobody will think they’re beautiful and nicely-maintained when they get arrested and auctioned in every backwater port in the world,” he said. “I’ll have every keel-kicker and scallywag in the world lowballing me on those ships. I am going to have to make a credit bid and put them into the Dipper.”
“Well…”
“Do you understand the gravity of this situation, Fairchild? I gave Coco Jacobsen an amortization holiday because you promised to get that IPO done and pay down my loan,” he said.
“I thought you gave him the holiday in exchange for the $5 million amendment fee,” Robert said.
“Now you listen to me and you listen closely,” he whisper-shouted. “I haven’t the foggiest notion why you are in a London pub drinking wine in the middle of the day with a retired shipbroker who is suffering from early stage dementia – a man who just last week told me his mum was the Queen of England – but you had better get back onto that roadshow in America post haste!” Alistair spat as he released his grip on Robert.
“I’ll do what I can, Allie,” Robert said stiffly. He decided it was probably not a good time to share the news about Luther’s draconian demand for preferred shares.
“You had better do more than that, Fairchild,” Alistair said. “You had better get that IPO done on terms acceptable to Coco.”
Robert was visibly shaken when he returned to the table where he found Sir Nicholas sheepishly sipping his wine. Robert’s suit was rumpled, his hair was messy, his skin was pale and his eyes were darting quickly around the room. “You look like you’ve just seen a ghost,” Sir Nicolas said.
“I have,” Robert said. “My own.”
“I saw a ghost once,” the shipbroker recalled. “I was living in Mozambique living on Quinine and working for a Dutch shipowner who gave me the unseemly task of…”
“Stop!” Robert interrupted. “Don’t get me wrong, Sir Nicholas, I love hearing all your old shipping stories, I really do, but I need your help before it is too late.”
“I’m always happy to work for red Burgundy and 1% fee,” Sir Nicholas said and flashed a macabre collection of wine-stained teeth.
“Here’s the deal,” Robert said as he leaned forward across the table so the Dippers were sure not to overhear the conversation. “What you said earlier about American Refining Corporation defaulting on the ten time charters to Viking Tankers is only half the story,” Robert said.
“That’s more truth than most broker gossip,” he said.
“The other half is that ARC is threatening to default on us in order to induce Coco to do something else,” Robert said.
“What’s the ask?” Sir Nicholas inquired.
“There are fifteen LNG carriers currently under construction at a shipyard in Korea called Regal,” Robert said.
“I am familiar with the units,” Sir Nicholas said.
“Rocky DuBois at ARC has apparently told Coco that if we can gain control of those ships, he will keep paying the charter hire and we can finish our IPO.”
“It sounds like you have a lot riding on those fifteen LNG carriers,” Sir Nicholas said.
“More than you can imagine,” Robert said.
“It’s astonishing how popular those boring LNG carriers have become lately,” Sir Nicholas said.
“You don’t need to broker me, Sir Nicholas,” Robert said. “I want the ships and I am willing to pay for them. I am a willing buyer and all I need now is a willing seller. I know your client just bought those ships from Great Dane a couple of months ago and now I want to make them an offer they simply can’t refuse.”
Sir Nicholas closed his eyes and said, “I’m afraid I can’t help you.”
“Why not? I thought everything was for sale in the shipping business,” Robert said. “I thought shipowners weren’t supposed to fall in love with the ships. I thought that’s why they never name them after their wives and daughters.”
“Yes, but LNG ships are a unique species,” Sir Nicolas said.
“Why?”
“Because for anyone who actually needs to move gas, and I speaking now of nations and not just private shipowners, there is simply no substitute for an LNG ship; unlike most types of vessels, you can’t just sell one unit and go into the market and charter-in another one. Nor is there a steady flow of ‘re-sales’ available for purchase from shipyards.”
“What? But I thought there were always too many ships,” Robert said.
“Ah yes, but only when you don’t need them,” the shipbroker replied.
“So what the heck am I supposed to do now?” Robert asked.
“The best advice I can give you, Mr. Fairchild, is to just forget about this deal, forget about shipping and try to return to a life on land that is safe and predictable,” he said.
“But you haven’t heard my price,” Robert shouted. “Nobody has ever heard my price! What is wrong with you people?” Robert exclaimed. He was ready to jump out of his chair. “Why doesn’t anyone care about the price?”
“Because, to be honest,” the old shipbroker said. “I have no idea who my client was on the transaction.”
“Hold on,” Robert said. “You just brokered a deal to sell $3 billion worth of ships and you don’t even know who bought them? How is that possible?” Robert asked.
“It is possible because the general manager at Regal Shipbuilding, an old mate of mine from Cardiff University, approached me with the deal on behalf of the buyer; all I did was to make the phone call to my old friend Mr. Juhl to see if he would be willing to sell. My secretary filled in the blanks on the MOA and added a few riders,” Sir Nicholas said. “I was actually at my house in Provence at the time.”
“And you never thought to ask who the buyer was?” Robert asked.
“Don’t ask, don’t tell,” Sir Nicholas said.
“What about all that stuff you said about shipping being a personal business that should be conducted face-to-face? What about Our Word, Our Bond?”
“I live by a different motto now, a more modern one: If the Wire Clears, Have No Fears,” Sir Nicholas laughed.
“But what am I supposed to do now?” Robert whined. “I only have a few days to get those ships on subjects or I am in serious trouble!”
“Mr. Fairchild, if you really want to gain control of those vessels you must pay a visit to Him,” he said.
“But you just said you don’t know who the buyer was,” Robert complained.
“That is precisely why you need to see Him,” Sir Nicholas repeated. “He is your only hope.”
“Who is?” Robert asked.
“Him is,” the Englishman repeated.
“What are you talking about?” Robert shrieked as he pulled on his hair.
Sir Nicholas replied and a calm and clear voice. “I am talking about Mr. William Him, the general manager of Regal Shipbuilding in Busan, Korea. He is the one who represented the buyers when I brokered the LNG carriers and he is the only person who knows the identity of the new owner.”
“In Korea?” Robert pleaded desperately, his eyes bulging. “You actually want me to go to Korea?” Robert repeated.
Sir Nicholas’s suggestion was highly distressing to Robert Fairchild who had been hoping London would be the third and final stop on his odyssey to find the owner of the LNG carriers before it was too late. The only thing he really wanted to do was go home, take a hot shower, put on pajamas and curl up on the couch with Grace watching Seinfeld re-runs.
If he did continue on to Korea, it was highly unlikely that he would make it home for his own fortieth birthday. Robert Fairchild was just about ready to give up once and for all when he remembered what Aphrodite had said to him just before he left Jimmy the Fish – This is shipping, Robert. Just when you are ready to give up, you need to hang on a little longer and you will be okay.
“Okay,” Robert sighed as he got up from the table. “Please inform Mr. Him that I will be paying him a visit.”
Chapter 26
The Power of People
There are three tenets upon which Navios is built – good people, open communication and prudent business practices. It is the people whom we entrust with making multi-million dollar decisions. If we do not hire and retain the best people, we will not be the best company. In addition, we cultivate a free exchange of ideas within the company – between groups and team leaders. It is this free exchange that allows good people to make wise decisions. And long-term success can only be achieved with a conservative business practices. This means that the controlling factor in all our decisions is “have we protected the company?”
Angeliki Frangou, Chairman & CEO,
Navios Group of Companies
As Robert Fairchild waited for the elevator to carry him up to Regal Shipbuilding’s executive offices on the top floor of the five-story building, Mr. William Him sat in his office proudly watching a two-hundred-ton crane nicknamed “Big Boy” insert a prefabricated bulbous bow into a partially constructed LNG carrier.
As Mr. Him’s army of highly skilled workers flawlessly performed the complicated industrial procedure, the Korean couldn’t help but feel philosophical; he had worked tirelessly for thirty-five years to become CEO of the largest and most technologically advanced shipbuilding complex in the world, and reinvested almost every dollar of profit back into the physical plant, yet he was lucky if he could make money one year in five on his $10 billion of annual revenue.
But despite the economic struggles, Mr. Him firmly believed in the nobility and importance of his contribution to global seaborne trade. He also knew that shipbuilding wasn’t a purely capitalistic enterprise, but a socio-capitalistic one that stimulated employment in economies transitioning from agrarian to industrial.
That was why Japan had increased its shipbuilding capacity in the 1960s and 1970s and why Korea had done the same thing in the 1990s. Both expansions of shipbuilding had temporarily oversupplied the market with ships and both were dwarfed by the expansion of shipbuilding capacity in China during the shipping boom of 2004-2008. During that four-year period the Chinese had nearly doubled global shipbuilding capacity which left shipowners, lenders and investors to wonder whether the world could ever absorb the excess capacity.
Mr. Him also knew that shipbuilders like him bore all the costs of shipping’s volatility but reaped few of its benefits. If the ships he was building dropped in value while under construction, his customers could renegotiate the contract price or abandon the vessels altogether. But if the ships increased in value during the construction period, those same customers could flip the half-built machines to another shipowner for a quick windfall – leaving Mr. Him with the original profit margin and a demanding new owner – which was precisely the case with the LNG carrier coming together before his eyes.
“Are you Mr. Him?” Robert Fairchild asked when he popped his head into the office.
“I am Him…and Him is me!” the Korean smiled warmly after using a well-worn ice breaker. He rose to his feet. “It is such a pleasure to see you!”
Mr. Him extended his right hand while ceremoniously brushing his left hand across his forearm, a Korean tradition which harkened back to the ancient kings who pushed back the sleeves of their robes as they greeted their visitors. Robert took a moment to study his affable host; thick head of dark hair, official shipyard jacket over a white shirt and tie, black work shoes with thick rubber soles.
“My name is…”
“Robert Fairchild,” Mr. Him finished his sentence. “Nico told me to expect you.”
Mr. Him continued to shake Robert’s hand as he inspected the man. Like most of the intelligent and hardworking Americans who took day trips to Korea in search of cut-rate ships, the man before him looked exhausted. But although Mr. Him had received many HP calculator-toting, coffee-seeking, value-hungry visitors with unshaven faces and dark circles under their eyes, never before had he seen one who looked quite as haggard as Robert Fairchild. That the American had not changed his suit since walking into the swimming pool at the Delano Hotel in Miami with Luther Livingston one week earlier would not have surprised Him.
“So,” Mr. Him said. “What can I do for you?”
“What can you do for me?” Robert asked with panic in his voice. He had fantasized that the London shipbroker and the Korean shipyard boss had cooked -up the deal during the entire day that Robert had just spent on the airplane. He hoped all he would have to do upon his arrival in Korea was to sign the MOA and race home for his fortieth birthday, but it wasn’t going to be that easy – deals never were.
“Yes,” Mr. Him said slowly as if to a young child. “Why are you here, Mr. Fairchild?”
“Didn’t Sir Nicholas tell you?”
“Who is Sir Nicholas?” Mr. Him asked.
“Sir Nicholas Eaton-Hardy,” Robert said.
“He didn’t even tell me who you work for,” he said.
Although Robert Fairchild had eagerly anticipated this moment during the long trip from London to Busan via Dubai and Seoul, he suddenly found himself without words. His strategy of being direct had gotten him nowhere in his meetings in Athens, Copenhagen and London, so he decided to try a different approach.
“Mr. Him, I am a private equity investor from New York City and I am here to buy some boats,” Robert said, deliberately using the term “boats” as many novice investors did in order to appear like a rookie to Mr. Him.
“The ships we build carry boats,” Mr. Him said.
“Then I want some ships,” Robert said.
“Today is your lucky day, Mr. Fairchild, because today is a very good time to order new ships,” Mr. Him said and switched into his salesman persona. He was eager to test-out his new pitches and Mr. Fairchild’s visit provided an ideal opportunity for a dry run.
“Why is that?” Robert asked.
“Because of the eco-ships, of course,” he said. “You see, shipping is usually a business of evolution in which small changes are made in vessel size, configuration and design, but today we find ourselves in a rare moment of revolution!” he oozed with excitement. “We believe that today’s low prices and new technology could make the current fleet of ships economically and environmentally obsolete.”
“That sure would be good for your business,” Robert said with the sort of skepticism often associated with owners of fuel-inefficient vessels. “But let’s face it, Mr. Him, reduced fuel consumption won’t change time charter rates; only supply and demand can do that.”
“That’s shocking,” Robert said, recalling that Mr. Him’s characterization was exactly how he had first analyzed his purchase of the Lady Grace that fateful evening in Greece. He thought he’d purchased the old ship at one times EBITDA but ended up having to fight for his life and work seven days a week for a year just to get his money back.
“Please, come with me,” Mr. Him said as he carefully placed an orange hardhat emblazoned with the shipyard’s logo on Robert Fairchild’s head. “Let’s go have a look at the shipyard, shall we, so you can do some shopping for ships.”
Ever since the collapse of the shipping market in 2009, Mr. Him had en
tertained dozens of investors in search of bargain-basement pricing on ships. In the spirit of ginning up some orders during those dark days, Mr. Him had given away windbreakers, baseball hats and fountain pens and spent countless hours educating investors about shipping – all of which amounted to not a single order.
He had learned the hard way that very few investors had the type of capital that was patient enough to wait the two years it took to build a ship before it generated any revenue – irrespective of how attractive the contract price or how high-quality the vessel. But no matter how much time he’d spent courting investors, Mr. Him had never grown tired of showing off his shipyard and his amazing workers.
Over the course of his career, he had given hundreds of tours – to Greeks, Norwegians, Turkish, Russians, South Americans and more – and his launchings and christenings had been attended by everyone from members of royalty to famous Hollywood actors to government dignitaries.
But never had he encountered an investor as intensely fascinated by the shipyard as Robert Fairchild. Even after the two men had been sitting in the back of the fiercely air-conditioned black Hyundai Equus station wagon for more than an hour, official flags flying on either side of its gleaming hood as hundreds of workers bowed toward the vehicle everywhere they went – Robert Fairchild wanted more.
So they zoomed through robotic machine shops the size of aircraft hangars, zipped along pipe-bending facilities and careened across a climate-controlled computer nerve center from which a battery of laser lathes cut, numbered and stacked the two inch-thick plates of gray steel. They watched a computer-controlled crane welding plates of steel onto the skeleton of a ship – all without any visible human intervention.
“I feel like we’re inside the Matrix,” Robert marveled.
“Welcome to the future, Mr. Fairchild,” Mr. Him said with a slow laugh as he admired the orderly industrial activity being conducted in a spotless environment.
Viking Raid Page 23
