'Hudner lays out $200m shipowning comeback'
Michael Hudner is targeting a $200m return to the market in medium-range (MR) products tankers.
The former shipowner, who has been through the good and bad times in a 40-year career, told TW+ that he and his daughter, Bay, are working with the core B+H management team to attract investors to a play on five to 10-year-old tankers.
“We’re going back to our roots,” Hudner told TW+ at the offices of his B+H Group in Bristol, Rhode Island.
B+H operated as many as 20 products tankers in the late 1990s and has owned nearly 50 over the course of Hudner’s career — before going through a 2012 Chapter 11 bankruptcy filing that saw him sell the last B+H ships in 2013.
Hudner is bullish about prospects for five to 10-year old MRs in the 47,000-dwt to 52,000-dwt range believing that, although the products market has begun a recovery, a shortage of available financing has prevented valuations from lifting off from trough levels.
B+H is seeking $200m to splash on a fleet of about 20 MRs in a 50:50 debt-equity play. Hudner sees estimated annual cash-on-cash returns of 11% to 24% on a five-year-old vessel, with internal rates of return ranging from 26% and 34% on a 10-year-old tanker.
It is said that everyone loves a comeback story but, despite having seen it all — from groundbreaking financial innovations to a major oil spill, the high times of peak markets and tough times of troughs — the Hudner pairing has not yet been able to clinch an investment deal.
Hudner says B+H has been close with eight or nine potential deals but has been told the main reason for financiers not participating is “they’re worried about what the investors will think of getting involved in a shipping deal".
A source in the tanker-finance market agrees with Hudner’s assessment of why the project has not yet been funded.
“The issue has been getting investors interested in shipping,” he said. “It’s incredibly hard today to convince an investor that he should invest in steel. Any time someone did in the last five years, they lost money.”
Clearly fuelling the comeback drive is the bitter taste in Hudner’s mouth his company's 2012 Chapter 11 filing.
Not long afterwards, Hudner was hit by the news that his wife, Hope, had terminal brain cancer, followed by a period in which he and Bay cared for her until her death.
The combination of events looks to have left Hudner, 70, with both the time and motivation to make one more run at a return to shipowning — the profession he chose after a start in the world of real estate.
Whether he owns ships or not, Hudner always has his trusty 61-foot sloop Moonracer, either for entry into the challenging Newport Bermuda Race — from Newport in Rhode Island to the British island territory in the Atlantic — or an easy cruise on Narragansett Bay, where he showed TW+ that he still knows what he is doing behind the wheel.
'B+H's Mike Hudner on the comeback trail'
Fate has dealt Mike Hudner some tough hands, in life as in shipping. But as Joe Brady discovers, the B+H veteran hasn’t lost the ability to spot an opportunity.
He is literally one of shipping’s greybeards now, but he is looking at a comeback all the same. The whiskers on Mike Hudner’s face are fairly new; the hairs on his head, at an age he calls “35 twice”, not so much.
Since 2013, Hudner has had the vexing distinction of being a shipowner without ships. It doesn’t sit well with him and he is plotting a return from offices in a converted sail loft in the boating mecca of Bristol, Rhode Island, half an hour up the Narragansett Bay from longtime America’s Cup venue Newport.
Hudner was among the first in shipping to launch IPOs and high-yield bonds, which became the platforms for his B+H Group. Now he figures he has at least one more act left on the maritime stage. By his own admission Hudner has made and lost a fortune in this business. He’s seen great personal and professional highs, but also painful lows that included an oil spill, a bankruptcy, and the deaths of his son and wife.
If he can pull off the comeback he is attempting in medium-range (MR) products tankers, it will be with the vital help of another family member: his 31-year-old Harvard-educated daughter Bay, who sits by her father during a visit from TW+.
“We’re going back to our roots,” Hudner says. “When I started this business, I still had unpaid college debt. Everything was about other people’s money [OPM]. Then we became shipowners and I’ve managed to make and lose nine figures net worth in shipping. Along the way, I’ve gained phenomenal experience and had 140 ships that we’ve owned and raised money from. Now we’re returning to an OPM world and the opportunity at the moment is a cyclical play.”
Although Hudner has owned everything from bulkers to combination carriers, he is returning to basics in his choice for an opportunistic play: MR products tankers. B+H operated as many as 20 products tankers at once in the late 1990s and has owned nearly 50 over the course of Hudner’s career. He is bullish about prospects for five- to 10-year-old MRs in the 47,000-52,000-dwt range. At the core of his pitch is the idea that although the products market has begun a recovery, a shortage of available financing has prevented valuations lifting off from trough levels. This affords investors minimal downside risk, with prospects for significant gains over the next five years.
B+H is seeking $200m to splash on a fleet of about 20 MRs in a 50:50 debt-equity play. Hudner sees annual cash-on-cash returns of 11%-24% on a five-year-old vessel, with internal rates of return ranging from 26% on that age of ship to 34% on a 10-year-old tanker.
“On a risk-reward basis, MRs are easily the most attractive, stable investment in shipping,” B+H says in its investor pitch.
Hudner still has support from his core team, Gerard H Potier as head of sale & purchase/product development and chief financial officer R Anthony Dalzell.
The new element is help from Bay Hudner, who heads business development & investor relations. Her varied background includes work as an analyst for an international real-estate consultant, management for a leading European technology fund and a stint on the tanker/sale and purchase desk of French brokerage Barry Rogliano Salles.
But one might say she was born into shipping. “I tell people I joined B+H in 1986 — that’s the year of my birth,” she says. In practice, Bay’s ability to relate to some of the young-gun investors who could become part of any deal has been invaluable, her father comments.
Despite these efforts, the Hudners have not yet been able to clinch an investment deal. “We’ve had eight or nine near misses,” Hudner says. “The most common reason we hear for people not participating is they’re worried about what the investors will think of getting involved in a shipping deal.”
Bay adds: “The feedback has included comments that ‘the fundamentals are interesting, but one of our [limited partners] has just seen an article about Hanjin going bankrupt’. Many still see shipping as monolithic, and it’s a long education process. There’s enthusiasm, but also issues of optics for them.”
Still, the Hudners persist with a clear focus, trying to find light after several years of darkness.
Hudner acknowledges that he was reluctant to place B+H into Chapter 11 bankruptcy in New York in 2012, insisting to this day that his hand was forced by the actions of charterer Sempra and its attempt to make early redelivery on a vessel.
Anger and frustration are still evident five years later.
He takes a break from the interview and returns from his personal office with a handful of papers — notes he says he compiled with the help of his late wife Hope as the couple together tried to work out the pros and cons of a bankruptcy filing.“I haven’t looked at these in five years,” Hudner says, and he begins to choke up.
“The whole idea of the filing made me sick, not getting the company home safely. My wife was very sensitive to that. She understood all the relationships, she understood all I had invested in that. She helped me work through the choices.”
In the end, the only choice was to file, and within the bankruptcy Hudner was unable to persuade B+H’s lenders to fund a reorganisation. By the end of 2013 the company’s last combination carriers had been scrapped or sold to a third party.
But that wasn’t the end of Hudner’s dark period. In December 2014, his wife of nearly 40 years was diagnosed with glioblastoma multiforme, a type of brain cancer. With the prognosis grim, Bay Hudner returned to Rhode Island from New York. She and her father devoted their time to caring for Hope until her death in January 2016. The trying stretch didn’t leave much time for work on a B+H comeback. But as time has passed, that has changed.
Hudner quotes Freud’s line about what it is a human needs: Liebe und Arbeit. “Love and work... work and love... that’s all there is,” he says. The collapse of B+H took away Hudner’s work, and then... “Liebe und Arbeit,” he says. “Well, now I have a lot of energy for the Arbeit.” Still, when he’s not focused on the work — “running around trying to raise money from people is a lot different from running a business” — there is always the sailing.
During the salad days for the B+H companies, Hudner would invite clients to Newport every other year for a weekend sailing event on vintage 12-metre America’s Cup yachts. While those times may be gone, he suggests the interview should conclude onboard Moonracer, the 61ft sloop built by legendary sailboat maker Ted Hood and owned by Hudner since its delivery in 1992. Hudner has captained the Moonracer through several Newport-to-Bermuda regattas and many family holidays, including a transatlantic sail to Ireland years ago.
He has the help of a captain in his employ, John Graham, in getting the sleek vessel away from dock in Portsmouth and out on Narragansett Bay. But before long, it’s the owner — with his new white whiskers and twice 35 — who takes the helm.
For a moment, at least, it’s plain sailing and a snapshot of what life looks like with Mike Hudner behind the wheel one more time.
Marine Money German Ship Finance Forum
Hamburg, 23 February 2017
Panel: Rightsizing Shipping Restructuring, Recapitalization and Mergers in the German Market
Axel Siepmann, Managing Partner, NAVES Corporate Finance GmbH
Bastian Hagebeuker, Investment Manager, CPO Investments (GmbH & Co.) KG
Kai Afflerbach, Managing Director – Restructuring, Pareto Securities
Moderator: Michael Hudner, Chairman, B+H Shipping Group