“Relazione di asseverazione”: specific issues in shipping

Shipping:
Specific issues and the asseveration methodology
Dr. Aldo Campagnola
Chartered accountant in Napoli e Milano
Napoli, 3 ottobre 2013 – “Shipping and the law”
1
“Relazione di asseverazione”: specific issues in shipping (1 di 6)
The report comprises the guaranteeing of accounting data veracity and the
Plan feasibility.
The issues that the independent expert* has to deal with related to the
variables which can influence the Plan feasibility.
The issue that can influence the Plan feasibility are more commonplace
with respect to the various scenarios that the Bankruptcy Law provides the
entrepreneur with:
- “Certified Recovery Plan” ex art.67, terzo comma, lettera d) L.F.
- “Debt restructuring agreement” ex art. 182 bis L.F.
- “Composition in bankruptcy” ex art. 160 L.F.
* Asseveratore
Napoli, 3 ottobre 2013 – “Shipping and the law”
2
“Relazione di asseverazione”: specific issues in shipping (2 di 6)
In shipping sector, the variables that could significantly affect a Plan trend
can either be exogenous or endogenous.
Exogenous Variables
- Fleet growth rate
- Demand growth rate
- Cost of debt analysis
Endogenous Variables
-
Counterparty analysis
Running costs analysis
Dry dock analysis and intermediate visits
Vessel analysis and scrapping
Economic balance analysis
Financial balance analysis
Freight rates trend
Napoli, 3 ottobre 2013 – “Shipping and the law”
3
“Relazione di asseverazione”: specific issues in shipping (3 di 6)
Fleet growth rate
The Fleet growth rate expresses the stowage capacity growth that is on the
basis of:
(+) orders on hand
(-) demolitions
(+) new orders
Demand growth rate
The demand for sea transport is on the basis of five variables:
-
the world economy
seaborne commodity trades
average haul
political events
transport costs
Napoli, 3 ottobre 2013 – “Shipping and the law”
4
“Relazione di asseverazione”: specific issues in shipping (4 di 6)
Cost of debt analysis
Assessing the financial burden should not only take into account the
conditions applied by the financial institutions involved in the operation but
it should also predict what the trend of interest rates could be
Counterparty analysis
The Plan feasibility analysis cannot be made wihtout a careful analysis of
the business partners who may be the source of significant contingent
liabilities
Running costs analysis
The Plan feasibility analysis imposes the precise control of the exploitation
of the costs involved in the Plan itself
Napoli, 3 ottobre 2013 – “Shipping and the law”
5
“Relazione di asseverazione”: specific issues in shipping (5 di 6)
Dry dock analysis and e intermediate visits
The independent expert has to verify the correct assignment of costs
expecially
during days of downtime related to dry dock and to
intermediate visits for every single ship according to its seniority
Vessel analysis and scrapping
In the presence of a Plan which provides for the disposal of the fleet or part
of it a key variable is represented by the evaluation of the ships, which in
turn, is a function also of the time horizon in which the dismissal is planned
Econimic balance analysis
The first requirement needed for a recovery plan to be accepted is the
economic rebalancing
Napoli, 3 ottobre 2013 – “Shipping and the law”
6
“Relazione di asseverazione”: specific issues in shipping (6 di 6)
Financial balance analysis
It is also important to consider that a feasible plan must guarantee an
economic balance also able to ensure financial balance conditions
Freight rates trend
In the shipping sector the freight variable assumes a fundamental nature
as it can influence the economic and financial balance in addition to the
evaluation of ships themselves
Napoli, 3 ottobre 2013 – “Shipping and the law”
7
“Relazione di asseverazione”: the methodology in shipping
Assessment of the ability of the Plan to withstand in the presence of a
pattern of variables not included in the Plan
The independent expert has to bring forward the monitoring process of the
Plan depending on the achievement of the "milestones".
We need to be certain of the levels of stress that the Plan is able to
withstand in order to define the "bearing areas" within which the variables
can move without affecting the sustainability of the Plan and, therefore,
the success of the said Plan.
In this perspective the independent expert adopts the “stress-test” respect
to the forecast and the projections, concepts also referenced from the socalled "Guidelines 2010" and from the sensitivity analysis contained in the
Plan itself.
Napoli, 3 ottobre 2013 – “Shipping and the law”
8