Dry Bulk Bankruptcy Wave Approaching, Warns Precious Shipping CEO, as BDI Falls to 290

Khalid Hashim, CEO of PSL, warns that a wave of bankruptcies in the dry bulk sector could be seen as banks tighten loan policies.

As the Baltic Dry Index (BDI) continues to slip to new record lows, falling to 290 on Wednesday, Khalid Hashim, CEO of Precious Shipping Public Company Limited (PSL) says that there could be wave of bankruptcies in the dry bulk sector as owners find themselves unable to secure financial backing due to banks pulling back on uncertain loans.

"Do not be surprised to see more bankruptcies and action brought on by the lending banks on borrowers who have failed to show performance in terms of raising additional funds to bolster their liquidity to at least partially service their debt since their shipping revenues are probably not going to be able to do that this year," said Hashim

Banks are examining their lending policies, meaning that they will likely consider "pulling the plug" on their doubtful loans, explains Hashim, noting that dry bulk companies will be left struggling to find access to cash.

"Most dry bulk shipping companies, especially the smaller and non-listed ones, will simply give up as they will not be able to manage against such overwhelming odds," he adds.

Hashim says that the companies that do manage to survive the difficult conditions could work to reduce operational costs, sell non-core assets, utilise bonds and leases, and tap shareholders to boost available funds.

Commenting on the BDI outlook, Hashim said "BDI will not push much lower than where we are today and will remain range bound within 350 to 750 points for the better part, or all, of 2016."

Last month Ship & Bunker reported that the historic collapse in dry bulk had been called the sector's worst crisis in living memory.