PEOPLE
PROFILE
n Angeliki Frangou opens
NASDAQ, joined by her
father, Capt Nikolas
Frangos (centre left)
CAREER PATH
ngeliki Frangou was
born into a Greek
shipping family and
was educated in the US,
receiving a BA from Fairleigh
Dickinson University, New
Jersey, and a graduate degree
in mechanical engineering
from Columbia University, New
York. Initial work experience
included a time at Republic
National Bank as a credit
analyst optimising the buying
power of customers trading
precious metals.
A
Appearances can prove deceptive with diminutive Angeliki Frangou,
ceo of emerging dry bulk giant Navios, as Barry Parker discovers
Driving force
ne of the most prominent success
stories of shipping's flirtation with Wall
Street – as well as of Greek owner
families embracing corporatisation – is
Angeliki Frangou and the company she now leads,
Navios Maritime Holdings Inc (NMH).
Navios has been around since the mid 1950s
when it was formed by US Steel to streamline that
corporation's sizeable iron movements. It later started
handling third party cargoes, and various financial
restructurings ensued before control passed in the
1980s to an investor group led by Sean Day (now
Teekay ceo) and Fednav. In 1999, Greek owners
Levant Maritime (controlled by the David family),
together with others, invested in Navios, taking over
the majority in 2002.
Ms Frangou, meanwhile, had been born into the
Frangos Greek shipping family and studied
mechanical engineering in the US (see box). She
soon turned to financial engineering, however, and
worked in banking as a credit analyst before
forming her own bulk shipping firm, Franser
Shipping, in the early 1990s.
A few years later she helped plan flotation of a
high-yield bond for her father's Greek-based dry
bulk company, Good Faith Shipping, which
eventually proved ill-timed and was dropped. But
the experience proved a useful test run, Frangou tells
Seatrade, as she 'sensed that things were going to be
happening in the (dry bulk) sector.'
Then along came 2003, a year when the sleeping
dry market turned into a roaring bull from autumn
onwards. Twelve months later, with the market's
O
strength confirmed, Navios's Greek owners turned
sellers and hired Lazard to explore strategic options.
Frangou, working with New York investment
bankers Sunrise Securities – no strangers to
shipping through investments in Tsakos Energy
Navigation – set about raising the necessary funds.
International Shipping Enterprises (ISE), described
as a Special Purpose Acquisition Company (SPAC) or more colloquially as a Blank Cheque Company was established via a $182m IPO to purchase an
unspecified dry bulk shipping business.
'The SPAC was a good clean way to make an
entry into the dry trades, which were ripe for
consolidation,' Frangou tells Seatrade. 'Once we had
the SPAC in place, we could move quickly on a cash
deal, unlike the traditional IPOs where ships might
need to be tied up for the lengthy, six months or
longer IPO period.'
SPACs are an uncommon but totally legitimate
device, which allow a promoter or packager to raise
money for acquisitions while a target is still being
identified. Funds raised are placed in a trust account;
when a target is identified and a deal struck, a large
majority of shareholders must approve the deal.
The ISE deal presented a number of unique
challenges, all handled expertly by Ms. Frangou
and her team.
Firstly, raising the funds for what is really a
'blind pool' is never easy, even for amounts way
smaller than the $182.6m ISE sought, to
accompany $520m of debt from HSH Nordbank.
Secondly, the valuation of Navios, which sourced
much of its tonnage through long-term charters with
Early 1990s Frangou
starts her own business,
Franser Shipping, running dry
bulk vessels.
1998 Frangou helped plan
a high-yield bond offering for
her father's company Good
Faith Shipping. Timing was
wrong as the so-called 'junk
bond' market collapsed and the
offer was pulled, but it proved
good experience for later.
2004, sensing the dry
market is about to take off,
Frangou invests some of her
own money and launches an IPO
to create International Shipping
Enterprises (ISE), described as a
Special Purpose Acquisition
Company set up to buy an
unspecified dry bulk business.
2005 ISE completes
$600m+ purchase of Navios in
August. Frangou becomes
chairman and ceo. Company
lists fully on NASDAQ.
May/June 2006
57
PEOPLE
PROFILE
n Navios fleet has
almost trebled
GREEK CONNECTIONS
ngeliki Frangou, prime mover behind
Piraeus-based bulk ship company
International Shipping Enterprises (ISE),
has always displayed the shrewd confidence of her
father Capt Nikolas Frangos (pictured previous
page), the founder of Good Faith Shipping, now
in his 80s and still an active owner.
The family is well known in the shipping
community. Good Faith, under Frangos and
partner Nicholas Moundreas, has long been
established as a name in the bulk trades and
is considered by those who matter as ‘a solid
operator.'
The doggedness of father Nikos has rubbed
off on his shipowning children, John who runs a
fleet of bulkers, and Angeliki who launched her
shipowning career under the Franser Shipping
banner and operated around a dozen handysize
general cargoships and bulk carriers.
John has displayed the Frangos trait in his
fight with ‘tanker king' Loucas Haji-Ioannou of
Troodos fame. Late February Frangos won a
London appeal court ruling which should end the
seven-year dispute started by the Cypriot owner in
an effort to recover over $49m he says he
entrusted to Frangos, who claims it was a ‘dowry'
advanced to him after his 1990 marriage to
Loucas’ daughter Clelia, which lasted three years.
Angeliki was behind an attempt by Good
Faith to launch a $280m high-yield bond in 1998
and, though the issue was ditched because it
could not attract a low enough interest rate,
Frangou as senior vice president declared the
project was ‘good experience.' There was some
criticism of the timing as it was at the end of the
bond era but Frangou was not phased, saying:
‘we can't worry too much about timing, that's the
job of the investment bankers.'
She adopted the same stance when analysts
raised doubts about the timing of the ISE IPO.
Not only did she go ahead, but there was a late
decision to up the ante and double the target
sum from $102m to establish a ‘blind pool' and
she gave no concrete details about what would
be done with the cash raised other than ‘acquire
one or more ships or an operating business.'
The timing was okay, the IPO flew, Frangou
emerged as a 25.16% stakeholder, and with
something under $200m in hand quickly set
about the $600m acquisition of Navios.
Paying out of her own pocket when necessary
to keep the project alive, Frangou won ISE
shareholder backing on August 23, 2005, to shell
out $607m for the Navios group.
A
purchase options, was complex and sophisticated.
And finally, earnings potential and asset values
were sliding steadily downward with the freight
market, during the nine-month period between the
time that ISE raised its equity, in December 2004,
and the actual consummation of ISE's Navios
purchase, in late August 2005 (after several
extensions of the original May 20 deadline).
ISE had initially entered into its purchase
agreement with Navios for $607.5mm just as the
market was peaking in late February 2005.
Nevertheless, the deal worked, even as the
market slipped, 'because the investors had secured
Navios's revenues for more than eight months until
the closing through a favorable purchase price
adjustment mechanism,' explains Frangou.
Regarding the valuation challenges for Navios,
which owned only six ships when purchased by ISE,
Frangou and her team have since re-engineered the
business into a more balanced shipping and trading
company. Core business now includes direct
ownership, long and short term chartering of vessels,
contracts for the transportation of cargoes, and use of
freight derivatives or Forward Freight Agreements. All
those layers of differentiation enhance its value.
Frangou is a passionate believer in FFAs and
describes a major tenet of Navios's financial
strategy as being its 'ability to control significant
assets without a capital outlay.'
But, recent results are a reminder that freight
derivatives are no guarantee of outsized earnings;
Navios's 2005 results show a gain of $0.1m on
FFAs, contrasted with 2004's staggering top line
FFA contribution of $57.7m.
Frangou is not unduly bothered by this difference.
'Now, we are a shipping company that uses
derivatives to supplement its income,' she says, 'as
opposed to a trading company with shipowning as an
add-on.' EBITDA (cash flow) from ship operations rose
in 2005 compared to 2004, she adds.
The company transformation strategy has
already involved growing the Navios fleet by 170%
in tonnage terms since last summer's takeover. Ten
vessels have been bought, six through exercising
purchase options and four through conventional
acquisitions. The fleet currently stands at 16 ultrahandymaxes and panamaxes, totaling 964,000dwt
with an average age of about five years.
In addition to the owned vessels, Navios has
eight ships on long term charters extending out as
far as 2012, with another nine vessels slated to
enter the Navios charter fleet when they are
delivered during 2006 through 2008.
True to its savvy financial
approach to shipping, Navios has
secured purchase options on nine of
the 17 chartered vessels; if history
repeats, more hidden value will be
monetized. Frangou describes the
purchase options as 'a nine-ship
newbuilding programme, where no
capital is required, compared to at
least $70m if we had placed a
conventional order... a huge
competitive advantage for Navios.'
And other acquisitions are
planned, with Navios eyeing an
optimum fleet of '30 to 35 vessels.'
Frangou believes that the dry bulk
market remains highly promising,
despite some 69.7m dwt of
newbuildings or 21% of the existing
fleet due to be delivered by 2008.
Currently 36% of the dry bulk fleet is
more than 20 years old, she points
out, and scrapping will surely set in
as and when market conditions
weaken, thereby producing a
counter-balance effect.
Navios also has a marker in
South America's growing export of
dry bulk commodities, particularly
to emerging markets such as China.
It owns and operates Uruguay's
largest bulk transfer and storage
terminal, strategically located by
the entrance of the River Plate.
On the financial front, Frangou has
quickly strengthened the Navios board
by bringing in former RBS ship finance
chief Rex Harrison, and fast tracked
NMH from an over-the-counter to full
NASDAQ listing so as to attract a wider
audience of investors.
Company premises may also be on
the move. Recent rumblings in the
New York markets suggest that Navios
– one of the first companies to move
out to Connecticut in the early 1980s
– is looking to move its headquarters
back into Manhattan, to be close by
several listed shipping companies run
by former bankers.
Once again, the maritime world
may do well to watch where Angeliki
Frangou leads. n
David Glass
May/June 2006
59