Billionaire Oil Tanker Owner Files for Bankruptcy
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Billionaire Oil Tanker Owner Files for Bankruptcy

November 21, 2011

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General Maritime Corp., which operates the second-largest fleet of oil tankers in the United States, recently iled for bankruptcy after it saw record financial losses in the wake of sinking oil demand and a surplus of freight ships.

Bloomberg Businessweek recently reported that General Maritime filed its Chapter 11 bankruptcy petition in federal court in Manhattan. The company lists assets of $1.71 billion, but it also has a staggering sum of debt, which rounds out to about $1.41 billion.

According to Nigel Prentis, an analyst at HSBC Shipping, the share prices of tanker companies “have just collapsed this year.” In his view, the stock market has “given up on them,” and he anticipates several more tanker companies joining General Maritime in bankruptcy court.

The financial statistics for General Maritime offer a bleak picture. Sources indicate that the freight rates for oil carriers have dropped to their lowest point in 14 years.

This year, single-voyage freight trips, in which roughly 20 percent of the world’s oil supply is transported, only made an average of $7,627 a day, which pales in comparison to the average daily rate of $32,006 in 2010.

Experts suggest that a few key factors have led to the demise of oil tanker companies. First, the sovereign debt crisis in Europe has sharply decreased much-needed lending to the oil tanker industry.

In addition, an unfortunate surplus of oil tankers has dramatically lowered the costs of each voyage, as well as other raw materials and refined oil products. According to Clarkson Research Services, the current global fleet of oil tankers is larger than it has been in any year since 1983.

Finally, the global demand for oil has taken a steep downward turn in recent months. Sources indicate that global demand for internationally-transported petroleum is at its lowest point in 27 years.

Specifically, the United States’ demand for oil shipped from overseas has dropped by roughly 17 percent this year, as American industries begin to use more domestic petroleum. In fact, domestic oil production in the United States, which remains the world’s largest oil market, is at its highest point in nearly a decade.

These unfortunate trends have led oil tanker companies to begin taking advantage of the protection of federal bankruptcy law. Companies like General Maritime hope that, by reorganizing under Chapter 11, they will solve their debt woes and create a stronger company.

To its credit, General Maritime has already found a few brave investors who are willing to support the company. This week, two venture capital firms agreed to offer almost $300 million in financing for the struggling oil transporter.


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