Viking Raid

by Matthew McCleery

  “That’s the shipbroker’s motto,” Sir Nicholas said and looked up at the grainy black-and-white photo. “At least it was when those gentlemen were still alive; before people came along who believe a bond is something that exists to be restructured, or bought back at a discount.”

  “You European as so sentimental about capital,” Robert said.

  “Those men lived through the glory days, Mr. Fairchild,” Sir Nicholas sighed wistfully as if reflecting on his own personal experience in the eighteenth century. “The days when The River Thames was thick with ships and the British Navy still ruled the sea. The days when cargo ships moved by sail to the Baltic Sea and your Virginia Colony to collect the only commodities that mattered – pitch and pine timbers to make the masts of sailing ships,” he said dramatically.

  “What goes on in here now?” Robert asked.

  “The same thing that goes on in your trousers,” the old man said slowly and without the hint of a smile.

  “Excuse me?”

  “Electrical impulses,” he winked. “I’m sure technology has changed every business but the availability of information has totally transformed the international shipping business.”

  “There is no shortage of information available,” Robert said as he thought about his fruitless visit to Copenhagen, “but a lot of it is out of date, wrong or incomplete.”

  “Back in the old days, having information that no one else had the way to make money. Before the internet, the email and the fax machine, all we had were expensive and unreliable transatlantic cables. That was when a few shipbrokers around the world controlled the market. They were the only ones who knew how much a ship cost to build, how much an oil company might pay to charter her and on what terms a London bank would provide financing. The people who had the information made a fortune in this business…sometimes paying off an entire vessel on just one voyage.”

  “What is it like now?” Robert asked.

  “Now it’s the organizations that can gather and process the overwhelming amount of information and manage a massive number of relationships that dominate the business now.”

  “Is there still a trading floor here at the Baltic Exchange?” Robert asked as he peered deeper into the building in search of the soaring marble ceiling portrayed in the photograph looming above him. “I’d love to see it.”

  “A trading floor?” Sir Nicholas laughed. “The closest thing we have to a trading floor is the snack bar.”

  “So where do shipping people come together nowadays to make their deals?” Robert asked.

  “Today they will come together over lunch at Harry’s Bar,” Sir Nicholas said as he opened the heavy wooden door and motioned for Robert to walk outside.

  “Harry’s Bar?” Robert asked.

  “Yes, that’s where I’m going to trade you two bottles of Domaine de la Romanée-Conti for the information you need,” Sir Nicholas said.

  Chapter 25

  Sammy Ofer

  Sammy Ofer (1922-2011) was an Israeli shipping tycoon, businessman and philanthropist. He was one of the wealthiest people in Israel, although most of his time he spent abroad, and managed his businesses from Monte Carlo in Monaco. Ofer was born in Romania and two years later, his family immigrated to Mandatory Palestine. After Ofer finished elementary school in Haifa, he started working as delivery boy for a shipping company. In 2008, Ofer donated $33 million to fund a new wing at Britain’s National Maritime Museum, which observers said was the largest private donation ever made to a British cultural institution. He was subsequently awarded an honorary knighthood.

  Robert Fairchild held Sir Nicholas’ arm as the shipbroker limped around the corner of St. Mary Axe and Threadneedle Street, howling in pain whenever he put even a modest amount of pressure on his left foot.

  The men moved slowly for another half block, battling the wet wind blowing-in from the Thames before cutting across a small cobblestone courtyard to Harry’s Bar. Once they were inside the restaurant’s foyer, Sir Nicholas smoothed his mane of windswept gray hair. He drew-in a breath, peered grimly down the dark stairway that led to the dimly lit basement dining room and sighed, “This is going to be truly excruciating.”

  “I’ve heard arthritis is tough,” Robert offered.

  “Arthritis!” the old shipbroker roared as he turned to face Robert and lifted his cane as if preparing to whack the American again.

  “They say it’s a very common condition,” Robert replied. “And it’s not your fault. The humidity in this city must be brutal,” he added as he took a step back from the shipbroker.

  “I don’t have arthritis!” Sir Nicholas said. “I’ve got the gout, boy!”

  “The gout?” Robert asked with grave concern. “What’s the gout?”

  “You call yourself a shipping man and you don’t know about the gout?” he coughed.

  “I’ve heard of it,” Robert said, “but I thought that was something sailors got in the seventeenth century, like scurvy.”

  “That’s almost right,” he smiled. “I got mine from spending seven days on a shipowner’s yacht during the Rugby Sevens in Hong Kong; I had been living on nothing but shellfish and lager which is exactly what causes the uric acid crystals to get stuck in the joint of the big toe.”

  “Sounds like an occupational hazard for a shipbroker,” Robert said.

  “You’re quite right,” he laughed. “I flew home to London with a swollen toe and a 1% commission on eighteen new bulk carriers worth $360 million,” he smiled.

  “I bet thinking about that commission makes you feel better,” Robert said.

  “Spoken like a true deal man,” Sir Nicholas smiled.

  “Maybe should we try to find a more accessible restaurant, perhaps one with a ramp?” Robert said. The shipbroker would have preferred a ground-level restaurant, but that wasn’t an option; he had strict instructions to bring the American to Harry’s Bar.

  “You listen to me, Fairchild,” he admonished. “I’ve been buying and selling ships since Andi Case and Richard Fulford-Smith were in diapers and I’ll doing it when they’re back in diapers,” Sir Nicholas said as he heaved his inflamed toe down the first step. “I do not need a ramp!”

  When they finally arrived at the bottom of the stairs, the hostess moved quickly across the dining room to greet them. “Nico!” said warmly and kissed him once on each cheek. “How’s the toe?”

  “It’s still angry as an alligator, Julia, but better than yesterday,” he said and handed her his cane and green tweed hat.

  “Don’t worry,” she said and spun around. “I’ll bring you a glass of fresh squeezed cherry juice straightaway.”

  Like so many things about the City of London, the cellar dining room of Harry’s Bar made it easy for Robert to imagine life as an eighteenth century shipping man; the massive stone hearth, the candle-dim lighting and the rough-hewn beams holding up the horsehair plaster ceiling appeared unchanged from the days when tallow and timber were the cargoes of interest and the world was fueled by whale oil and hard labor – instead of leverage and carbon.

  Despite claims that the shipping business was moving to the Far East to serve China, and that capital was coming primarily from America, Robert learned that London’s multi-century role as the epicenter of the international ocean shipping industry was unlikely to change – at least in his lifetime.

  With its storied maritime history dating back to when England traded with her colonies, twenty-first century ocean shipping still employed half-a-million professionals who generated more than $30 billion of annual revenue. A staggering 50% of tanker and dry bulk chartering, along with vessel sale and purchase, was concluded in the City of London thanks to the roughly 2,000 shipbrokers who operated in the city twenty-four hours a day. Shipping was important to London and London was important to shipping. Full stop.

  While a diaspora of shipowners would forever wander the world in search of the ideal balance between maximum lifestyle and minimum taxation
, the largest and longest standing ship financiers in the industry were rooted in London. The city was also home to the ship finance industry’s best known graduate school, Cass, which produced a guild of professional talent that ensured the specialized knowledge of ship financing would passed down through the generations.

  Just as he and Sir Nicholas sat down at the corner table, Robert was startled by the explosion of laughter that erupted on the opposite side of the room. He turned around expecting to find a pack of intoxicated twenty-five-year-old bankers in the midst of a liquid lunch. Instead, he saw a dozen well-dressed older gentlemen packed tight around a round table.

  “Who are those guys?” Robert asked.

  “Take a guess,” Sir Nicholas asked as he raised his arm in what looked like a type of tribal greeting. “Let’s see how perceptive you are.”

  “They look like bankers with a generous expense account,” Robert replied.

  “You have a keen eye, Mr. Fairchild,” Sir Nicholas said without peering up from the leather-bound wine list.

  “But I thought London bankers were all depressed because they don’t get bonuses anymore,” Robert said.

  “The Dippers are different,” he said as he peered over the rim of the tortoiseshell reading glasses perched on the tip of his crooked nose. He slammed closed the leather bound wine list as though it were a form of emphatic punctuation.

  “The what?” Robert asked with a laugh.

  “The Dippers,” Sir Nicholas repeated as he used the cryptic hand signals of a baseball catcher to communicate his indulgent selection to the sommelier. “It’s a very special organization.”

  “What makes it so special?” Robert asked.

  “That small group of men and women control more than $150 billion of ship loans,” he said. “That’s nearly 50% of the entire global market for debt secured by ship mortgages.”

  “Wow,” Robert asked. He was stunned that such a massive industry, the single largest asset class on the planet, was controlled by the handful of people sitting around a round table having lunch.

  “The Dippers got together in 2009 after Lehman Brothers collapsed and the shipping market went into a terrible slump when Letters of Credit dried-up. They had to repossess hundreds of vessels, but they couldn’t afford to sell them because the losses would have made the banks insolvent. So instead of selling the ships at the bottom of the market and taking the losses, they formed a shipping company and named in DIP Shipping.”

  “DIP Shipping?” Robert asked.

  “It’s short for Debtors in Possession,” he laughed.

  “How did that work out for them?” Robert asked.

  No more than two minutes after the shipbroker had hand signaled his desired vintage, a solicitous sommelier had peeled the crimson foil from the neck of a green bottle and was screwing an opener into the cork. After he’d filled the bottom of Sir Nicholas’s large wine glass for his pre-purchase evaluation, the broker closed his eyes and rolled the Burgundy around with a look of ecstasy on his face. Then he lifted his glass in front of a nearby wall sconce, closed one eye and studied the streaks of residual alcohol.

  “Quite well actually,” Sir Nicholas broke the silence and lowered his nose into the wide bowl of the glass and took a sniff.

  “Really?”

  “Some people accused them of kicking the can down the road, the people who didn’t really understand the peculiarities of shipping, but their patience proved to be the right strategy; it saved the shareholders of their bank from massive losses.”

  “Just when you’re ready to give up you need to hang on a little longer in this business,” Robert said.

  “Indeed,” Sir Nicholas said. “The DIP fleet is not only profitable in its own right, but has now become a place where banks voluntarily put their ships; the pooling of tonnage is the future.”

  “Sounds like they are really stick together,” Robert said.

  “That is the code of the sea, Mr. Fairchild,” he said, “and it extends to shipping people on land as well,” Sir Nicholas said.

  “I’ll drink to that,” Robert said and raised his empty glass. The American was praying he would be able to preserve his position at Viking Tankers and not be forced back into the real world; even when shipping was bad it was still pretty good.

  “Oh my,” Sir Nicholas said suddenly with a look of concern suddenly spreading across his face.

  “What’s the matter?” Robert asked. “Is the toe flaring up again?”

  “This is worse,” he said. “There appears to be a new Dipper at today’s lunch: Alistair Gooding.”

  “Alistair Gooding?” Robert cranked his neck around to confirm the presence of Viking Tankers’ largest lender. “Why is he at the Dipper lunch?” Robert asked. “I always thought Allied Bank of England had the cleanest portfolio in the industry.”

  “He’s probably looking for a place to park Coco’s ships,” the old broker said casually and popped a morsel of brown bread into his mouth.

  “That’s ridiculous,” Robert laughed.

  “Oh please,” he said as he aggressively refilled his own empty glass while ignoring Robert’s. “Everyone knows that Coco Jacobsen and Alistair have been sharing the same leaky lifeboat for years. When Coco goes down, Mr. Gooding will be forced to take possession of an ungodly quantity of crude oil tankers.”

  “But why would Alistair repossess Coco’s ships?” Robert asked.

  “You would know better than I,” Alistair said. “Broker gossip says that the end is near for Mr. Jacobsen. Apparently he chartered-out quite a few ships to those blokes at American Refining Corporation and now they are in the process of handing them back.”

  “But that makes no sense,” Robert said. “Even if ARC, I mean ART, does default the spot market for VLCCs is still about $25,000 per day; Viking Tankers can squeak by with rates like that.”

  “Actually, the spot market has been firming nicely during the last few days,” Sir Nicholas said.

  “It has?” Robert asked. He had not been keeping track of the tanker market since he started the roadshow and then began his global scavenger hunt for the LNG ships. “What’s going on?”

  “What’s going on is that the pundits got the market wrong,” Sir Nicholas said. “A lot of people just assumed that the tanker market would crumble because the U.S. is importing less crude oil; a lot of people were wrong.”

  “How could they be wrong about that?” Robert asked. “It couldn’t be more obvious.”

  “The movement of commodity is a complex organism,” the shipbroker said. “As it turned out, the barrels of light, sweet crude that America stopped buying from West Africa are now going to China which is twice as far as the U.S. Gulf and – that is very good for crude oil ton mile demand. In fact, the future for crude oil tankers has never looked brighter.”

  “Holy smokes,” Robert said softly. “Coco was right.”

  “He usually is.”

  “That’s great news,” Robert said. “Because if the spot market is stronger, then Viking Tankers will be okay even if ARC, I mean ART, does default.”

  “I’m afraid it’s not that simple,” he said.

  “But you said the spot market is looking robust,” Robert said.

  “The spot market isn’t the problem,” Sir Nicholas said.

  “What’s the problem?”

  “The problem, boy, is that Rocky DuBois has apparently threatened to file a complaint with the U.S. Coast Guard alleging that Viking Tankers has been ordering its crew to pump oily water in the ocean.”

  “But that’s absolutely not true!” Robert cried. “No one is more careful about that than Coco; he spends a fortune on oil-water separators.”

  “Perception is reality,” Sir Nicholas said. “If ARC makes the allegation nobody will charter any of his ships; Coco Jacobsen could be blackballed in the Arabian Gulf.”

  “Oh no,” Robert finally said slowly, his head spinning with vertigo; he had never even consid
ered the possibility that ARC could permanently damage Coco’s ability to trade his ships. He hadn’t thought about the fact that in a small business like shipping, reputational risk was one of the biggest risks – bigger than storms at sea and bigger than pirates and even bigger than the market itself; a ship that couldn’t earn money was nothing but a liability. In trying to protect Coco with the time charters, Robert had actually put him at greater risk.

  Just as Sir Nicholas raised his arm, Alistair Gooding rose from his chair, placed a neatly folded cloth napkin on the table and marched aggressively toward Robert. “What on earth are you doing here?” the British banker demanded after failing to acknowledge Robert’s outstretched hand.

  Robert wasn’t sure if the banker knew about ARC’s threat to default on the ten time charters, and its demand for the fifteen LNG carriers, and he wasn’t about to tell him. “I’m just having a nice lunch,” Robert smiled. “Just like you and the Dippers.”

  “Unfortunately, I am doing business,” Alistair snarled. “Shouldn’t you be on the IPO roadshow?”

  “Now Alistair,” Sir Nicholas said in a soothing voice, clearly trying to calm the enraged banker. “Take it easy on Fairchild, he’s just a boy.”

  “He’s not a boy, Nico, he will be a forty-year-old man in just a few days and I want to know why he’s not out raising the equity that he promised he would raise for Viking Tankers,” the banker demanded again.

  “Because I…”

  “Follow me,” the normally genteel banker growled through his gritted teeth. “We have to talk.”

  Robert Fairchild reluctantly rose from his seat and slowly followed Alistair like a man marching to his own execution. Once Alistair was satisfied that no one in the dining room could see them, he grabbed Robert by the collar of his wrinkled blue button-down shirt and pushed him up against a wall paneled with the wood of old French wine cases.

  “What’s the matter with you?” Robert croaked as he unsuccessfully attempted to remove Alistair’s hand. “You’re hurting me, Allie.”

  “Not as badly as you’re hurting me! You may have free money on Wall Street, Mr. Fairchild, but money is most certainly not free at the Allied Bank of England!” He shouted into Robert’s face.