As the container shipping industry continues to boom, companies are adopting new technologies to move cargo faster and shifting to crewless ships. But it’s not all been smooth sailing and the future will see fewer players stay above water.

Many are fearful of investing, many already did it, others are on the fence as to whether it’s still worth it. Nicholas Gregory, founder and CEO of London-based cryptocurrency enabler CommerceBlock, here provides Finance Monthly with some insight as to whether you’ve missed the boat or not at this point.

The chatter surrounding Bitcoin investments has reached fever pitch in the new year, and the higher its value rises, the louder it gets.

But how do you time an investment in a market like this, and is it worth it?

A massive stumbling block for would-be investors is the fact that nobody inside the industry truly understands how valuable Bitcoin really is. Fair value is difficult to pinpoint, and the market has been gyrating wildly as record high after record high has bowed to the cryptocurrency’s seemingly unstoppable rise.

Meanwhile skeptics continue to question whether Bitcoin has any value at all.

Warren Buffett of Berkshire Hathaway famously called Bitcoin a “mirage” back in 2014, and his criticism still echoes today. This is largely because regulation in many jurisdictions is yet to catch up.

Putting the intrinsic value of Bitcoin aside for a moment, the appeal of cryptocurrency largely depends on whether or not the investor expects other people to want to take it off them at a later date.

If people think Bitcoin has value, then it does. This faith - that it is a store of value and means of exchange - is what has underpinned traditional Fiat currencies ever since stone money was created in Micronesia. Those ‘coins’, which could be so large they weren’t even moved, were also a store of value solely because a community of people agreed they should be.

This same dynamic can lead potential investors to grow nervous over the future value of Bitcoin but, as history shows, it’s nothing new.

I, and my colleagues at CommerceBlock, help companies do business in Bitcoin. So if it’s true that Bitcoin is worthless, then we are in serious trouble.

What makes me more certain than ever that we have a future, is the same excitement that is driving the headlines. Bitcoin promises to be a currency not anchored to the old guard, not beholden to bankers, lawyers, high fees and costly international settlements. It’s a no-brainer for businesses who can accept huge payments from the other side of the world in minutes.

So what impact does this have on the value of Bitcoin? Well, anyone who has observed the astronomical growth in its valuation over the course of 2017 will know that its price has been volatile, to say the least. At the start of the year it was at around $800, before more than doubling to $2,000 in May. Then, in August, it broke the $4,000 mark for the first time. As I write this, Bitcoin is worth over $16,600 just four months later.

However, it’s a leap of faith to chase a market that has risen so dramatically. At the same time, I am one of those who believe bitcoin will be worth $100,000 one day. It’s either that or it will be worth nothing at all.

This is only my opinion. But even if I’m right, I can’t tell you how long that will take or what bumps we will encounter along the way.

In investing, you can be right in the long run, but still lose money. It is best summed up by a retort to famed hedge fund manager Michael Burry, played by Christian Bale, in the film The Big Short, as he defends his decision to short the housing market.

Burry tells a disgruntled colleague: “I may have been early, but I'm not wrong.”

Then comes the reply: “It’s the same thing.”

Finance Monthly speaks to lawyer Rona Kaspi about trends within Maritime Law.

What’s your general opinion on the current position of vessel financing environment realized since 2008?

The maritime sector is one of the sectors affected by the global crisis after 2008. The global crisis started a chain reaction causing a constriction in trade, resulting in a negative impact on both the shipping and banking sectors, which, in turn, had adverse effects on the rapid financing of the maritime sector. The maritime sector, which takes up little space on their balance sheets, has become a sector that larger banks, and, in particular European banks, want to exclude from their portfolios due to the losses it causes them. Other than a few banks that have the expertise and are efficient in the maritime field, several German banks that do not consider maritime clients as their target audience made the decision to withdraw entirely from the maritime sector, especially in Turkey. They have chosen to transfer the credits to third parties by giving 30-40% discounts on the debt amount of the principal, for the sole purpose of removing it from their balance sheets. While executing such transfers, the loan repayment performance of the indebted companies have not been considered. They removed the companies that do not have other source of income and are not managed in a professional manner and have limited the number of vessels in their portfolio.

After the unfavorable market in 2016, improvement in the sector is being projected by ship owners and shipyards in 2017 onwards. What is your opinion on this? Where do you think the financial opportunities will come from?

2015 was quite fruitful for tanker owners but, as mentioned, 2016 was not a productive year. Currently, the conditions for dry cargo and tanker markets look positive and I can confidently say that Turkey has a very influential position in the region in relation to shipyards.

It is impossible to find availability repair and docking services at the shipyards. This is an indicator of the success of the services provided by the shipyards in the region.

However, the maritime sector is no longer a primary sector whose investment is supported by European Banks, neither in relation to ship owners nor to shipyards. The rapid fluctuations caused a disincentive to banks which would be interested in earning money in a short period of time through high interest rates expected for a limited number of banks. The European Banks consider the labor force used in relation to maritime loans under €20 million as unproductive. Additionally, banks prefer giving loans to holding companies that have a more professional administration structure to family companies. Due to this, it would not be easy for Turkish ship owners and shipyards to find foreign financing. On the other hand, local banks continue to actively provide a support to the maritime sector. However, during client selection, the local banks consider not only the financing of the vessel, but also the previous loan transactions of their clients and their relationship with the banks during the previous crisis period.

Today, firms which continued their activities find themselves to be grateful to the local banks that supported them during the financial crisis. This has changed the sectorial companies’ opinion on the banks. Although local banks offer higher interest rates when compared to foreign banks, they now have more customers in the sector due to the support they’ve offered to their clients. Local banks will continue to provide their financial support, however, access to foreign financing sources will gradually become difficult.

What is the risk perception in respect of maritime assets and, among others, are there any less-risky vessel types? How eager are the banks to take maritime investment risks?

While the foreign finance institutions make sector assessments for long terms, local finance institutions offer lending for smaller amounts and shorter terms. Foreign finance institutions prefer providing funds to the publicly-traded firms or maritime companies, rather than financing an individual vessel.

Before the 2008 crisis, when the market was at its best, financing of general cargo vessels was as common as financing larger ships. Perhaps this has deteriorated more rapidly after the crisis, in comparison with other vessel types. Is it likely that the banks specialised in global vessel financing may again show such an interest in the short and medium term? How accessible would financing be for small vessels and ship owners?

As far as local banks are concerned, coaster-style small vessels will always continue to be attractive to them, however, they are out of the scope for foreign banks. In my opinion, local banks will continue to finance coasters by taking additional guarantees, such as maritime hypothecation.

In this context, how risky are the short-distance sea transports and general cargo vessels, according to banks?

Local banks will always deal with local trade. Nevertheless, there will always be requests for additional guarantees. Most of the local banks do not consider the clients they finance as business partners and they do not consider vessel loan transactions as project financing – to them, this is asset financing. Hence, this always necessitates additional guarantee requests that are not ship mortgages.

Have European banks overcome the crisis or are there any new mergers and consolidations in the future?

As far as European Banks are concerned, the issue is not restricted only to a maritime crisis. Actually, one of the reasons behind the crisis in the maritime sector is the global banking crisis. Many banks leave the maritime sector, make major discounts on their credits, sell the credit or pressuring their clients to settle the loan, as they’re not familiar with maritime market and they don’t have control over the market. Although the risks are generally small, maritime creates significant issues in the balance sheets of foreign banks. Overall, banks are doing well and I don’t think that they will be faced with any unfortunate surprises in the near future.

The vessel prices reached rock bottom, which presents a great opportunity for the ship owners who would like to enlarge their fleets. On the other hand, financing opportunities are very scarce too. So much that, even if there are financial means, it is not possible for some vessels to generate enough daily revenue to make the repayments in the current markets. In this regard, would it be less risky for the banks if they finance the vessel purchases at the current lower prices with more convenient payment conditions and then increase the repayments when the vessel prices increase?

The developments in our maritime sector gained momentum after 1995, but real growth was achieved in the beginning of 2000s, due to the involvement of foreign banks.

During those years, banks and finance institutions played a great role both in the second-hand market and in supporting the construction of new ships. However, when we’re in foreign countries, we see companies making continuous investments to the maritime sector. It is not possible to reach a strong capital structure within a short period of time. Although rapid growth seems attractive to people, the status of the companies that do not have the adequate capital structure to overcome the crisis will always be a danger. In the maritime field, the most impossible situation can be encountered. It is vital to ensure that your company has a strong capital at all times to take the necessary measures and be able to position itself in the event of a crisis. Instead of targeting a rapid growth for their companies in the short run, the partners of the company should target a company structure, which is managed professionally, maintains the speed of growth within the frame of a specific plan and ensures survival by relying on its strong capital structure in case of a risk. A consistent growth should be targeted; our recent experiences showed us that a rapid rise might lead to a sharp decline.

Finally, we are all aware that standards such as Basel 3, which require greater transparency, have been introduced. In this respect, what are your suggestions to the Turkish ship owners about the transparency requirements that need to be satisfied by banks in the future?

First of all, they must ensure a more professional administrative structure. Many banks have actually witnessed the problems which occurred in family companies. Having witnessed issues resulting from family-related problems, banks which previously had a large number of clients in Turkey have now stopped to gravitate towards the country. Family members can be the partners of the company but their personal issues should not affect the daily business of the company. Besides, transparency in the capital structure is also required. Evidence about the source of the capital should be made available. Now there is no off-the books money. The companies should be professionally managed, their accounts should be audited and the audit reports should be submitted to the banks regularly. Today, the application forms of the banks that needs to be filled by standard clients require the name of the audit firms and lawyers. Refraining from auditing may result in saving a small amount, but it is important to mention that the companies that submit regular audit reports have better reputation in the eyes of banks.

Website: http://www.aktlaw.com

Whether it’s in investing, a partnership, a sponsor, or simply a paying client, a sinking ship can cause a deep wound in the business. Here Rachel Mainwaring, Operations Director at Creditsafe talks Finance Monthly through the steps in identifying a failing house.

One of the fears for any business is that it won’t get paid for the work or services it has supplied because their client is in financial difficulty. This fear became more prominent last year when, for the first time in three years, there was an increase in businesses closing their doors through insolvency (up 24% on 2015).

Given the uncertainty within the UK economy after the Brexit vote, an increase in failures was not entirely surprising. But knowing who will be affected is a trickier call. When a company gets into trouble, it can often take the businesses it deals with by surprise. Unfortunately, a sinking business is not always as obvious as the Titanic going down with the band playing.

With 2017 set to be just as unpredictable as 2016, it’s essential that companies are attuned early to the signs of possible distress. Obviously a negative balance sheet and falling profit can indicate that a company might be failing – but results statements in Annual Reports or company filings can be issued many months after year-end and long after problems have begun to take hold.

There are other, less obvious signs that business leaders should be looking out for when doing their due diligence on the companies they are in business with, as well as those they may be about to start working with.

These signs can usually be found in a company credit report, which is why they really are worth investing in obtaining. Things to look out for include:

Changes in directors. It’s natural for directors to change occasionally within a business, but if it becomes a trend, or if a director isn’t replaced within a few months, it could be a sign of deeper issues within the company.

Directors with previous failed ventures. You can check individual directors’ histories – and if they have a record of previous failures, that could be a warning sign. Our data found that if a director has been involved in a company that has failed in the last three years, they are nine times more likely to fail again compared to a director who has never been involved with a business collapse.

Adverse payment information. According to trade body R3, at least one fifth of UK corporate insolvencies in 2016 were caused by late payment or the insolvency of another company. If there is an increase in the number of days a client is taking to pay their bills, that could indicate cash flow difficulties. Check whether their average Days Beyond Terms (DBT) has increased or whether they have any CCJs against them.

Spike in views of a company’s credit report. It’s natural that if other businesses are worried a company is getting into financial difficulties, they will check their credit status and report. So look to see whether there has been a rise in the number of views. It could be due to other issues, but nevertheless it can be a useful indicator.

Links with businesses with low credit scores. Many companies are owned by or have links with other businesses. Their financial position can have a knock-on effect on each other. So another thing to look at in a credit report is the information on linked companies and other businesses in the Group structure. Look at their credit scores and histories – it could be very worth doing.

It’s important to study a credit report carefully and not merely look at the topline statistics. It’s also important to do some of your own research. What’s been written about an organisation in the press, for example? Do you have contacts at other businesses who may have worked with them?

What’s more, it’s important to keep monitoring on an on-going basis: if they seem fine in January, that doesn’t necessarily mean they will be, come July.

It’s also possible to sign up for risk tracker alerts that automate your monitoring process and notify you when there has been a change to a company’s credit report – from a director leaving to the company receiving negative publicity in the press.

Keeping abreast of your clients’ credit status is not difficult to do. The small effort involved could pay for itself many times over if it prevents your business incurring a bad or irrecoverable debt.