With a long history and diverse fleet, International Shipholding Corp. (ISC) is one of the more interesting U.S.-based shipping companies.
The company was founded by Niels F. Johnsen in 1947 as Central Gulf Steamship Corp. with a single Liberty ship, the SS Horatio Allen, and run for many years by his sons Niels W. and Erik F. Johnsen. Today it is headed by their sons, Niels M. and Erik L. Johnsen, chief executive officer and president, respectively.
ISC has owned and operated some very interesting ships during its history. Its Waterman Steamship and Forest Lines subsidiaries operated LASH or “lighter aboard ship” vessels from 1969-2007. Today its fleet includes two rail ferries that operate between Mobile, Ala., and Coatzacoalcos, Mexico; five pure car-truck carriers (PCTCs); and various Jones Act vessels, including a self-unloading bulk carrier and integrated tug-barges that carry coal and phosphate rock, and a molten sulfur carrier.
Over the past year, the company has been getting out of international bulk shipping, which has seen freight rates crash.
The Baltic Dry Index (BDI) fell below 300 for the first time ever last month, 297 on Feb. 5, down from a recent peak of 2,330 in December 2013 and its bubble high of 11,793 on May 20, 2008. Demand for bulk cargo such as iron ore and coal has plunged as new ships continue to be delivered.
Even though ISC is diversified, its stock price reflects the plummet in dry-bulk charter rates.
The company’s stock has been on a downward trend since peaking at $32.06 a share on March 7, 2014, to as low as 50 cents in December 2015. In the first few days of February it was trading between $1.21 and $1.39.
On Dec. 18, the company was notified by the New York Stock Exchange that it was not in compliance with listing standards. Its common stock is now traded on the OTCQX market.
Probably nobody feels the pain of that plummeting share price more than the Johnsen family. The company’s 2015 proxy statement said three generations of the Johnsen family collectively own about 1.5 million shares or 20.5 percent of the company’s common stock.
With conditions deteriorating in shipping, the company began to sell some assets last year to reduce debt and improve liquidity.
After recording a loss of $7.2 million in the third quarter of last year, ISC’s directors adopted a strategic plan to streamline, sell assets and focus on three segments—Jones Act shipping, PCTCs, and the U.S.-Mexico ferry which operates under the name CG Railway, while divesting itself of dry-bulk shipping assets and some specialty businesses. It set a goal of reducing debt from $214 million on Sept. 30, 2015, to $85 million-$90 million by June 30, 2016.
The company was due to report its year-end results in late February, but ISC has been regularly reporting on the implementation of its strategic plan since last fall. It has since disposed of a PCTC, the remaining two handysize bulk carriers, a capesize bulk carrier and supramax bulk carrier. It is in the process of disposing of its minority interest in a fleet of 15 mini-bulkers with capacities of 8,028 to 9,300 deadweight tons, and reached agreement to sell a minority interest in two chemical tankers and two asphalt tankers.
“I’ve been through some really bad periods,” Niels M. Johnsen told me, but he added the current downturn for bulk shipping is “as bad as it’s ever been,” given the very low charter rates, which in some cases only cover half the operating costs. And he noted with more ships on order, it’s not clear when the market will turnaround.
ISC is also seeking a buyer for a FSI, a facility in Mobile that repairs railcars and transfers rail freight to and from trucks, and a Jones Act integrated tug-barge in layup. The company uses its other Jones Act tug barges and a belt-unloading bulker to move coal and fertilizer components, mostly in the Gulf of Mexico where clients include Tampa Electric and Mosaic. It is striving to run those vessels more efficiently.
ISC expects to continue to operate under contract other specialty contract ships, such as those tied to Freeport-McMoRan’s giant copper and gold mine in Indonesia, and operate some other leased ships.
Asked if he rued the decision to invest in the dry-bulk business, Niels M. Johnsen noted ISC has always had some involvement in the sector.
“I think the important thing, and its part of our fundamental strategy, is that you can’t love your steel so much that you are not willing to sell it,” he said. “There are any number of reasons why you might sell an asset,” he explained—performance may be poor or asset value high—“but I think you have to be ready to make those hard decisions.
“Part of our fundamental strategy, which we have no intention of changing as it has served us well, is that we try to be more of a niche market type of operator with underlying contracts and a cargo-centric approach to our business,” he added.
Ocean Transport: Dry-bulk downturn’s bite
