November 9, 2017

SELF-DEALING:

Criticized for ship holdings, Ross owns more than previously known and the deals continue : Most of the 75 ships transport oil and gas products worldwide, presenting a conflict of interest for the commerce secretary as he negotiates trade deals. Records show 11 purchases since March. (Tom Scheck and Maria Curi, 11/08/17, American Public Media)

An APM Reports investigation reveals Ross has financial ties to 36 previously undisclosed ships that are spread among at least nine companies. Combined with the Russia-tied company -- Navigator Holdings Ltd. -- Ross has a financial interest in at least 75 ships, most of which move oil and gas products across the globe. The value of those ships stands to grow as Ross negotiates trade deals on behalf of the U.S. and advises on U.S. infrastructure policy. And one fund linked to Ross was still buying and selling ships after Ross was confirmed as Commerce secretary.

APM Reports compiled the list by combing through Ross' financial disclosure forms, relying on business filings in the U.S., Luxembourg, Bermuda and the Cayman Islands, searches through shipping trade publications and through the internet domains of major shipping companies across the globe. [...]

Today as Commerce secretary, Ross is positioned to help shape the export practices of the U.S. He's forcefully advocated for reducing the nation's trade deficit across the globe, notably in China, Mexico and Canada. In May, he announced a deal that pushes China to buy more natural gas from U.S. exporters. A chief beneficiary of those increased exports is shipping.

Ross' first investments were stakes in Diamond S. Shipping, a crude oil carrier, and Navigator Holdings, a company that moves liquid petroleum products.

He invested at a time when the shipping industry appeared to have bottomed out after the Great Recession -- the industry had too many ships to move too few products. It was a classic investment strategy for Ross, who's made his money by buying and selling distressed companies in troubled sectors.

In 2002, for example, he scooped up steel companies LTV Corp., Acme Steel and Bethlehem Steel in bankruptcy. He cut costs by laying off workers, installing new work rules and stripping employee pension funds. Three years later, he sold the repackaged company for $4.5 billion, an investment strategy he used years later in the coal and textiles industries.

His hunch about shipping a few years later stemmed from the oil and gas boom in the U.S. A drilling technique known as hydraulic fracturing in shale rock formations -- fracking -- in the U.S. produced large amounts of crude oil, natural gas and other petroleum products. His investment in Diamond S. Shipping and Navigator Holdings was a bet that energy exports would spur growth in the shipping industry.

"There is optimism that shale gas and oil will transform the U.S. economy and require unprecedented oceangoing capacity," Ross said at the Marine Money Asia Week forum in 2012.

Most of Ross' ships -- 80 percent -- move oil and gas products. But the stark reality is that Ross' investments haven't paid off.

The share price of Navigator Holdings declined 47 percent since it debuted in 2013 at $19 a share. His investment firm held a 61 percent stake in the company when Ross, the majority investor, took the company public in 2013, according to business filings.

Ross also shelved his attempts to take Diamond S. Shipping public in 2014 because he felt the stock price for the company was too low.

Shipping continues to have an overcapacity problem, according to Ben Nolan, managing director of Marine Transportation Research at Stifel Financial Group, and the sector is far from its high valuations of 15 years ago.

He said that while shipping is gradually recovering, many private equity investors who gambled on the industry five years ago have cut their losses. He said others, like Ross, continue to wait for the big return.

"A lot of the reason that they still have those positions is they anticipate at some point there is going to be a better exit," he said.

Posted by at November 9, 2017 7:19 AM

  

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