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  • June 2010 (Revised August 2021)
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Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships

By: Benjamin C. Esty and Albert Sheen
  • Format:Print
  • | Pages:18
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Abstract

After booming for more than five years, the global shipping (maritime) industry experienced a dramatic crash in late 2008 as the global financial system froze and the global economy slid into recession. Ship charter rates (revenue) fell by as much as 90% causing prices of used ships to fall by as much as 80%. As ship prices (values?) fell, ship owners began to default on loans and new purchase contracts while banks holding loans secured by ships faced the possibility of increasing defaults (violations of loan-to-value covenants), foreclosures, and write-offs. In the midst of this crisis, VHSS, the German Shipbroker's Association, introduced a proposal to value ships using discounted cash flow analysis (to determine a long-term asset value, LTAV) rather than market prices from comparable transactions. Thomas Rehder, the chairman of VHSS, argued this approach was necessary because market prices did not reflect fundamental values in the current environment. After announcing the alternative valuation methodology in September 2009, he must convince industry participants—ship owners, appraisers, and bankers—to adopt the new valuation methodology and bank regulators and auditing firms to approve its use.

Keywords

Fair Value Accounting; Financial Crisis; Capital Markets; Financial Liquidity; International Finance; Globalized Markets and Industries; Valuation; Banking Industry; Shipping Industry; Germany

Citation

Esty, Benjamin C., and Albert Sheen. "Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships." Harvard Business School Case 210-058, June 2010. (Revised August 2021.)
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About The Author

Benjamin C. Esty

Finance
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Related Work

    • June 2010 (Revised August 2021)
    • Faculty Research

    Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships

    By: Benjamin C. Esty and Albert Sheen
Related Work
  • Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships By: Benjamin C. Esty and Albert Sheen
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