COLUMN | ICBC vessel auction update: three down, 14 to go; other “for sale” signs out in China [Offshore Accounts]

Some things are painful to watch (see here). Unfortunately, the slow process of auctioning, failing to sell and then re-auctioning the Bourbon vessels controlled by Chinese lender ICBC is painful to watch, but without the high-speed shock of a dramatic skateboard wipe-out.

When I said I would keep you posted on this protracted process, I was not expecting a constant drip-drop of failure and price reductions, nor a scattergun approach to adding new vessels to the process. This is death by a thousand papercuts, and one that threatens to seize up the whole sale and purchase market in offshore for the next few months, at a time when market expectations are resetting lower.

New auction, new tattoo

There was a second full phase of the online auction on the shipbid.net website last week, as we advised. Twelve laid-up, cold-stacked vessels were offered for sale again, after only one ship was sold in the first round last month – the success story being the in-service, high-specification platform supply vessel (PSV) Bourbon Rainbow, which closed for US$23.58 million on July 22…

All the rest had failed to sell in the first round. All were offered with reduced prices with at least 10 per cent off the original reserve on an “as is, where is” basis, scattered across the globe.

We reminded the sellers of the tattoo on the forearm of grand slam-winning tennis player Stan Wawrinka: “Ever tried, ever failed, no matter, try again, fail again, fail better,” a quote from the Irish poet Samuel Beckett. We recommended that they get the same tattoo and add the words "with lower prices" at the end.

Low expectations fulfilled with mostly failure

We expected most of the remaining 12 vessels not to sell, and (surprise!), most of them indeed did not sell. The prices were just too high.

Two laid-up DP2, 80-ton bollard pull vessels of the Bourbon 200 series of anchor handling towing tug supply vessels (AHTS) design, Bourbon Ampan and Bourbon Morrakot in Indonesia and Thailand, respectively, were sold for an en bloc price of US$8.3 million on Thursday, July 31, nicely above the reserve price of US$7.3 million on the day. Again, the buyer was not disclosed.

Since Morrakot was only laid up in October last year, this was the vessel most recently stacked in the fleet offered, confirming our view that buyers will always choose either vessels in service or those recently mothballed to minimise their reactivation risks and costs.

The other ten vessels did not receive a bid and remain unsold.

Another new auction, third time lucky?

So, guess what? Nine of them will be auctioned again this week between August 6 and 8.

For some reason, the subsea vessel Bourbon Evolution 803 has been withdrawn from the auction site and is not advertised for sale in this round, but don’t worry… the sister vessel, 2011-built Bourbon Evolution 801 is being auctioned after four and a half years of lay-up in Abidjan, with a reduced reserve price of US$19 million.

Remember that the buyer will likely bear additional reactivation and renovation costs equal or greater to the reserve price. Contain your excitement!

I don’t think this will be a case of third time lucky, partly because the reduced prices are mostly still too high for the risks that the buyers are expected to bear, and partly because ICBC has decided to add additional vessels of much higher quality for sale as well, but only after the third attempt to sell the failed ships.

Four more on the block in four weeks

And now, four more vessels have been added to the auction…  but not in the same wave this week.

Instead, three recently laid-up AHTS will be auctioned at the end of the month, with one ship a day offered between August 26 and 28.

Then the modern high-specification, in-service, DP2 PSV Bourbon Calm will be sold in Willemstad, Curacao on September 2. Bourbon Calm is being offered with the same US$18 million reserve price, which the sister vessel Rainbow punched through last month, so this ship should sell easily.

If it doesn’t sell or achieves only the reserve price, then we should probably look at what this says for the valuations of all listed offshore support vessel operators.

To summarise the vessels and the latest iteration of the auction, please consult our handy table here.

Obviously, all details are given in good faith without guarantee, based on the listings here.

As before, vessels shaded with the same colours are being sold en bloc. The en bloc reserve price in our table is the total of the individual vessel prices for the vessels marked as being sold together – so, for example, the reserve price for the 80-ton bollard pull anchor handlers Bourbon Liberty 202 and Bourbon Liberty 203 is now US$4.86 million (down from US$6 million when the process started), and an interested buyer must bid on both vessels together.

Ever tried, ever failed, no matter, try again, fail inflexibly… better, please!

I don’t know who is responsible for the auction strategy in ICBC, which we have dubbed the “Inflexible Chinese Banking Corporation,” or even if such a person exists, but the addition to the auction process of two more Bourbon Liberty 200 series AHTS and the more modern, higher specification Bourbon Liberty 300 series Bourbon Kaimook after the next phase would seem to make the sale of the Bourbon Liberty 202, 203 and 206 much harder.

It also makes it much more difficult to shift the four Bourbon Liberty 100 series PSVs, which are technically obsolete and completely overpriced in our humble opinion.

Why go through the trouble of buying ships that have been laid up for eight years, in the case of 202 and 203, when you can buy the sister vessel Bourbon Phet that is two years younger, and has only been laid up for just three months, not the best part of a decade?

Phet is more expensive, but should be reactivated and put to work within a few months at most. Or a buyer in the market for an 80-tonner could also bid on the even younger Bourbon Kaimook, which offers greater deadweight, a bigger clear deck and a much better design, and has only been in Batam for three months?

At US$7 million, at least you have a ship you can probably charter with a three-year payback in Southeast Asia.

Is there a process?

The rather random inclusion of the four new vessels is also important and detrimental to the successful outcome of the process. We know that there are probably thirty-something vessels that ICBC intends to sell from the Bourbon fleet, but the details of the remaining two dozen ships not yet being formally released on the auction site raises the question of when those ships will be offered.

Is the process going to drag on over a year? Which ships will be offered and when?

In April, ICBC put out an announcement via Shipbid.net that it would be selling 14 ships. This number includes Bourbon Calm, which was not included in the first round but has now appeared on the site. No pre-announcement was made for the next three vessels.

Does wait and see mean lower prices?

Many buyers may assume that it is better to wait – either for prices to fall further, or for other similar ships to come into the market. If Bourbon Calm is sold for less than the near identical Bourbon Rainbow, this would seem to validate that thesis.

Even if the new reserve prices are considered attractive, the short period between the failed second round and the new third round does not give any new bidders sufficient time to inspect the vessels, let alone file a deposit that now exceeds 10 per cent of the reserve price due to the failure of inflexible sellers to adjust the deposit to the new lower prices.

Weaker market, slower sales

The market has weakened since ICBC decided to embark on its strategy of re-possessing the ships from Bourbon and auctioning them, and the overhang of tonnage threatens to dampen the offshore sale and purchase market for some time to come.

Well-connected Greek brokers have been circulating at least another six Chinese-owned AHTS of various ages and sizes from 60 tons bollard pull upwards for sale for several months without finding any buyers.

These include some of the former Gulfmark-owned 140-tonners of 10,800hp (8,050kW) built at Keppel, a vessel originally owned by Jaya Offshore of 125 tons bollard pull, and the 150-ton bollard pull AHTS Crystal Pioneer, which was originally built as Xin Yun Yang in 2013 and has been sitting idle in Singapore.

The 16,000hp (12,000kW), 200-tonner Eastern Tulip, the former POSH Concorde, was also advertised for sale for many months without finding a buyer or employment.

Four benchmark sales

Seabrokers, in their excellent Seabreeze newsletter, did report that that the market is still transacting, albeit at lower price levels than last year, and the brokerage paper highlighted a number of sales, including Tidewater finally disposing of the 2006-built, 80-ton, DP2 AHTS Pacific Rapier to Global Offshore Services of India, which have renamed the ship Mahanadi.

DOF entered into agreements to sell two VS 472 design AHTS vessels of around 180 tons bollard pull, ships it acquired with its 2024 take-over of Maersk Supply Service, the 2009-built Skandi Tender and  2008-built Skandi Trader, for a price believed by us to be in the region of around US$30 million together.

The most curious sale was the report that the China Sunrise Group had sold its laid up 2002-built anchor handler Pegasus III, the former Olympic Pegasus, to Stabbert Maritime, an American owner with a more mature fleet, including the 2002-built PSV Ocean Valor. With a bollard pull of 273 tons, Pegasus III was one of the most powerful AHTS in the world when it was delivered from Ulstein Verft in Norway .

Unfortunately, the unit has been flipped between various registries and owners since it was sold by cash-strapped Olympic in 2022, and the ship has been stacked in Vietnam for the last eight months. Eight months, not eight years, note.

There’s a market

What’s interesting about these four sales is that there is a market for older offshore tonnage that has been well looked after and has a good quality underlying build from delivery. Three of the four vessels were built in Norway, and ex-Pacific Rapier was built in Indonesia by Swire.

All had been built for reputable owners, and all were built to proven Norwegian designs. None were Chinese-built, and none were Chinese-designed. ICBC may face an uphill struggle selling its old and cold Bourbon assets unless it offers much steeper discounts.

The headline to the Seabreeze report last week was “North Sea spot market collapses.” We’ll investigate that later in the month, after Tidewater has reported its second quarter results, but such a headline sets a dismal tone to the ICBC sale.

Back to Beckett for ICBC in Beijing – Ever tried, ever failed, no matter, try again, fail again, fail better, with lower prices and a clearer process.

Background reading

Shocking news that a British solicitor has been fined for breaching anti-money laundering rules related to funds from the children of Azerbaijan's former security minister, according to the Organised Crime and Corruption Reporting Project. The charges included a transfer earmarked for the purchase of British property now held via an offshore structure. Surprise!

If you are interested in the "dark fleet," do read Windward’s excellent review of the American sanctions imposed on Iran’s oil and shipping network last week. The sanctions are the most extensive since 2018 and focus on the shipping empire controlled by Mohammad Hossein Shamkhani, widely known in trading circles as “Hector”.

Around 37 per cent of all the newly sanctioned vessels were flagged in Liberia, the world’s largest flag registry, and 26 per cent in Panama, the second largest, Windward reported. Windward’s senior researcher and analyst Michelle Weiss Bockmann published more context and her “I told you so” comments here. Keep up the good work!