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Whiplash, what next?
06 Feb 2008
With “Wall Street whiplash” another phrase is coined to sum up the recent snakes and ladders effect taking place on Wall Street and mirrored on other stock exchanges around the world, not least the FTSE.
To say it has been an interesting time is something of an understatement and there is every prospect that there is more to come despite US Government action designed to bring stability to the markets. Turbulence followed the dramatic intervention of the US Federal Reserve towards the end of January when it slashed rates by 75 basis points to 3.5% and such eminent figures as financier George Soros called for further government rescue efforts to stabilise the financial markets. And it seems that this is on the cards and specifically in the shape of a $15bn plan to bail out the US bond insurers which lie at the heart of the world financial system. This will reportedly guarantee immense assets.
Clearly, among the providers of debt financing to the port sector there is view that the credit crunch will have an impact and that more conservative terms will be applied than has been the case in the recent past. This is seen as a fairly inevitable outcome of what has gone in the financial markets recently and also factors in the impact of what some sources are saying could be another $300bn dollars worth of losses to come from the subprime fallout on top of the $100bn reported already.
Similarly, there is an expectation that finance for acquisitions and capital development will be both less readily available and available at a higher cost. The quality of the opportunity will come more and more into focus and the task of proving the strength of a given opportunity to bankers. Safe havens are likely to become the order of the day, for the near term at least, and in particular this may lead to some throttling back on enthusiasm for projects in the emerging world where potentially larger rewards have recently been seen as a positive despite an often higher risk profile.
Having said all this, the start of 2008 has been punctuated by a clear enthusiasm for pursuing innovative port deals, one measure of this potentially being Babcock & Brown’s move on Forth Ports, the only remaining listed major UK ports group (pxx). There is also the news that UK-based International Port Holdings, backed by Global Infrastructure Partners, has together with PSA International acquired a controlling stake in the Buenos Aires-based container terminal operator Exolgan. This proves that for the time being at least, recent financial market volatility has not been enough to derail the 2007 love affair of infrastructure funds with the international port sector.
