Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from the line of Jon Chappell with JPMorgan.
Jon Chappell - JPMorgan
The use of the word "opportunities" was pretty prevalent in your presentation. Can you talk about what opportunities are out there today?
Also, in past conference calls, you've made reference to not being in a rush, waiting a little bit longer. Can you talk about your views on asset prices, and therefore, how that translates to opportunities? Do you think that better pricing points might come in somewhere down the road?
Morten Arntzen
What we have said pretty consistent is that we think that the banking markets clearly are still very troubled and the ship financing markets have been hit relatively harder than the overall banking markets. That hasn't changed. There is almost no new money available for ship financing in the world, no more mortgage lending new money. If you looked at the sum total of the top 10 shipping banks, they are trying to reduce their portfolios, not increase them.
There is still a huge amount of unfinanced newbuildings at the world's shipyards. Depending on whose numbers you use, it's somewhere between $70 billion and $100 billion worth of unfinanced newbuildings. Those are going to require a combination of equity, which exists in some amounts, but not enough to finance that, and debt financing, which does not exist. It's that combination of lack of bank financing, expensive newbuilding commitments relative to where values are today and the fact that you have poor markets in practically every segment in shipping.
We always expected that most of the 2009 deliveries would get built, though that number would slip into 2010. It is now that owners have to start putting down their second and third installments for deliveries that come in 2010 and 2011. If they don't have it, they're going to have a problem. If they need to go to a bank to get money, they can't get it.
So, what is going to happen is that that combination of newbuilding commitments, lack of bank financing, in some cases refinancing risk or covenant risk is going to create distress sales. We have started to see small amounts of this. There may have been one last week that we saw.
Compare that to the secondhand market, I could give you what's happening in the secondhand market, but the reality is there is no secondhand market right now. There are very few sales, it's not a liquid market and there is no financing for it. The sales you're going to see are going to be distressed sales that come out of yards and banks.
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