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Shipping: Specific issues and the asseveration methodology

Shipping: Specific issues and the asseveration methodology

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Shipping: Specific issues and the asseveration methodology

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  1. Shipping: Specific issues and the asseveration methodology Dr. Aldo Campagnola Chartered accountant in Napoli e Milano 1 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  2. “Relazione di asseverazione”: specific issues in shipping (1 di 6) • The report comprises the guaranteeing of accounting data veracity and the Plan feasibility. • The issues that the independent expert* has to deal with related to the variables which can influence the Plan feasibility. • The issue that can influence the Plan feasibility are more commonplace with respect to the various scenarios that the Bankruptcy Law provides the entrepreneur with: • “Certified Recovery Plan” ex art.67, terzo comma, lettera d) L.F. • “Debt restructuring agreement” ex art. 182 bis L.F. • “Composition in bankruptcy” ex art. 160 L.F. * Asseveratore 2 2 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  3. “Relazione di asseverazione”: specific issues in shipping (2 di 6) In shipping sector, the variables that could significantly affect a Plan trend can either be exogenous or endogenous. Exogenous Variables - Fleet growth rate - Demand growth rate - Cost of debt analysis Endogenous Variables - Counterparty analysis - Running costs analysis - Dry dock analysis and intermediate visits - Vessel analysis and scrapping - Economic balance analysis - Financial balance analysis - Freight rates trend 3 3 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  4. “Relazione di asseverazione”: specific issues in shipping (3 di 6) Fleet growth rate The Fleet growth rate expresses the stowage capacity growth that is on the basis of: (+) orders on hand (-) demolitions (+) new orders • Demand growth rate • The demand for sea transport is on the basis of five variables: • the world economy • seaborne commodity trades • average haul • political events • transport costs 4 4 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  5. “Relazione di asseverazione”: specific issues in shipping (4 di 6) Cost of debt analysis Assessing the financial burden should not only take into account the conditions applied by the financial institutions involved in the operation but it should also predict what the trend of interest rates could be Counterparty analysis The Plan feasibility analysis cannot be made wihtout a careful analysis of the business partners who may be the source of significant contingent liabilities Running costs analysis The Plan feasibility analysis imposes the precise control of the exploitation of the costs involved in the Plan itself 5 5 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  6. “Relazione di asseverazione”: specific issues in shipping (5 di 6) Dry dock analysis and e intermediate visits The independent expert has to verify the correct assignment of costs expecially during days of downtime related to dry dock and to intermediate visits for every single ship according to its seniority Vessel analysis and scrapping In the presence of a Plan which provides for the disposal of the fleet or part of it a key variable is represented by the evaluation of the ships, which in turn, is a function also of the time horizon in which the dismissal is planned Econimic balance analysis The first requirement needed for a recovery plan to be accepted is the economic rebalancing 6 6 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  7. “Relazione di asseverazione”: specific issues in shipping (6 di 6) Financial balance analysis It is also important to consider that a feasible plan must guarantee an economic balance also able to ensure financial balance conditions Freight rates trend In the shipping sector the freight variable assumes a fundamental nature as it can influence the economic and financial balance in addition to the evaluation of ships themselves 7 7 Convegno “Shipping and the law” - Complesso Monumentale di Santa Chiara - Napoli

  8. “Relazione di asseverazione”: the methodology in shipping Assessment of the ability of the Plan to withstand in the presence of a pattern of variables not included in the Plan The independent expert has to bring forward the monitoring process of the Plan depending on the achievement of the "milestones". We need to be certain of the levels of stress that the Plan is able to withstand in order to define the "bearing areas" within which the variables can move without affecting the sustainability of the Plan and, therefore, the success of the said Plan. In this perspective the independent expert adopts the “stress-test” respect to the forecast and the projections, concepts also referenced from the so-called "Guidelines 2010" and from the sensitivity analysis contained in the Plan itself. 8 8 Napoli, 3 ottobre 2013 – “Shipping and the law” - Complesso Monumentale di Santa Chiara