Bermuda has a long and enviable reputation as the offshore jurisdiction of choice among ship-owners and investors in ship owning structures. The stock of Bermuda's shipping offering has risen in recent months due to a number of high-profile restructurings which have resulted in a significant increase in the number of ships on the Bermuda Ship Register and more shipping industry participants choosing a Bermuda company as its top listing company on the world's major stock exchanges, including the New York Stock Exchange and the Oslo Stock Exchange.
As far as vessel registrations are concerned, there has been a noticeable and significant rise over the normal yearly average in the number of new vessel registrations with the Bermuda Shipping and Maritime Authority. The Bermuda Ship Register experienced an exceptional year in 2015, with 36 ships added to the Bermuda Register. Of these 36 ships, 19 were oil/chemical tankers and four were LNG carriers. 2016 has also been a busy year for the Bermuda Registry, with 29 ships added to date. The total number of commercial ships currently registered in Bermuda stands at 162. Total gross tonnage currently stands at 11,233,565.
There are a host of factors that underpin the recent surge in registration of commercial ships in Bermuda. Bermuda has a reputation for being a premier jurisdiction with strict safety and manning regulations, and discerning owners choose Bermuda for this reason. Documentation from many of the major classification societies such as American Bureau of Shipping, Bureau Veritas, Det Norske Veritas, Germanischer Lloyd, Lloyds Register, Registro Italiano Navale, and Nippon Kaiji Kyokai are acceptable to the Bermuda Registry. Registration and tonnage fees are competitive with other offshore jurisdictions.
Bermuda ships are British ships and fly the red ensign. The Bermuda Registry is a Category One member of the prestigious Red Ensign Group. Bermuda is continuously (and has been for many years) listed on the "White List" of the Paris MOU, showing Bermuda registered vessels as having a very low detention rate when calling at ports around the world. In addition, the Bermuda Registry is part of the US Coast Guard QUALSHIP 21 programme for its commitment to safety and the quality of its fleet. In practical terms, this should mean that Bermuda-registered vessels would not be targeted for inspection in US waters by the US Coast Guard.
There are also other more romantic reasons to use the Bermuda ship registry. The Cunard line reflagged its entire fleet — the Queen Mary, Queen Victoria and Queen Elizabeth from Southampton in the UK — to Bermuda. While there are likely many factors which led to this move, the most publicised at the time was that the change would allow Cunard to offer weddings at sea to its passengers. Ships flagged in the UK are apparently not allowed to offer such a service unless the ship is in port, and th e ceremony must be conducted by a minister or other notary, rather than the captain of the ship.
The Bermuda shipping platform has also been buoyed by a n umber o f new Bermuda companies that have listed on the New York Stock Exchange in recent months. The most recent example is Nordic American Offshore Ltd. (NYSE: NAO) which made the decision to redomicile from the Marshall Islands to Bermuda so that it could also join its major shareholder, Nordic American Tankers (NYSE: N AT) as a NYSE-lis ted Bermuda company. Bermuda is also the h o me of Scandic American Shipping Ltd, which provides company management services to NAO and NAT. Scandic is a wholly-owned subsidiary o f NAT. The executives of the NAO made the decision to redomicile to Bermuda to take advantage of the benefits of a Bermuda platform which include the introduction of one set of corporate law procedures that applies to both listed companies and its management services company.
Another transaction that has underscored market confidence in Bermuda as the offshore jurisdiction of choice for public shipping-related companies is the recent merger of TAL International Group, Inc. (a Delaware corporation – NYSE: TAL) and Triton Container International Limited (a privately held Bermuda company) into Triton International Limited (NYSE:TRTN). Notwithstanding the established Delaware connection, the decision was made for the combined group to have a Bermuda holding company – thus confirming Bermuda's position as a leader for public companies with global, shipping- related operations.
Nordic American Offshore Ltd. and Triton International Limited join the long list of public Bermuda companies in the shipping/shipping-related industries that are publicly listed on principal stock exchanges in the US and Europe.
A perfect case study showcasing both Bermuda's strength in ship registration and its desirability as a jurisdiction for public listing was the restructuring of Eitzen Chemical into Team Tankers International Ltd. ("TTI") which included a debt for equity swap and an injection of working capital, along with a voluntary offer whereby shareholders received shares in the newly Bermuda incorporated TTI. Eitzen Chemical, at the time of the restructuring, operated a fleet of 44 ships, 33 of which were owned. As part of the restructuring, 14 ships were reflagged to Bermuda on the same day. Following the initial phase of the restructuring, TTI re-flagged additional ships on the Bermuda ship register in the past 12 months. The shares of Bermuda-incorporated TTI were listed on the Oslo Stock Exchange upon the consummation of the restructuring, the result of which 46% of the listings on the Oslo Stock Exchange Shipping Index are Bermuda companies.
Bermuda has taken active steps recently to put itself in a position to further improve the quality of its shipping offering. The Bermuda Ship Registry recently became an independent authority, legally and operationally separate from the Bermuda Government's Ministry of Tourism, Transport and Municipalities. Historically, the Bermuda Ship Registry existed as a department of the Bermuda Government, and staff has been subject to Bermuda civil service regulations and benefits. The Bermuda Shipping and Maritime Authority was created by the enactment of the Bermuda Shipping and Maritime Authority Act 2016 which was passed by the Bermuda legislature earlier this year. This new legislation and related regulations should enable the Bermuda Ship Registry to expand and safely accommodate additional tonnage in the future. The transition became effective on 1 October 2016, and will see the new authority operating from new premises in Hamilton. This will allow the Bermuda Ship Registry, as an independent authority, to grow the Register and hire the necessary staff to ensure the proper oversight of the maintenance of safety standards and responsiveness expected by owners of Bermuda registered ships and yachts.
As we head towards the end of 2016 with continued demand for registrations of vessels on the Bermuda Ship Register and for Bermuda shipping companies in the public markets, Bermuda is well-positioned to continue to provide superior offerings to the discerning shipping clients who choose Bermuda's high quality shipping offerings.
This article was originally published in Marine Money, November 2016.
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