The last time Ernie Dahlman felt this good about shipping markets, he founded an investment bank and caught the boom-cycle wave of equity deals that transformed the sector in the mid-2000s.
Dahlman is excited again. And while he has not started a bank this time, he is working for one and predicting that once again there will be plenty of business to do in the near future.
“The turn is here,” Dahlman told TradeWinds in an interview this week from his new base in Costa Mesa, California, where he is now the shipping investment banker for B Riley FBR.
“The commodity deck is going to fly, and shipping will start a substantial bull market, beginning with dry bulk.
“I’m really going after it. This is the same environment as when we started. There is opportunity everywhere and we are only going up from here. I called it last time and I’m calling it again.”
Dahlman Rose beginnings
For those who may not remember, “last time" was 2004. That was when Dahlman and partner Simon Rose formed New York-based boutique bank Dahlman Rose with an initial focus on the shipping sector.
The move came just as trailblazers such as Angeliki Frangou and George Economou saw an opportunity in dry bulk and launched initial public offerings that created Navios Maritime Holdings and DryShips.
They paved the way for a horde of dry bulk owners to go public in New York from 2005 in a sector that had been limited to little other than Excel Maritime Carriers as a listed option to date.
Then other operating sectors joined in a record-setting 2005 for shipping equity issuance.
When the dust cleared a few years later, shipping had morphed from a handful of public listings in the US to more than 40 today.
'Hustled and punched above its weight'
Although Dahlman Rose was just a modest start-up operation, it quickly became known as a bank that hustled and punched above its weight.
Rose handled a growing number of senior accounts as the investment banker, while Dahlman was a specialist in equities trading after years of experience with earlier employer Fleet Bank.
In a matter of months, it stood side by side on deals with larger firms such as Jefferies, Morgan Stanley, Citibank, UBS and JP Morgan.
Dahlman Rose became a household name in the New York equity market, expanding into commodities and other related industries.
Dahlman grew rapidly and at its height was sponsoring elaborate parties that each June concluded the annual Marine Money week in Manhattan with unprecedented flair.
And while the good times would not last — Dahlman and Rose both were forced into retirement by the bank’s private-equity investors in 2011 amid shrinking business after the global economic collapse — the bank remains synonymous with the last true boom market in shipping.
Now, Dahlman is feeling similar optimism as he did ahead of those boom times.
“I’m extremely bullish on commodities,” Dahlman said. “The market is setting up in exactly the same way as in 2001 and 2002, in the time leading up to our decision to start Dahlman Rose.
“I expect to see a global repricing of commodities higher and a lot of dislocation, and that’s going to be positive for shipping markets. I’m really constructive on the dry bulk sector right now. I feel dry bulk has taken enough abuse and is on the verge of having a pretty significant upsurge.”
Second act in shipping
For Dahlman, it is something of a second act in shipping. He got remarried after leaving Dahlman Rose and moved to California, where he plunged into real estate and other projects, still in a non-compete period with his former employer.
Meanwhile, B Riley was in acquisition mode, snapping up the investment banking business of FBR in 2017.
The combined venture is described as a full-service investment bank and a subsidiary of Nasdaq-listed B Riley Financial.
The new B Riley FBR had no one doing maritime work, and that is where Dahlman stepped in last November as managing director for transportation and natural resources.
The bank hired Liam Burke to begin rolling out coverage of shipping names as equity analyst.
Last week, Burke introduced coverage on three master limited partnerships (MLPs).
It is just the beginning, Dahlman said.
“Liam [Burke] started only about a month ago, but our plan is to cover the entire [shipping] universe,” Dahlman said. “He’ll likely pick a sector at a time. We plan to be everywhere.”
On the investment banking side, B Riley FBR intends to be involved in a range of areas: workouts and restructurings, “baby” bonds, preferred stock, and of course equity deals, with at-the-market (ATM) structures a house specialty.
Dahlman says colleague Seth Appel, the managing director for investment banking, is among the industry’s leaders in ATM deals.
“We’ve done more in that space than any other firm on the street and we have four in the pipeline right now in the marine sector,” Dahlman says. “Every company has a credit facility and we look at ATMs as kind of an equity credit facility. It’s another tool that’s available to shipowners.”
He noted that B Riley Financial has a staff of 1,000 people: “It’s like Dahlman Rose, but we’ve got an army behind us. We are starting over again and it’s very exciting. I came back because I see the turn. The boom is coming. That’s why I dusted off the sneakers and came back to play.”