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In our exploration of maritime shipping finance...

...we are currently looking at what happened in the maritime shipping industry from 1950 to 2002. Now what was particularly important during this period of time was the rise of standardization by means of containerization.

Constant change was so prevalent...

...from 1950 onwards that Dr. Martin Stopford, Managing Director of Clarkson Research, divided the period up into 5 distinct periods. In an October 2002 forum, he explained that the period since 1950 can best be understood by the following phases, namely Cash (1950-1956), Charterback (1956-1970), Bubble (1970-1979), Distress (1979-1988), and Convalescence (1988-2002).

If you can remember, last time we talked about the "Distress" period (1979-1988)...

Now today we are going to look at the period directly following that. The period I am referring to was called the "Convalescence" period (1988-2002). Many experts believe that, even today, shipping markets have still not fully recovered from this period.

“Convalescence” (1988 – 2002): Much has been written about the difficult Bubble and Distress conditions from 1970 to 1987. Some say this extended well into the 21st century. Many experts believe that, even today, shipping markets have still not fully recovered from this period. 

Whatever the case may be...

The 1990's represented a volatile period in ship finance history as the industry experienced a correction. The volatility in the period, as well as the desire of shipowners and bankers to mitigate some of the risk involved in shipping, prompted the development of an active derivative market. It also resulted in the formal, direct inclusion of private investors into the shipping industry. 

The German KG model...

...is a model where typically 25% to 45% of the capital needed for a new-building originates from High Net Worth Individuals. Also from other outside investors. It became one of the main forms of ship financing (Stopford 2002).

References:

Stopford, Martin, 2005. Marine Investments Financing Forum, Shipowners versus capital providers "a tango for two" 31st October 2002 the Grand Hotel, Amsterdam Setting the Scene, Identifying the Objectives, Fifty years of ship finance