FROM: Don Pierce, Chief Investment Officer
SUBJECT: Greywolf Capital Management MCA
RECOMMENDATION:
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Approve the creation of a Master Custodial Account (MCA) with Greywolf Capital Management, subject to completion of operational due diligence and finalization of legal documents. The MCA will have an initial focus on the firm's commingled maritime opportunities fund and an SBCERA-directed maritime fund-of-one.
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BACKGROUND:
Greywolf Capital Management ("Greywolf" or "the firm") was founded by Jon Savitz in 2003 and currently has approximately $3 billion of assets under management. The firm began investing in commercial shipping in 2006, with dedicated maritime investments beginning in 2017. Since that time, Greywolf has raised six dedicated maritime funds and invested in 27 commercial ships. The maritime strategy is led by James Kelly, who first joined Greywolf in 2004; after four years at another firm, he rejoined Greywolf in 2013. The firm is headquartered in Purchase, NY and employs 31 total employees, of which 15 are investment professionals.
The maritime strategy developed from distressed ship investments executed after the Great Financial Crisis; the investment thesis focuses on acquiring mid-to-end-of-life ships in niche markets (primarily smaller feeder containerships). These ships are a small subset of the overall shipping market, and the strategy benefits from a long tail of fragmented sellers with a large pool of disparate buyers. The firm underwrites to a low case in which return of capital is achieved through the ship's demolition value plus in-place contracted cash flow; upside is achieved through re-leasing and potential sale of ships at a premium to demolition value.
Greywolf works primarily with Conbulk Shipmanagement (a commercial/technical shipping manager and operating partner) to underwrite and manage the ships in the portfolio. Conbulk is responsible for the asset and fleet management of ships, including crewin...
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