As a slew of financial companies and investors attempt to value the Premier Cruises fleet in light of that company's problems, Cruise Industry News polled international ship brokers on the current state of the second-hand market. Their response: after a surge in activity during 1996 and 1997, business has now become decidely slower and more uncertain.

"There is a quiet period ahead," asserted Claes Ancher, owner of Sweden-based Simsonship. "There is still a demand for good, new second-hand cruise ships, but their owners are keeping them and continuing to make money off them."

According to Anders Hoegh of Miami-based Hoegh, Person & Partners, the second-hand cruise market is so specialized that it is strongly influenced by "the disposition of a few operators, be they active buyers or active sellers." After the sellers' market of late 1996 and 1997, fueled by buyers in Asia and the U.K., as well as Premier and Norwegian Cruise Line, Hoegh maintains that this year, "We don't have any dominant buyers, so I don't see any clear direction in the market."

Michael Matantos, CEO of Greece-based Marine & Industrial Enterprises, also sees a dearth of active buyers. "Many people are not selling because there are no buyers. If there were buyers out there you would see the ladies lift their skirts." He characterized today's buyers as primarily "interested in ships which are part of a foreclosure situation," or to put it more colorfully, "people sniffing a body which is beginning to look like a corpse."

Whether there are active sellers is open to question. Ships are reportedly for sale by Star Cruises, Holland America Line (HAL), Royal Caribbean International (RCI), Princess Cruises and Costa Crociere -­ but these are sellers who hold firm on prices. On the other hand, the waiting game has begun to see what happens with Premier, the consensus being that the fleet will eventually be available in a must-sell situation.

Pre-1970: A Tough Market

Matantos divides the second-hand market into two basic categories. "The first category, roughly speaking, is the post-1970-built ships, the second is the pre-1970 ships. Past 1970, there is a greater likelihood that the vessel was built as a cruise ship," he explained, "whereas before they were very likely to have been built as passenger liners and converted."

While all brokers agreed that prices on the post­ 1970s ships will remain strong, their outlook for older ships ranged from mildly negative to exceedingly grim. Voicing the latter end of the spectrum is Matantos, who claims, "The converted (pre-1970) ships do not have a chance." Matantos believes that demand and prices for pre-1970 ships "will fall very dramatically" and that "anyone involved with those types of ships should consider leaving the market while there is still some income to be made above scrap price."

But J.B. Raoust, vice president of France-based Barry Rogliano Salles, is less negative. While expecting prices in this category to decrease, he maintains that "just because it is an old ship does not necessarily make it a bad ship." He also believes that while American passengers are accustomed to cruising on modem ships, and less accepting of older tonnage, Europeans (and assuming their economies rebound, the Asians) are still open to sailing on such vessels.

Nevertheless, Raoust does note an upcoming problem: compliance with Solas 2010 regulations will be too costly to justify many ships' continued operation beyond that date. Thus, with their life expectancy predetermined, the amortization costs of such vessels will increase every year. The impact of this issue is enhanced by the budget-market nature of potential buyers, whose per-diems cannot cover high amortization costs.

According to brokers, the outlook is worst of all for older ships belonging to financially distressed companies, especially when ships must be laid up. Case in point: three years after the Regency Cruises bankruptcy, demand for the Regent Sun remained so low it is reportedly being sold at auction.

'Newer' Ships

In the more favorable post- 1970s category, brokers note a special subset at the upper end: ships built in the late 1970s and 1980s which remain in profitable service for major lines, having been maintained and refitted during their life span, and which are being sold to make room for newbuildings.

These ships command values in the $100 million range and sell very slowly.

According to Hoegh, whose company brokered the Song of America sale, "There are few buyers who can afford $100 million, and at the same time, the sellers are in no rush because the ships are profitable."

Overall, brokers predict that for post-1970 ships, the future price outlook is positive. Such vessels can be placed into specialized niche service, with current potential buyers predominantly located in Europe.

However, for the 1980s-built ships currently in service being sold in the $100 million range, there remains a lingering question: With Carnival Corp., RCI, Princess and NCL focusing on newbuilding programs and industry-wide consolidation pushing small fish out of business - how many viable buyers for high-priced, 1980s-built, second-hand vessels will be left in existence?