After launching an armada of junk bonds with the help of commercial banks, the global shipping industry seems to be reversing its course.

At least two shipping companies say they will probably default on their junk bond payments, and a third has called its bonds for 75% of the price at which they were issued. Experts say the industry is likely to remain depressed, at least for the rest of the year.

That does not bode well for commercial banks that saw the shipping sector as part of their plan to break into the high-yield bond business. Many commercial banks have deep, historic lending relationships with shippers and have identified the industry as one that is underserved by Wall Street.

The last two years marked the first time many shipping companies ventured into the high-yield bond market. From June 1997 through June 1998, more than $3 billion worth of high-yield shipping bonds came to market.

Now many of those issues are in dire straits because of the downturn in the global economy. And two of the most troubled deals were managed by the securities units of commercial banks.

Alpha Shipping Co.-which has told its bondholders that it will not be able to make its $8.4 million interest payment due next Monday-used Citibank Securities Inc. to manage its issue last year.

And British shipper Panoceanic Bulk Carriers, which called its bonds last month, tapped Chase Securities Inc. when it came to market with its $100 million issue in December 1997.

Chase has staked a big claim in shipping. One of its first junk bond deals was for Greek shipper Gearbulk in 1994-less than one year after Chase received Federal Reserve authority to underwrite high-yield debt. The bank has had a lending relationship with this industry since the 19th century.

Kirk Ludtke, a shipping high-yield analyst with Chase Securities, said he viewed the Panoceanic bond call as a relative success story.

Panoceanic renegotiated its debt in the fall, when its bonds were trading at about half of their issue price. Last month Panoceanic called the bonds, paying investors 75 cents on the dollar. That provided the bondholders with a substantial premium over the bonds' trading price, Mr. Ludtke said.

Michael Nilsson, a shipping analyst at Standard & Poor's, said he considers the Panoceanic deal a default because investors had little choice but to accept the discount.

Alpha Shipping, meanwhile, has a 30-day grace period to try to renegotiate with its bondholders, who number about 20 and are predominantly American, said George Economou, Alpha's general manager in Athens.

Alpha's $175 million junk bond deal priced at $99.43 in February 1998. Last week, the bid price for Alpha's bonds was around $26.

Mr. Economou said the New York investment bankers he worked with at Citibank Securities are no longer with the company, due to Citicorp's merger with Travelers Group. He said he is in contact with Citibank officials in Athens.

Another Greek shipper, Ermis Maritime, has said it will likely default on its bond payment due March 15. Ermis issued $150 million of junk bonds with an additional $13.6 million of warrants last March, in a deal managed by Merrill Lynch & Co. The bonds were issued at $100, and were trading around $28 last week.

Before 1997, most shipping issues tended to be from large, publicly held companies with higher credit ratings. But the new wave of issuers was dominated by highly leveraged issuers with older fleets, Mr. Ludtke said.

It is not yet clear whether larger shippers who tapped the junk bond market will suffer a similar downturn. So far, some of the largest companies have been outperforming the market. But that may be due to the contracts they hold that lock in freight rates, which will come up for renewal during the next year.

Shippers are facing the worst rates for their services since the recession in the early 1980s. The sharp decline is due mostly to the downturn in the global economy, particularly in Asia, which relies heavily on shipping.

Alpha's Mr. Economou said this is the worst business environment in his industry since he entered the business 25 years ago. He said overhead is much higher than it was the last time freight rates were this low, 15 years ago.

The breadth of the downturn in freight rates, affecting all the major segments of the industry, also makes the current situation highly unusual, said Richard Bittenbender, a shipping analyst with Moody's Investor Service.

"Current freight rates leave many shipping companies at cash break-even levels. The companies with substantial debt payments or fragile financial structures are having troubles," said Richard Bittenbender, a shipping analyst with Moody's Investors Service.

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