Saturday, November 7, 2009

CMA CGM Struggles To Satisfy Creditors As Container Freight Trade Slump Continues

No News as yet on Refinancing Arrangements for Shipping Giant
Shipping News Feature

FRANCE – The five and a half billion dollar debt hanging round the neck of CMA CGM must resemble a mountain more than a millstone to CEO and group founder Jacques Saade at the moment. Despite the fact the company is still family controlled, the people holding the groups purse strings, its bankers, are likely to insist on major management changes before a rescheduling of debts is agreed.

Saade’s position is tenuous, as boss of the third largest container shippers he needs to sell part of the company immediately to investors to ensure CMA CGM doesn’t default on its huge overdraft but he has stated publicly that he wishes to stick loyally by his trusted team. Such loyalty may well cost him the top job, his bankers clearly are not satisfied with the company’s proposals this time and the announcement that the debt has been rescheduled has now been postponed with talk of a settlement “by the end of the month”.

The line up of creditors consists of a cartel of banks, three French giants, BNP Paribas, Societe Generale both buoyed by an excellent last quarters results and Natixis, plus the Korea Export – Import Bank (Eximbank) plus other Asian interests, all of whom clearly want to have more control over the company’s future before committing more cash. The banks will want to support the ailing shipping line through this darkest period as we have detailed previously but with so much at stake they will doubtless want their own people in place to follow the promised improvements.

One of the spectres at the feast is the situation regarding new builds. Eximbank’s exposure is thought to exceed half a billion dollars but CMA CGM have reportedly told Daewoo Shipbuiding and Hyundai Heavy Industries, both Korean companies, they wish to hold off on the purchase of dozens of proposed ships they have on order. CMA CGM currently has more than fifty such vessels outstanding and, when news broke of possible delays or cancellations last month, Hyundai’s shares dropped sharply. Daewoo admitted they had been asked to postpone the orders they had received for eight ships.

The CEO has recently called for state aid whilst CMA CGM have repeatedly denied that Saade senior's leadership is anything but secure, however expect to see his position reviewed in the next couple of weeks if the situation remains unchanged. One thing is certain, he will retain considerable power within the company which he created in 1978.