Tuesday, February 12, 2013

Container Shipping Line Says It Is Getting Its (Financial) House In Order

French Giant Finalises Restructuring Plan
Shipping News Feature

FRANCE – WORLDWIDE – CMA CGM, third largest of the world’s container shipping lines, has issued a statement saying that the major financial restructuring of the group which it embarked upon a year ago has now been finalised. It claims that the new financial arrangements it has made make allowance for the volatility and uncertainty surrounding the trade after the recent depression in the ocean freight industry following the high points reached in 2008-9.

CMA CGM has sometimes been accused of failing to internationalise due to its history of state ownership (until it was sold in 1996 to Jacques Saade, CGM had been government owned for 23 years). In 2009 as the crisis began to bite Mr Saade, founder and manager of the group, stated that further state funding should be made available to the European box lines as EU policy unfairly hindered competition. Later that year after pressure for government help the Fonds Stratégique d'Investissement (FSI), a brainchild of former President Sarkozy which is funded in large part by the state, agreed to assist but only after debt restructuring.

The latest announcement states that there is now in place an agreement with its Banks regarding this debt restructuring which provides for a new covenant package and a partial refinancing of a credit line maturing in 2013 into new secured term loans of a maturity of more than 3 years for a total amount of EUR 280 million. This clears the way for a binding agreement with the FSI who it says will subscribe to bonds redeemable in shares for an amount of US$150 million giving rights to a 6% stake in CMA CGM upon conversion.

There has also been the closing of the subscription, under the terms of the existing agreement, by the Yildirim Group of bonds redeemable in shares for an amount of US$100 million giving rights to a 4% stake in CMA CGM upon conversion. Our article in November 2009 indicated how the group's bankers wanted more control of the company's affairs before stumping up any more support and, having raised €400 million recently with its sale to the Chinese of 49% in its Terminal Link handling subsidiary, CMA CGM says this latest agreement with its bankers will result in a significantly more resilient and flexible financial structure for the group. Rodolphe Saadé, CMA CGM’s Executive Officer, said:

“The finalization of the debt restructuring combined with new equity injection from FSI and Yildirim Group and the sale of 49% of Terminal Link will allow CMA CGM to operate with the required financial flexibility and constitutes key milestones before contemplating an IPO.”

CMA CGM retains a substantial fleet but, like other carriers in the box trade, newbuild orders made during the boom years are now looking to be somewhat unnecessary in the light of reduced TEU levels.