Monday, March 15, 2010

French Container Shipping Giant Battles Through Stormy Financial Waters

Who Will Step Up to Help CMA CGM ?
Shipping News Feature

FRANCE – As reported here over the past few months CMA CGM have been through the wringer of late with accusations bandied about after illegal arms incidents involving their subsidiaries ANL in a Persian Gulf situation and just last month Delmas in South Africa. The companies main problem however remains one more familiar to container shipping companies and freight truckers alike lately, that of spiralling debts.

Jacques Saadé still battles to retain control of the family run group as the relentless pressure from the groups bankers make it more likely that credit extensions will only be forthcoming in sufficient amounts if the company restructures to suit its creditors. The appeal made for state aid came under criticism from competitors and the Fonds Stratégique d'Investissement's refusal to advance money without required conditions in October was followed by our November report in which CMA CGM envisaged a resolution before the years end.

Now, three months later, CMA CGM is still searching for outside investors and their plight is plain for all to see. They have cancelled new builds and had other vessels which they ordered sold to alternative bidders, the company has embarked on an economy drive, cutting services in unprofitable areas whilst still seeking newer, more profitable markets such as the recently introduced weekly feeder service running between North Germany, Denmark, Sweden and Poland in collaboration with JR Shipping of the Netherlands with a 650+ TEU vessel.

The question is of course what happens next? In some ways the groups situation is similar to what we saw with YRC Worldwide, the US based less than truckload haulier who were rescued from the brink by investors on New Years Eve after teetering on the edge for months. Will the industry backers, who have already seen major bail outs for groups like Hapag Lloyd, CSAV and Zim Line allow the third biggest container line in the world to sink beneath the waves? Industry observers had assumed that national pride would see the French Government step in. When they didn’t a half billion dollar loan was said to be in place from the groups bankers and it looked as if it was game on again, but it now appears that that money is likely only to be made available if CMA CGM management accepts that whoever is paying the piper will call the tune for the future.

CMA CGM’s cause is not helped by the sideways glances being cast at their 45% owned subsidiary Global Ship Lease. The company purchased the CMA CGM Berlioz last year for in excess of $80million, money borrowed after a seemingly complex restructuring of debt to free up funds. The CEO stated that the entire fleet was secured on long term charters but as is the case of the Berlioz, those charters are currently back to CMA CGM. This month it has been reported that the parent company now owes at least $12 million in charter fees to Global and questions are being raised by investors and analysts.