One of the world’s largest shipping companies, CMA CGM, said shipments from China are returning to normal, even as investors bet against the French group’s creditworthiness.
Rodolphe Saadé, CEO of CMA CGM, based in Marseille, told the Financial Times: “Warehouses are empty in Europe, they have to order from China to meet demand. [Chinese] the factories reach 80% of their full production and we think that by the end of March the situation will be back to normal. ”
However, Saadé warned that the economic shock was shifting from China to Europe. “Today we can see that it is becoming a global crisis,” he said. “In Europe, there is a lot of fear for the coronavirus.”
Fear stalks CMA GGM itself. The private company’s debt value has dropped in recent weeks, with its five-year bonds trading at just 65 cents on the euro, as bond holders prepare for heavy losses. The company has an obligation of 725 million euros maturing in January which will have to be refinanced or reimbursed by a capital increase.
The cost of purchasing credit default swaps – a derivative contract that acts as insurance against a company that does not pay its debt – on CMA CGM has more than doubled since the beginning of the year to pass the 2,000 point mark base this week. This price implies that the company has an 80% chance of defaulting over the next five years.
The company said its bond performance “reflects the volatility of all financial markets – including the entire industry – in the context of the Covid-19 virus.” CMA CGM also highlighted the progress it is making in its plan to raise more than $ 2 billion in cash and lines of credit by mid-2020, having already renewed lines of credit for $ 535 million and agreed to sell terminals to a joint venture to help raise nearly $ 1 billion. .
CMA CGM is on the brink of the abyss after the financial crisis. He narrowly avoided the catastrophe since the father of Mr. Saadé, Jacques Saadé – the Franco-Lebanese shipping tycoon who founded the company – negotiated $ 750 million in combined capital injections from a Turkish investor and of the French sovereign wealth fund in 2010 and 2012.
Saadé said group volumes in February were down nearly 8% from January, as CMA CGM reported a loss of $ 229 million in 2019 compared to net profit of $ 34 million a year previous. CMA CGM is trying to overthrow its loss-making logistics branch Ceva, which it took control in 2018.
Net debt increased from $ 10.1 billion to $ 17.8 billion, which CMA CGM largely attributed to the new accounting standards.
Saadé said demand for Chinese products from hungry international customers was so intense that Ceva Logistics recently chartered 50 aircraft to transport auto parts from China to Los Angeles for a large customer in the United States.
“We also have customers in Europe who ask us to make ships available for containers from Shanghai to Le Havre,” he said.
At the height of the coronavirus epidemic in China, CMA CGM had 19 of the more than 500 ships in its fleet idling at anchor, the company said.
Two weeks ago, AP Moller-Maersk, the world’s largest container shipping company, said coronavirus will hit revenue this year when it warns of “very, very weak February and weak March” because of the deadly epidemic.
Additional reporting by Richard Milne in Oslo
One of the world’s largest shipping companies, CMA CGM, said shipments from China are returning to normal, even as investors bet against the French group’s creditworthiness.
Rodolphe Saadé, CEO of CMA CGM, based in Marseille, told the Financial Times: “Warehouses are empty in Europe, they have to order from China to meet demand. [Chinese] the factories reach 80% of their full production and we think that by the end of March the situation will be back to normal. ”
However, Saadé warned that the economic shock was shifting from China to Europe. “Today we can see that it is becoming a global crisis,” he said. “In Europe, there is a lot of fear for the coronavirus.”
Fear stalks CMA GGM itself. The private company’s debt value has dropped in recent weeks, with its five-year bonds trading at just 65 cents on the euro, as bond holders prepare for heavy losses. The company has an obligation of 725 million euros maturing in January which will have to be refinanced or reimbursed by a capital increase.
The cost of purchasing credit default swaps – a derivative contract that acts as insurance against a company that does not pay its debt – on CMA CGM has more than doubled since the beginning of the year to pass the 2,000 point mark base this week. This price implies that the company has an 80% chance of defaulting over the next five years.
The company said its bond performance “reflects the volatility of all financial markets – including the entire industry – in the context of the Covid-19 virus.” CMA CGM also highlighted the progress it is making in its plan to raise more than $ 2 billion in cash and lines of credit by mid-2020, having already renewed lines of credit for $ 535 million and agreed to sell terminals to a joint venture to help raise nearly $ 1 billion. .
CMA CGM is on the brink of the abyss after the financial crisis. He narrowly avoided the catastrophe since the father of Mr. Saadé, Jacques Saadé – the Franco-Lebanese shipping tycoon who founded the company – negotiated $ 750 million in combined capital injections from a Turkish investor and of the French sovereign wealth fund in 2010 and 2012.
Saadé said group volumes in February were down nearly 8% from January, as CMA CGM reported a loss of $ 229 million in 2019 compared to net profit of $ 34 million a year previous. CMA CGM is trying to overthrow its loss-making logistics branch Ceva, which it took control in 2018.
Net debt increased from $ 10.1 billion to $ 17.8 billion, which CMA CGM largely attributed to the new accounting standards.
Saadé said demand for Chinese products from hungry international customers was so intense that Ceva Logistics recently chartered 50 aircraft to transport auto parts from China to Los Angeles for a large customer in the United States.
“We also have customers in Europe who ask us to make ships available for containers from Shanghai to Le Havre,” he said.
At the height of the coronavirus epidemic in China, CMA CGM had 19 of the more than 500 ships in its fleet idling at anchor, the company said.
Two weeks ago, AP Moller-Maersk, the world’s largest container shipping company, said coronavirus will hit revenue this year when it warns of “very, very weak February and weak March” because of the deadly epidemic.
Additional reporting by Richard Milne in Oslo
