Fitch downgrades CMA CGM debt
Fitch Ratings downgraded some of the credit ratings of CMA CGM to reflect the company’s deteriorating balance sheet and the downturn in the global container shipping business.
Fitch said June 3 it is also withdrawing the ratings and will no longer provide ratings of the French container line.
The ratings company downgraded the long-term Issuer Default Rating and its senior unsecured rating to 'BB-' from 'BB+'. It rated the outlook “Negative.” CMA CGM's Short-term IDR remains 'B.'
Fitch said the downgrade “reflects a weakening of prospective coverage and leverage ratios, amid the ongoing difficult conditions affecting the global container shipping industry.”
It said CMA CGM and its competitors face large vessel order book deliveries in 2009 and 2010 even as the industry is in the midst of a record down-cycle, resulting in fleet over-capacity, reduced freight volumes and downward pressure on freight rates. Dynamics on the key Asia-Europe route, where CMA CGM deploys some 24 percent of its capacity, remain challenging.
The “Negative” outlook reflects Fitch's view that current, exceptional, market conditions will be protracted and any significant improvement is unlikely to occur before 2012.
The ratings acknowledge CMA CGM's ability to reduce its capacity through the cancellation of charters, which represents some 71 percent of its capacity, approximately 40 percent of which are short-term contracts. Cancelled charter agreements and falling bunker fuel net costs should partially mitigate the decreased revenues from reduced freight rates and volumes.
Fitch said CMA CGM's liquidity was significantly lower by the end of December 2008, with unrestricted cash and cash equivalents of $8 million, compared to $2.1 billion at the end of 2007, which were sufficient to meet estimated short-term maturities in 2009.
The company’s total debt rose to $5.2 billion from $4.8 billion in the previous year.
Fitch said it adjusts CMA CGM's coverage and leverage ratios to reflect the annual fixed cost and debt-equivalent effect of chartering/leasing.
The ratio of lease-adjusted (on a net present value basis) net debt to EBITDAR was 2.5 in fiscal 2008 and the ratio of EBITDAR to interest plus rent was 1.6.
Fitch said that as of December 2008, the majority of CMA CGM's $7 billion vessel order book had been pre-financed.
Fitch said June 3 it is also withdrawing the ratings and will no longer provide ratings of the French container line.
The ratings company downgraded the long-term Issuer Default Rating and its senior unsecured rating to 'BB-' from 'BB+'. It rated the outlook “Negative.” CMA CGM's Short-term IDR remains 'B.'
Fitch said the downgrade “reflects a weakening of prospective coverage and leverage ratios, amid the ongoing difficult conditions affecting the global container shipping industry.”
It said CMA CGM and its competitors face large vessel order book deliveries in 2009 and 2010 even as the industry is in the midst of a record down-cycle, resulting in fleet over-capacity, reduced freight volumes and downward pressure on freight rates. Dynamics on the key Asia-Europe route, where CMA CGM deploys some 24 percent of its capacity, remain challenging.
The “Negative” outlook reflects Fitch's view that current, exceptional, market conditions will be protracted and any significant improvement is unlikely to occur before 2012.
The ratings acknowledge CMA CGM's ability to reduce its capacity through the cancellation of charters, which represents some 71 percent of its capacity, approximately 40 percent of which are short-term contracts. Cancelled charter agreements and falling bunker fuel net costs should partially mitigate the decreased revenues from reduced freight rates and volumes.
Fitch said CMA CGM's liquidity was significantly lower by the end of December 2008, with unrestricted cash and cash equivalents of $8 million, compared to $2.1 billion at the end of 2007, which were sufficient to meet estimated short-term maturities in 2009.
The company’s total debt rose to $5.2 billion from $4.8 billion in the previous year.
Fitch said it adjusts CMA CGM's coverage and leverage ratios to reflect the annual fixed cost and debt-equivalent effect of chartering/leasing.
The ratio of lease-adjusted (on a net present value basis) net debt to EBITDAR was 2.5 in fiscal 2008 and the ratio of EBITDAR to interest plus rent was 1.6.
Fitch said that as of December 2008, the majority of CMA CGM's $7 billion vessel order book had been pre-financed.