Standard & Poors downgraded its outlook for CMA GCM to negative and affirmed its B+ plus rating on the French ocean carrier’s debt, the Journal of Commerce reported.
“We now believe that CMA CGM will report weaker operating results for full-year 2011 than we originally expected, leading to a further deterioration in cash flow protection measures and financial covenant headroom,” the ratings agency said.
“The negative outlook also reflects our view that CMA CGM will likely need to take preventative action to avoid breaching its financial covenant tests, due in December, and that a failure to do so well ahead of time is likely to adversely affect our rating.”
CMA CGM, along with other ocean carriers, have come under pressure from inflated operating costs and lower freight rates, particularly on Asia-Europe trades, S&P said.
The announcement follows an analysis of credit default swaps by Bloomberg signaling a 90 percent probability the world’s third largest carrier will be unable to meet its obligations within five years.
“We now believe that CMA CGM will report weaker operating results for full-year 2011 than we originally expected, leading to a further deterioration in cash flow protection measures and financial covenant headroom,” the ratings agency said.
“The negative outlook also reflects our view that CMA CGM will likely need to take preventative action to avoid breaching its financial covenant tests, due in December, and that a failure to do so well ahead of time is likely to adversely affect our rating.”
CMA CGM, along with other ocean carriers, have come under pressure from inflated operating costs and lower freight rates, particularly on Asia-Europe trades, S&P said.
The announcement follows an analysis of credit default swaps by Bloomberg signaling a 90 percent probability the world’s third largest carrier will be unable to meet its obligations within five years.