Ocean carriers could face a short-term funding call of up to $20 billion in 2012 as they are not generating sufficient cash to cover interest payments and meet capital requirements, according to container market analyst Alphaliner.
Most carriers appear to have successfully weathered the market downturn in 2011 but “a number of them continue to struggle under high levels of indebtedness and committed capital expenditure obligations.”
“Greater attention will be paid to their balance sheets, with fresh capital injections required to keep some of them solvent.”
Alphaliner’s $20 billion cash call forecast is based on the carriers’ estimated debt repayment and finance cost requirements this year.
Only four of the 17 lines surveyed by Alphaliner reported “healthy” leverage ratios of net debt less than seven times earnings before interest, tax, depreciation and amortization.
Eight carriers with negative EDITDA cash flow earnings “were unable to service interest payments from their operating cash flow and had to raise cash from selling shares, raising additional debt or through asset disposals.”
Four carriers surveyed displayed high liquidity risk with negative EBITDA cash flow and gearing levels of above 200 percent at the end of 2011.
Alphaliner rated A.P. Moller-Maersk, parent of Maersk Line, Evergreen Marine, Orient Overseas (International), Hapag-Lloyd and China Shipping Container Line as low-risk, while Cosco, MOL, CMA CGM, NYK, CSAV and "K" Line are at moderate risk.
Yang Ming, Hyundai Merchant Marine, Hanjin and Zim are rated high-risk.
Despite the poor liquidity outlook for some of the leading carriers, none are likely to go bankrupt this year as operating margins have improved rapidly since January and stakeholders are expected to continue to support lines in the event of a continued slump, according to Alphaliner.
Most carriers appear to have successfully weathered the market downturn in 2011 but “a number of them continue to struggle under high levels of indebtedness and committed capital expenditure obligations.”
“Greater attention will be paid to their balance sheets, with fresh capital injections required to keep some of them solvent.”
Alphaliner’s $20 billion cash call forecast is based on the carriers’ estimated debt repayment and finance cost requirements this year.
Only four of the 17 lines surveyed by Alphaliner reported “healthy” leverage ratios of net debt less than seven times earnings before interest, tax, depreciation and amortization.
Eight carriers with negative EDITDA cash flow earnings “were unable to service interest payments from their operating cash flow and had to raise cash from selling shares, raising additional debt or through asset disposals.”
Four carriers surveyed displayed high liquidity risk with negative EBITDA cash flow and gearing levels of above 200 percent at the end of 2011.
Alphaliner rated A.P. Moller-Maersk, parent of Maersk Line, Evergreen Marine, Orient Overseas (International), Hapag-Lloyd and China Shipping Container Line as low-risk, while Cosco, MOL, CMA CGM, NYK, CSAV and "K" Line are at moderate risk.
Yang Ming, Hyundai Merchant Marine, Hanjin and Zim are rated high-risk.
Despite the poor liquidity outlook for some of the leading carriers, none are likely to go bankrupt this year as operating margins have improved rapidly since January and stakeholders are expected to continue to support lines in the event of a continued slump, according to Alphaliner.