Happy Holidays

I'm taking some time off over the holidays.

That's the one really nice thing about not working in the day to day business of international shipping, which never shuts down for holidays.

It has started to snow here in Kansas, so we will have a white Christmas.

Along with the snow has come the cold. High today of 29 F,( -1.6 C) low 13 F (-10.5 C), with a wind chill factor of -6 F (-21 C). And, it will continue to get colder for the next few days.

I hope to be heading south to Corpus Christ, Texas in Jan. It's about a 800 miles, (1300 kilometers), and takes about 1 1/2 days to drive.

If you are not familiar with the U.S., take a look at a map.

It's a big country.

CMA CGM gets tough with bondholders

From Bloomberg

Dec. 18 (Bloomberg) -- CMA CGM SA, the world’s third- biggest container shipping company, told bondholders it faces bankruptcy unless they approve a plan to raise more debt.

CMA CGM is asking holders of $570 million of senior bonds to change the terms of the notes to allow prospective lenders to have first claim on the company’s assets in the event of a default, said Paris-based spokeswoman Anne-France Malrieu. Otherwise CMA CGM may be “forced to commence bankruptcy proceedings” and the investors may lose their money, the company said in a Dec. 16 notice to bondholders.

Marseille-based CMA CGM is seeking changes to the terms of its bonds in dollars and euros due 2012 and 2013 as part of an effort to restructure $5.6 billion of debt and raise new money, according to the notice, which Malrieu confirmed is authentic. The company is in breach of conditions on most of its debt after suffering from a slump in world trade amid the deepest financial crisis since the 1930s.

CMA CGM needs a majority of the bondholders to agree to the proposed changes in the terms of the notes by Dec. 22, according to the notice. Otherwise it said it “may be forced to file for bankruptcy proceedings in the near term, in which case there would be no assurance that CMA CGM would be able to repay” the senior notes.

click here for complete article

YRC Worldwide update

The struggle between bondholders and YRC Worldwide continues, and today it appears the bondholders have the upper hand. They may push YRC Worldwide into bankruptcy.

The stock is presently at 95 cents US.

From Bloomberg

Dec. 18 (Bloomberg) -- YRC Worldwide Inc. has less than two weeks to persuade bondholders to accept a debt exchange and prevent a bankruptcy filing that its employees’ union says may force the biggest U.S. trucking company to liquidate.

YRC, which has pushed back the deadline for the swap three times this month, must complete the tender by Dec. 31 to avoid a $19 million payment of interest and fees that would leave the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said yesterday in a regulatory filing.

Bonds and shares fell yesterday as the company, which posted more than $1.7 billion in losses in the past five quarters, said the percentage of creditors who agreed to the exchange fell to 57 percent from 75 percent on Dec. 15. YRC, facing a slump in freight demand, is locked in a struggle with a group of bondholders who own derivatives that would profit if the company defaults, people familiar with the situation say.

“Bondholders are in the driver’s seat,” said David Ross, a Baltimore-based analyst at Stifel Nicolaus & Co. who has a “sell” rating on the stock. “They could force the company to file if they don’t tender enough notes, and then there is a high chance the business is liquidated.”

CMA CGM gets credit line

The bankers for CMA CGM have extended a credit line so operations will not be disrupted, as talks with creditors continue.

Apparently, part of the deal was for the founder and CEO Jacques Saadé, to step down, which he has now done, following two missed deadlines for refinancing agreements.

The French Government said they would assist CMA CGM if necessary, but only if they came to terms with their creditors for refinancing.

The creditors had said part of the requirement for refinancing was for Mr. Saadé to step down. He had resisted doing so, which is certainly understandable as he founded the company.

This paves the way for new investors, which are believed to be

Louis Dreyfus Armateurs, a French bulk ship owner, French private equity group Butler Capital Partners, and Los Angeles-based Apollo Management, the owner of CEVA Logistics of the Netherlands.

click here for article from JOC

YRC receives credit extention

Earlier I posted there were bets out against YRC Worldwide, which would have paid off if they filed for bankruptcy.

Dec. 15 (Bloomberg) -- YRC Worldwide Inc., seeking to avoid bankruptcy by exchanging equity for debt, faces resistance to the swap from investors holding bonds and derivatives that pay out in a default, according to people familiar with the matter.

Now, the banks have come to the rescue of YRC, extending their credit agreement until Jan. 12.

From The Journal of Commerce

YRC Worldwide's banking group came to the troubled carrier's rescue today, extending its credit agreement until Jan. 12 and effectively giving YRC another month to complete a debt-for-equity swap with bondholders key to its plans to avoid bankruptcy.

In their thirteenth amendment to the credit agreement since 2007, the banking group agreed to continue to let YRC draw up to $50 million at any time from its $950 million revolver reserve block, and it suspends a minimum cash requirement through Jan. 11.

That pushes off concern over a near-term bankruptcy filing by the carrier, which has lost more than $2 billion over the past two and a half years. The company detailed the credit amendment in a Dec. 16 filing with the Securities and Exchange Commission.

YRC is wrestling with reluctant bondholders as it struggles to complete a debt-for-equity swap that would wipe $536.8 million in debt from its books.

As of Dec. 15, 75 percent of the bondholders had agreed to the exchange, but the tender offer requires 95 percent of the note holders to swap their bonds for company stock.

YRC also has a problem of getting the Union to take some cuts.

Last I saw, they voted against doing so.

It's going to be tough for YRC Worldwide to stay out of bankruptcy without the support of the Union.

and... this just in

Dec. 16 (Bloomberg) -- The International Brotherhood of Teamsters blamed Goldman Sachs Group Inc. for making derivatives trades that would benefit from the bankruptcy of YRC Worldwide Inc., the biggest U.S. trucker by sales.

Gambling on YRC

This is unbelievable

From Bloomberg

Dec. 15 (Bloomberg) -- YRC Worldwide Inc., seeking to avoid bankruptcy by exchanging equity for debt, faces resistance to the swap from investors holding bonds and derivatives that pay out in a default, according to people familiar with the matter.

Yellow Freight, the largest LTL (less than truckload) carrier purchased Roadway, the 2nd largest LTL carrier several years ago.

It took forever to get the two operations merged. Also, they are union, thus quite high operating costs.

The other day their stock was around 86 cents. They are trying to restructure, but now it appears too many people have "bet" on their default, and are pushing them in that direction.

How sad.

CMA CGM still in talks on debt

CMA CGM has missed, for the second time, their targeted date for refinancing debt.

From Lloyd's List

No debt deal for CMA CGM yet

Andrew Spurrier and Janet Porter - Tuesday 15 December 2009

FRENCH container shipping group CMA CGM has again overshot its target date for completing talks with its banks on a restructuring of its $5.6bn debt.
The group, which had originally signalled a mid-November date, told its employees last month that it needed to get agreement on certain key measures by December 15.
Today, however, the group admitted ...

The rest of the article is available only to subscribers.

Back on Dec. 2nd I said I didn't expect them to meet the deadline (I had calculated mid-Dec to be latest Dec.18)

Now that we are into the Holiday season, it will be more difficult for them to achieve the restructuring. I guess it will have to wait until after Jan 1. I hope they have enough cash to get them through until then.

Rotterdam Rules 2009

What has become known as "Rotterdam Rules" has the official title of:

United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea

This document is 39 pages long.

If you are involved in the actual transport of international shipments, it would be a good idea to read this document. It is not yet in effect, but probably will be in the not too distant future.

It was necessary for this agreement to be updated, to take into consideration the changes in international transportation due to containerization, which allows for, amongst other things, door to door delivery.

There is also a considerably amount of clarification regarding the bills of lading which are transmitted electronically.

Happy reading!

Global Ship Lease regulatory filing Dec. 9, 2009

Here's the regulatory filing referred to in the Fairplay article.

GLOBAL SHIP LEASE, INC. filed this 20-F/A on 12/09/2009

This is the part about conflict of interest.

CMA CGM is Global Ship Lease’s initial sole Charterer and its wholly owned subsidiary, CMA Ships, is Global Ship Lease’s initial Ship Manager. CMA CGM’s ability to continue to pay charterhire and CMA Ships’ ability to render ship management services will depend in part on their own financial strength. CMA CGM has guaranteed the performance of CMA Ships under the ship management agreements. As described above, the container shipping sector is suffering a severe cyclical downturn and has been incurring substantial losses. Furthermore, many containership operators, including CMA CGM, have commitments to purchase newbuildings for delivery over the next three to four years which may not be fully funded with committed financing.

Circumstances beyond their control could impair CMA CGM’s and CMA Ships’ financial strength, and because they are privately held companies, information about their financial strength is not publicly available. As a result, Global Ship Lease and an investor in its securities might have little advance warning of financial or other problems affecting CMA CGM or their wholly owned subsidiaries even though their financial or other problems could have a material adverse effect on Global Ship Lease.

CMA CGM and Global Ship Lease’s Ship Manager have conflicts of interest with Global Ship Lease and limited contractual duties, which may make them favor their own interests to Global Ship Lease’s detriment.

Conflicts of interest may arise between Global Ship Lease, on the one hand, and CMA CGM, Global Ship Lease’s initial Charterer, and CMA Ships, its Ship Manager, on the other hand. As a result of these conflicts, Global Ship Lease’s Ship Manager may favor its own or its parent company’s interests over Global Ship Lease’s interests. These conflicts may have unfavorable consequences for Global Ship Lease. For example, Global Ship Lease’s Ship Manager could be encouraged to incur unnecessary costs, for which it would seek reimbursement from Global Ship Lease. Although Global Ship Lease’s ship management agreements expressly prohibit its Ship Manager from giving preferential treatment when performing any of its ship management services to any other vessel that is affiliated with it, or otherwise controlled by CMA CGM, conflicts of interest may arise between Global Ship Lease, and its Ship Manager and its initial Charterer.

Global Ship Lease’s financial reporting is dependent on CMA CGM.

Under the ship management agreement with CMA Ships, the Ship Manager is obligated to provide Global Ship Lease with requisite financial information on a timely basis so that Global Ship Lease can meet its own reporting obligations under U.S. securities laws. CMA Ships and its parent company CMA CGM are privately held French corporations with financial reporting schedules different from Global Ship Lease. If CMA Ships or any of its affiliates is delayed in providing Global Ship Lease with key financial information, Global Ship Lease could fail to meet its financial reporting deadlines.

CMA CGM could compete with Global Ship Lease.

Along with many other vessel-owning companies, CMA CGM, currently Global Ship Lease’s sole Charterer and largest holder of its common shares, could compete with Global Ship Lease in its search to purchase newbuildings and secondhand vessels. Further, CMA CGM is not precluded from acting as an owner in the direct chartering market. While Global Ship Lease understands that CMA CGM currently has no intention of doing so, competition from CMA CGM may potentially harm Global Ship Lease’s ability to grow the business and may decrease its results of operations.

Certain terms in Global Ship Lease’s agreements with CMA CGM and its affiliates may be the result of negotiations that were not conducted at arms-length and may not reflect market standard terms. In addition, they may include terms that may not be obtained from future negotiations with unaffiliated third parties.

The asset purchase agreement, the charters, the ship management agreements and the other contractual agreements Global Ship Lease entered into with CMA CGM and its wholly owned subsidiaries were made in the context of an affiliated relationship and were negotiated in the overall context of the previously contemplated public offering of its Class A common shares in 2007, the Merger in August 2008 and other related transactions. Global Ship Lease’s agreements with CMA CGM may include terms that could not have been obtained from arms-length negotiations with unaffiliated third parties for similar services and assets. As a result, its future operating results may be negatively affected if Global Ship Lease does not receive terms as favorable in future negotiations with unaffiliated third parties or has to enter into lengthy and costly negotiations with third parties in connection with entering into such agreements.

Global Ship Lease’s growth depends on its ability to purchase further vessels, obtain new charters and maintain and potentially expand its relationship with CMA CGM. Global Ship Lease will require additional financing to be able to grow and will face substantial competition.

One of Global Ship Lease’s objectives is to grow by acquiring additional vessels and chartering them out to container shipping companies including potentially CMA CGM. This will be particularly challenging since Global Ship Lease will need to obtain additional financing in order to acquire vessels. Due to the global banking crisis and the severe cyclical downturn in the containership

So, if you are investing in Global Ship Lease stock (which I am not), please keep this in mind.

Payments to Global Ship Lease delayed

This from Lloyd's List

CMA CGM lagging behind on payments

Rajesh Joshi - Wednesday 9 December 2009

GLOBAL Ship Lease has confirmed “increasing delays” in charterhire payments from CMA CGM, and raised doubts over the troubled French company’s ability to keep up with these payments.
GSL has also warned against the possibility that CMA Ships, which serves as GSL’s ship manager, and the rump CMA CGM have “conflicts of ...

That's all I've got. The rest is for paid subscribers, which I am not.
I presume the last sentence reads "conflicts of interest", which I have mentioned all along.

And from Fairplay

GLOBAL Ship Lease confirmed in a filing today that it faces pressures on multiple fronts, including delayed payments from charterer CMA CGM.

All of GSL’s fleet is on hire to CMA CGM, which is exploring restructuring.

Again, the rest is subscription.

It refers to a filing, so maybe there is something with the SEC.

12 Percent of containership fleet is idle

American Shipper quotes Alphaliner on the delays in orders for new containerships

More than 300 ordered containerships, accounting for 2.4 million TEUs worth of capacity, have seen their delivery dates deferred or delayed since October 2008, according to the maritime news service Alphaliner.

But what I thought was most interesting, was the comment on current idle capacity

...the idle container fleet has hit 1.5 million TEUs, Alphaliner reported. That’s approaching 12 percent of the global fleet, a record high. That the idled fleet is rising during December is unsurprising, given that carriers are rationalizing services during the traditionally weak winter months. Alphaliner projects the idle fleet will keep rising until March.

Until the idle capacity goes away, one would think the newbuildings will just keep getting pushed back.

Of course, there are two ways idle capacity can be decreased. Ships can be chartered or, they can be scrapped.

click here for link to article

Why is the FDA holding up delivery of an Apple computer?

This question was posed on BoingBoing

Why is the FDA holding up delivery of an Apple computer?

The Food and Drug Administration is holding up the delivery of MG Siegler's iMac because they apparently think it is an apple, not an Apple.

In the comments of the tracking report are these notes:

UPS (who is the transportation company, and apparently handling customs clearance) has obtained documentation and submitted to Food and Drug Administration and/or department of AG/PPQ ( which stands for agricultural plant, protection and quarantine).

There were several comments by readers of Boing Boing, wondering if U.S. agriculture/customs thought an Apple computer was in fact an apple, as in fruit.

I thought I should set the record straight. Although U.S. Customs (or now called Department of Homeland Security) does sometimes make mistakes, this was not an error.

The reason for the documentation required by PPQ (who's job it is to protect plant species in the U.S.) is because there was this nasty bug, the Asian Longhorned Beetle, which found it's way into the U.S. in packaging material from Asia. It killed a lot of trees, mainly in the Northeastern U.S.

From USDA

Asian Longhorned Beetle

Background
After the discovery in 1996 of Asian longhorned beetles (ALB, Anoplophora glabripennis) on several hardwood trees in Brooklyn, New York, the Secretary of Agriculture declared an extraordinary emergency in order to combat the infestation with regulatory and control actions. Asian Longhorned Beetles are believed to have been introduced into the United States from wood pallets and other wood packing material accompanying cargo shipments from Asia.

This is the documentation requirement. They don't inspect the shipment. They are trusting that people are not lying.

Documentation requirements

Every shipment which has solid wood packing material must be accompanied by certification from the Chinese government stating that the wood has been heat treated, fumigated, or treated with preservatives. ....

Shipments which do not have solid wood packing material must be accompanied by an exporter statement saying that the shipment contains no solid wood packing material.

I guess it's doing some good

In April 2008, both the Jersey City and Chicago infestations were declared eradicated. Currently, USDA-APHIS' Plant Protection and Quarantine (PPQ) is implementing quarantine and control strategies in New York, New Jersey, and Massachusetts that seek to eradicate this serious pest from the United States.

China Shipbuilding Industry Co. announces IPO

As I have mentioned before, China will become more and more dominant in the world economy. You can whine all you want, but there is no stopping them. They seem to have a fairly solid economic plan, and are rolling it out, little by little.

They have been making steel. Now they will increase production of one of many products made from steel; ships.

From Bloomberg

Dec. 4 (Bloomberg) -- China Shipbuilding Industry Co., the nation’s largest maker of vessel equipment, plans to raise as much as 14.7 billion yuan ($2.15 billion) in Shanghai in the country’s third-largest initial public offering this year.
..............
The Chinese government wants locally made components to account for 80 percent of Chinese-made vessels by 2015, as part of a wider drive to surpass South Korea as the world’s biggest shipbuilding nation.
................
China Shipbuilding will use about 4.3 billion yuan of the proceeds to construct production capacity for ship engines and parts, according to a draft prospectus Nov. 25. Another 1.45 billion yuan will be used for producing additional marine auxiliary machinery, while the remaining 673 million yuan will be to finance an expansion of transportation equipment.

The company plans to offer 45 percent of the shares available to institutional investors through an offline sale, while the remaining 55 percent will be offered to both institutional and individual investors in an online tranche.

click here for link

French Government might help CMA CGM

From The Journal of Commerce

The French government said Dec. 2 it is willing to help CMA CGM, but the troubled ocean container carrier must first sign a debt restructuring deal with its creditors.

The government "does not exclude intervention" in CMA CGM "but it must first resolve its debt problem with the banks," said Transport Secretary Dominique Bussereau.

"We would intervene in a second phase," Bussereau said without giving details.

The government's statement of support for CMA CGM came as the carrier entered a third month of talks with its 63 European and Asian banks over restructuring its $5.6 billion debt, much of which is linked to orders for 60 containerships.

click here for link

CMA CGM said they expect to have the restructuring with the banks accomplished by mid-Dec, a month later than anticipated. I will be surprised if they make that date.
Let's give them until Dec. 18, (the Friday before Christmas week) which is 16 days from now.

I'll keep you posted if I see anything.

Baltic Dry Index

Following comment was posted today

Question-What was going on with the Baltic Dry Index this summer? It kept rising monthly all the way through to Nov. and is now falling like a rock?

I remember when it went up dramatically. I thought it was a bit crazy, but didn't say anything. It was when China was stocking up on commodities.

Honestly, I am getting a little concerned about the integrity of the BDI in general. It's a bit of an art, getting comparable rates, as there can be so many variables.

Anyway, I started to do some research, and ran across this in the blog section of Lloyd's List (which is free).

A two-day conference on dry bulk shipping was almost entirely dominated the topic of how much iron ore would China import next year. With China’s huge spike in iron ore demand this year seen as almost entirely responsible for the unexpected recovery in dry bulk shipping rates, the hope is the country’s appetite for iron ore will continue to grow to keep the industry buoyant.

click here for link to complete article. It's worth the read.

CMA CGM looks to cancel newbuildings

Well finally, CMA CGM has figured out they really don't need to be spending their money buying new ships.

They need to be saving every penny they can scrape together to survive this long downturn in international container shipping.

I don't subscribe to Lloyd's List, but this is the beginning of their article (the free part)

CMA CGM is seeking the cancellation of 15 small containerships as part of a much wider restructuring of its huge orderbook.
South Korean shipbuilders are now considering a series of proposals from the French line that is stepping up the pressure on yards to delay deliveries of the much bigger ships it has on order.

I'm not sure what they mean by "small containerships". The last vessel CMA CGM took delivery of was 13,300 TEUS. That is huge. I guess "small" is around 6000-8000 TEUS.

From The Journal of Commerce, Nov. 10, 2009

CMA CGM, facing economic troubles that threaten the carrier's financial stability, took delivery Tuesday of one of the world's largest container ships, a 13,300-TEU behemoth that will become the company's flagship.

The CMA CGM Christophe Colomb is an energy-efficient vessel coming in at 1,198 feet long, 168 feet wide, and with a draft of 51 feet, among the largest of a new generation of ships that were ordered in boom times and now are arriving amid steep decline in shipping demand.

I haven't seen any mention recently as to the demand by creditors that the Chairman resign.

Perhaps he got the message.