Global Ship Lease buys time

Lloyd's List reports Global Ships Lease has convinced the banks to postpone (again) the loan-to value tests on their ships.

Janet Porter - Friday 31 July 2009
GLOBAL Ship Lease, the containership owner in which CMA CGM has a sizeable interest, has obtained a further loan waiver from its banks while the two sides discuss amendments to its $800m credit facility.

The existing waiver expires today, but New York listed GSL said it had agreed with its lenders to extend its waiver for loan-to-value tests until the end of August. In the meantime, dividend payments remain suspended.

At issue are ship prices, with bankers concerned about the decline in charter free market values of containerships.

The company had initially been required to submit vessel valuations in April and previously received a waiver from loan-to-value tests until the end of July.

OK, that doesn't bother me too much.

However, when I got down to this comment in the article, I started get that funny feeling.

GSL currently owns 16 vessels and has contracted to purchase an additional three ships. That includes the CMA CGM Berlioz, to be bought from the French line for $82m in September, contingent on financing.

Oh, that's just great. Like something DryShips would do. Sell a ship from CMA CGM to Global Ship Lease, probably for a price much higher than current market value.
I am just guessing. I don't know for sure, but if the price was fixed even 6 months ago, it's more than it's worth today.

And, they have contracts for a couple of more ships, to be chartered out to Zim??!!

The company also has contracts in place to buy two newbuildings from German interests for approximately $77m each, which are scheduled to be delivered in the fourth quarter of 2010 with charters to Zim.

Zim isn't going to need any more ships. They are having financial troubles of their own.

Possible merger partners for Hapag-Lloyd

The Journal of Commerce names two potential merger partners for Hapag-Lloyd

Hamburger Abendblatt also reported Hapag-Lloyd is open to a merger or partnership with rival ocean carriers following a review of its operations by Roland Berger, a consultant.

The most likely partners are France's CMA CGM or APL, a unit of Singapore's Neptune Orient Line, it said citing sources in Hapag-Lloyd.

click here for link to article

The City of Hamburg is voting today regarding a cash infusion to Hapag-Lloyd. The problem is, it is contingent on the other shareholders also putting in a substantial amount of cash.

They have been reluctant to do so.

I suspect they won't get the cash.

Guess we should know by the end of the day.

Is Hapag-Lloyd close to bankruptcy?

Lloyd's List has a lenghty article today regarding the current situation at Hapag-Lloyd.

It says they are asking shipowners for charter price cuts, similar to what was received by CSAV. This, in addition to needing more cash from their shareholders.

I find this a bit disturbing, because I thought they negotiated with the shipowners last month, with the shipowners investing money in the company in exchange for equity.

At the time, I thought it was a bad move not to get lower charter rates, but maybe this was the plan all along.

I doubt it. I think things are worse than they thought.

This comment really caught my eye.

Without financial aid from its shareholders, the line would face bankruptcy within weeks, industry insiders said.

click here for link to complete article

Two more years of losses for Hapag-Lloyd

No wonder there is some concern about putting more money into Hapag-Lloyd.

Reports are surfacing losses are expected for 2009 and 2010.

Hapag-Lloyd AG, Germany’s largest container-shipping company, probably won’t make a profit before 2011, Die Welt reported, citing unidentified people from the company. Falling freight orders and prices will create a loss of at least 700 million euros ($998 million) at the Hamburg-based company this year, and about 200 million euros in 2010, the newspaper reported.

click here for Hellenic Shipping News article

If this is the projection for Hapag-Lloyd, it will probably be the same for many container carriers.

Tough times in international shipping.

Hapag-Lloyd is saved, for now

From the Journal of Commerce

Hapag-Lloyd, the world’s fifth largest container carrier, will get approximately $1 billion in financial support from its owners as it seeks additional aid from the German government and lenders.

click here for complete article

There are a lot of numbers thrown around. A mention of $2.4 Billion. Probably everyone is scratching their head and writing down numbers on napkins.

Who really knows.

But in my opinion, this is throwing good money after bad, or, as they say in the oil patch, pouring money down a dry hole.

Anyway, I would say Hapag-Lloyd is in a whole heap of trouble.

Hapag-Lloyd in trouble

Yesterday it was reported the shareholders of Hapag-Lloyd met, and agreed to help the container line.

That's not exactly correct, because Mr. Kuehne did not attend.

Today it's reported they need about 1.4 BILLION dollars to survive.

That's a nice chunk of change.

I'll bet Mr. Kuehne is wishing he had done something else with his money, rather than buying part of Hapag-Lloyd.

Patrick Hagen, Cologne - Wednesday 8 July 2009
HAPAG-Lloyd’s shareholders have agreed to help the stricken container line.

At a meeting held today in Hamburg, the members of the Albert Ballin consortium and tourism group Tui decided unanimously that they will give financial aid to Hapag-Lloyd.

Tui’s chief executive Michael Frenzel, chief financial officer Rainer Feuerhake and controlling chief Horst Baier were at the meeting. Neither Klaus-Michael Kühne nor his deputy Karl Gernandt attended.

This was seen as an affront by some of the participants, who were unhappy with Mr Kühne’s public comments on the financial situation at Hapag-Lloyd.

click here for link to Lloyd's List July 8 article.

And from Lloyd's List July 9

GERMANY’s largest container line Hapag-Lloyd needs fresh capital of more than €1bn ($1.4bn)

The actual amount will depend on market conditions and could be as much as €1.8bn in a worst possible case scenario, sources said.

click here for link

Container Lines once again try to increase rates

From my blog posting of March 20, 2009

Ocean Rates Will Not Go Up

(In reference to the TSA)...What these guys don't understand is, you can't restore market discipline by saying "don't do that". You restore market discipline by getting the supply more closely matched with demand.

I am repeating this, because once again, the idiots at the TSA are getting together to once again attempt to fix prices. But, they aren't very good at it.

The lines decided on a $500 increase for carrying a 40-foot box from Aug. 10 as a “voluntary guideline,” the Transpacific Stabilization Agreement said in an e-mailed statement yesterday. The companies will also raise fuel levies and may add peak season surcharges as well, the group added.

click here for complete article from Bloomberg

Carriers will start going bankrupt, or be taken over, in the next year (my best guess).

Some of these carriers are so badly managed they deserve to go out of business.

Survival of the fittest.

CSAV won't survive

I don't think CSAV will make it. There will not be a recovery any time soon, and they just don't have the deep pockets which are needed to survive in international shipping.

The ship owners who have ships on charter to CSAV did everything they could to keep them in business, and some are now having second thoughts.

Also, some of the comments now coming out are interesting.

And, by the way, congrats to Janet Porter who called this dead on in her blog posting, Delaying the inevitable.


This, from Lloyd's List

EMBATTLED Chilean container line CSAV has come under fire from rivals and shipowners for cutting freight rates weeks after being handed reduced charter rates on 79 of the vessels operating in its fleet.

But some owners are beginning to regret having agreed to the deal, as CSAV shows little sign of having learned its lesson after threatening counterparties with bankruptcy if they did not bail out the company.

Hamburg shipowners Bertram and Erck Rickmers, who each participated in the rescue in a small way, said CSAV had come within “seconds” of going bankrupt. Furthermore, if CSAV had not been saved, shipowners with vessels on charter to the line would have been liable for delivering cargo in transit to the final destination.

click here for complete article

Which container lines will go bankrupt?

Lloyds List has an article about shippers concerned which lines to use, based on their financial viability.

I agree they should be concerned, but I don't think the criteria given is correct.

If credit agencies such as Fitch or S&P have put a company on creditwatch, then that is a clear indicator of a higher risk.

“Another indicator is the percentage of what is on order compared with the existing fleet. A company may have an enormous orderbook, and you could conclude that this company is more exposed to the downturn than others.”

I do agree with the comment regarding creditwatch, but ships on order to not have to be delivered.

Most carriers are operating with only about half of their fleet as owned.

The problem will be, do the carriers have enough money to reduce the value of their ships to consider the daily rate in line with current charter rates.

It will come down to deep pockets.