Zim misses deadline to obtain concessions

It's difficult to say how much this will impact Zim's future. If they continue
to lose money, they will need to get cash from somewhere. Obviously the banks who lent them money don't want to make the required adjustments at this time.

From The Journal of Commerce

Zim Integrated Shipping Services failed to meet a Dec. 31, 2011 deadline to obtain concessions or amendments to financial covenants with its creditor banks, the Israeli ocean carrier’s parent said.

As a result, Israel Corp. may have to record Zim’s debt on its balance sheet as short term debt for the fourth quarter of 2011, which in theory means the shipping operation could be liable for repayment immediately rather than over the long term.

The change in the status of the debt is technical but it could affect Israel Corp.’s financial ratios and financial covenants with its own banks, according to Israeli reports.

Zim has no financial covenants that are based on classifying debt as short term or long term, Israel Corp. said in a statement to the Tel Aviv stock exchange.

Zim is believed to owe around $2 billion to mainly foreign banks.

Zim swung to a $66 million net loss in the third quarter of 2011 from a year earlier profit of $37 million swelling losses for the first nine months to $245 million compared with a $42 million loss in the 2010 period.

Israel Corp, which owns more than 99 percent of Zim, injected $50 million into the carrier in November and the controlling Ofer family provided an additional $50 million. Israel Corp contributed $450 million to the carrier’s restructuring in 2009

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Carriers in financial trouble

When the global recession hit a couple of years ago I predicted a lot
of carriers would go out of business.

I was wrong. Some of them were saved by government intervention,
as was Hapag-Lloyd by the German government. Others were saved
by banks or various investors.

Once again shipping companies are in trouble. I hesitate to make
predictions this time around, but here is a little bit of
what is going on.

From Lloyd's List

CSAV seeks partner as losses soar

Monday 05 September 2011, 13:36

STRUGGLING Chilean container line CSAV is actively looking for a strategic partner and has already held talks with other leading carriers as it takes action to stem mounting losses.

The rest is available to paid subscribers.


As for Hapag-Lloyd, this was published in the Journal of Commerce on Aug. 11

Weak rates, fuel costs hit German carrier's second quarter results

Hapag-Lloyd’s second quarter profit tumbled to 26 million euros ($37 million) from $294 million in the second quarter of 2010 as declining rates and higher fuel costs offset a 3.3 percent increase in container volume.

The German container line said its results also were affected by soft demand for transport services in Japan following the March earthquake and tsunami, and the dollar’s weakness against the euro. Revenue for the quarter totaled $2.1 billion, down 9 percent after conversion into euros.

Hapag-Lloyd said it expects continued growth for container shipping in the medium to long term but “short-term results will be influenced by high crude oil prices and pressure on freight rates as a result of tougher competition, particularly in the Asia-related trades.”

Hapag-Lloyd’s average freight rate fell to $1,531 per 20-foot-equivalent unit from $1,563 in the first quarter. For the year’s first half, a 4.4 percent increase in average rates to $1,546 was offset by bunker costs that surged from $480 per metric ton in January to more than $630 in June.

Container volume rose 3.3 percent to 2.5 million TEUs. Regional totals included the North Atlantic, 582,000 TEUs, up 1.5 percent; Latin America, 559,000 TEUs, up 7 percent; the Far East, 549,000 TEUs, down 2.6 percent; the trans-Pacific, 560,000 TEUs, up 8.3 percent; and Australasia, 284,000 TEUs, up 2.9 percent.

For the first half of the year, earnings before interest and tax totaled $60 million, down 80 percent from $310 million in the first half of 2010.

TUI, the German tourism group that is Hapag-Lloyd’s largest shareholder, said its quarterly loss widened to $56.4 million from a loss from $17 million a year earlier because of unrest in North Africa, foreign exchange effects and high fuel prices.

TUI has been trying to sell its stake in Hapag-Loyd. A plan for a public listing of the container line was postponed earlier this year.

There are mixed reports as to the strength of international container transport.

The next 6 months will be very crucial for many companies in this business.

CMA CGM chairman living in a dream world

Creditors want the CMA CGM chairman out, before they agree to refinancing.

From Bloomberg News

Oct. 29 (Bloomberg) -- CMA CGM SA creditors have told the French container-shipping operator to replace founding Chief Executive Officer Jacques Saade before they restructure its $5.6 billion debt, three people with knowledge of the matter said.

And this was the response by the chairman

In an e-mailed statement to Bloomberg News, Saade said CMA “needs the expertise of its entire management team” to recover from the economic crisis.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” he said, adding that the company expects a return to breakeven “in coming months.”

What's his definition of "coming months". I would like to see those calculations.

Must be that French math.

Maybe something got lost in the translation.

click here for link to article

Infighting amongst European carriers

This is quite amusing. Maersk thinks the other European carriers (Hapag-Lloyd and CMA CGM) should be forced to reduce their capacity, because they are receiving government monies.

Well, that's a nice way to try and kill off your competition.

But, what if they just found a way to reduce their expenses, without reducing capacity?
Wouldn't that be a better idea for the monies given to them by the government?
Oh, but then, they might survive?
And, Maersk doesn't want that.
Anyway, here's the article from Lloyd's List.
Judge for yourself.

Danish owners call for CMA CGM and Hapag Lloyd capacity cuts

Richard Meade - Wednesday 14 October 2009

HAPAG Lloyd and CMA CGM should be forced to cut their fleet capacity in return for government financial support, Danish shipowners have told the European Commission.

The suggestion to directly link state support with fleet reductions was put forward during a meeting between Brussels competition officials and the Danish Shipowners’ Association last week.

According to association executive vice president Jan Fritz Hansen, proposed moves by France and Germany to support CMA CGM and Hapag Lloyd risk creating significant market distortions.

“What we said to the commission was that they need to look carefully at these plans,” Mr Hansen told Lloyd’s List. “We want to be the early birds here saying that this should not turn into a subsidy race.”

The Danish Shipowners’ Association, which counts AP Moller-Maersk as its largest member, raised specific concerns during the meeting regarding Germany’s approval of a €1.2bn ($1.8bn) package for Hamburg-based Hapag-Lloyd and a potential French government equity stake in Marseille-based CMA CGM.

While the meeting was said to be informal and no official proposals were put forward, the commission is understood to have taken the association’s comments “on board”.

“If you get that kind of assistance we suggest that it is only fair that you participate in the solution,” Mr Hansen said. “If you get guarantees, or subsidies or if the government buys into the company there should be strings attached. One of these strings should be that the company has to adjust its capacity.”

According to Mr Hansen internal discussions within the association had considered whether a legal case to stop the Hapag Lloyd aid could be launched, however the plans were dismissed because a challenge would be unlikely to solve any wider problems.

Plans to enforce fleet reductions on any owners receiving state support, however, would helpcompanies avoid bankruptcy wile simultaneously addressing the urgent concerns of fleet overcapacity, he said.

“It is not good that one year into the crisis these companies are asking for subsidies,” said Mr Hansen. “What are they going to be asking for in two years time? From our point of view it is worrying.”

Despite forecasting losses of $2bn this year, Denmark’s biggest shipowner AP Moller-Maersk has repeatedly shunned any suggestion that it would look for government support. As Mr Hansen pointed out there is also little chance that the Danish government would be financial able or willing to offer it.

“We are a small country but a big shipping nation and our state finances could never afford to subsidise the industry. For France and Germany as big countries with smaller shipping industries, perhaps it is easier for them,” Mr Hansen said.

“We could never compete on state aid. We want to compete on fair, commercial free competition.”

Zim's problem

Zim's main problem is, it needs $1 Billion dollars between 2009 and 2013.

This is what it plans to do, to get the money.

From The Journal of Commerce.

Israel Corp., which is controlled by the Ofer family, plans to inject $60 million into Zim and reduce by $150 million charter payments for 19 container ships owned by family firms.

Israel Corp. plans to inject a total of $350 million into Zim, the world's seventeenth largest ocean carrier.

Zim's recovery plan also involves cancelling and delaying box ship orders, returning vessels when their charters expire and shrinking its network and payroll.

I'm not really sure that's going to get them the billion they need.

The rescue meeting is set for Oct. 28. The other creditors/owners will get their say at that time, I guess.

I don't know why a lot of these plans haven't already been executed, like the shrinking of payroll and network. Plus, they should have already returned chartered tonnage, and should have already reduced the charter hires.

Someone has been asleep at the wheel.

Wake-up call for CMA CGM

I guess CMA CGM has finally figured out things aren't getting better any time soon.

Pity is, they only figured this out when they have almost run out of cash.

Now, they will ask creditors for a moratorium on debt, and consider canceling and/or delaying ship orders. They better do more than just consider.

Note to the Management of CMA CGM -
Wake up! If you don't cancel the ship orders, start cutting costs like crazy, you will be filing for bankruptcy reorganization.

From the Journal of Commerce

Carrier unable to meet payments on $5 billion debt

CMA CGM reached agreement to establish a committee of French, European and international banks that will help it restructure its troubled balance sheet, the company said Tuesday.

The French carrier, the world’s third-largest container line by capacity, met with its creditors in Paris on Sept. 25 to ask for a moratorium on its debt. The group of banks, which includes major financial institutions from Asia and the Republic of Korea, discussed measures that CMA CGM said will ensure its “continuing development.”

The shipping line, which is owned by Jacques Saade and his family, said the bank committee will propose measures to resolve the carrier’s short and medium term financing requirements and strengthen its capital structure.
....................
The French carrier has 60 large new container ships on order that are scheduled for delivery through 2012 and accumulated a debt of $5 billion on which it is no longer able to meet payments, according to the French journalists’ Web site econostrum.info, which said CMA CGM is asking its creditors to freeze the repayments for one year.

As part of an effort to conserve cash, CMA CGM said it will continue to try to renegotiate and in some cases cancel “certain ship deliveries.”

CMA CGM has a fleet of 91 owned and 272 chartered ships with a combined capacity of 1,024 million 20-foot equivalent units.

click here for link

TUI Travel pays back loans early to TUI parent

TUI will need cash to shore up Hapag-Lloyd, despite the expected bail out from the government.

Apparently, they will get some of this cash quite soon from their other company, TUI Travel.

From Bloomberg News

Sept. 29 (Bloomberg) -- TUI Travel Plc, Europe’s largest tour operator, said it plans to sell 300 million pounds ($477 million) of convertible bonds to start repayment of a loan from controlling shareholder TUI AG and fund acquisitions.

The U.K. holiday company also obtained a new 140 million- pound loan facility from a syndicate of five banks and will repay 92 million pounds of the 900 million pounds it owes TUI tomorrow, Crawley, England-based TUI Travel said today.
.........................
“These actions remove the immediate refinancing risk, but they crystallize an increased financing cost and we will need to adjust forecasts to reflect this,” Evolution analyst Ivor Jones wrote in a note today. He has a “sell” rating on the stock.

TUI Travel fell less than 1 percent in London trading, while shares of parent company TUI gained as much as 8.5 percent in Frankfurt. TUI, which owns a 51 percent stake in the tour operator, needs funding to support the unprofitable Hapag-Lloyd container line, in which it holds the biggest stake.

One smart move on the part of TUI Travel is to cancel orders for new planes.

The tour operator said today it has canceled 10 of the 23 787 Dreamliner aircraft ordered from Boeing Co., while adding no-obligation purchase rights to buy a further 13 of the planes.

Container carriers need to be doing this. They just keep thinking by the time the new ships come out of the yard, business will have picked up.
They need to just keep their old ships running, and maybe try to negotiate a similar no-obligation purchase with shipyards.

I realize this is a new idea for shipyards. Boeing has been through the ups and downs many times, so by now they know how to handle these drops.

Shipyards will need to learn how to handle the downturn. Most of the ones around today haven't been through such lean years.

Hapag-Lloyd financial problems as reported by Spiegel

I found an article originally from Spiegel on-line (part of the German news group Der Spiegel), which has been translated into English and published on the Free Internet Press.

Here is the link

It's really long, but if you are interested in the state of international container shipping, take the time to read it.

Here are some parts which I found interesting.

At current prices, we aren't making money on any route," Ulrich Kranich, the executive board member in charge of global operations, says, summing up the main reason for Hapag-Lloyd's financial woes. Shipping companies currently receive only about $500 to ship one container from Asia to Europe - about $300 less than they need to cover their costs. A year ago, shipping companies were still collecting more than $1,500 per container.
........................
Although Maersk also lost money - $373 million - in the first quarter, the Danish shipping company is owned by an oil and gas company that can more easily shoulder the losses in its shipping division.

None of the world's major shipping companies is currently turning a profit. Singapore-based NOL, for example, posted a $245 million loss, while South Korea's Hanjin lost $110 million.

Like Maersk, though, these companies have the backing of either financially strong corporations or their governments. NOL is owned by the Singapore state investment fund Temasek, which just approved a $1 billion capital increase. The Chinese shipping companies Cosco and China Shipping can rely on the support of their government. The same is true of Japanese shipping line NYK.

But Hapag-Lloyd appears to have been hit by the biggest crisis in shipping at the worst possible time. Because it was forced to transfer its substantial profits from previous years to its ailing parent company TUI, the Hamburg shipping company was barely able to build any reserves. At the end of last year, TUI sold Hapag-Lloyd to a consortium of the City of Hamburg, local businesspeople and banks. At the same time, it burdened the shipping company with €1.3 billion in debt, creating an additional drain on a company already faced with operating losses. The consequences are clear for company management in Hamburg. "Without outside help, we won't make it," says an insider.
................................
Hapag-Lloyd is also getting rid of ships it leases. The company owns only about half of its fleet of 128 container ships. The other half are leased and, for this reason, are to be jettisoned more quickly. Hapag-Lloyd has already returned about 30 ships to their owners. Other shipping companies are pursuing the same strategy. Industry insiders say MSC, a Swiss company, does not plan to renew charters on close to 80 ships, while French company CMA which reportedly has up to 170 charter ships with charters about to expire.

This, in turn, is becoming an existential problem for many other Hamburg shipping companies suddenly faced with the return of ships they had been leasing to other companies.

Hapag-Lloyd financial figures

From The Journal of Commerce (regarding Hapag-Lloyd)

The German container line’s cumulative loss for the first six months reached $627.1 million, compared to a profit of $190 million in the first six months of 2008.

First-half revenue totaled $3.14 billion, compared to the previous year’s $4.14 billion.

Average freight rates fell by around 25 percent year-on-year in the second quarter and about 20 percent year-on-year in the first half of 2009.

Container volumes declined by around 17 percent in the second quarter and around 16 percent in the first half of the year as a result of the impact of the global financial and economic crisis.

click here for link

Hapag-Lloyd is looking at further lay-offs and cost reductions in staff. However, it's not so easy under German law.

Perhaps the German Government will give them aide, so they won't go bankrupt, as a way to preserve jobs.

Aries Maritime Transport in trouble

Aries Maritime Transport Limited is one of those Greek shipping companies listed on the NASDAQ exchanged in the last few years. Their symbol is RAMS. click here for link to google finance.

As I write this, the stock is trading for .64 US. That's less than 1 USD.

As recently as May 28, 2008 they paid out a stock dividend of .10 USD, when their stock price was trading around 6.00 USD. They are just like most of the Greek companies listed in the U.S. Paying out big dividends to keep investors buying their stock, but not putting any money away for a rainy day.

Well, it's raining cats and dogs, and they are in big trouble.

This, from Lloyd's List.

ARIES Maritime has said foreclosure of its ships is a real possibility, and it does not expect to meet its loan covenants in the near future unless its lenders provide relief.

PricewaterhouseCoopers, the company’s auditor, has raised “substantial doubt” about Aries Maritime’s ability to continue as a going concern, even as Aries pushes ahead with an intended takeover by fellow Greece-based company Grandunion.

click here for complete article

Don't buy this stock, and if you can get 64 cents for any shares you own, be happy.