CMA CGM’s rating was downgraded by Moody’s on September 8, 2011, increasing the possibility of default, even as the credit-rating firm described the carrier’s business profile as strong.
Reports said the Marseilles-based liner has been downgraded to B1 from Ba3, and its senior unsecured notes that will mature in 2019 and 2017, respectively, have been revised down to B3 from B2, with a negative outlook.
The downgrade was due to negative factors that have come up in recent months, said Moody’s, including the shipping company’s second quarter 2011 results that fell below Moody’s previous expectations. Moody’s attributed CMA CGM’s poor performance to the intense market competition, which has impinged on the company’s ability to recover the rise in bunker costs.
But Moody’s also said the container carrier had solid market shares worldwide and held a distinctive position in certain lanes that are more profitable. The shipping giant also solidified its capital base early this year, selling certain assets more recently as planned to bolster its liquidity.
Moody’s downgrading of the shipping line came after a similar move by Standard & Poor’s, which on September 7 revised its outlook to negative and gave it a B+ rating.
Meanwhile, CMA CGM assailed Bloomberg’s recent statement that it faced a 90 percent chance of default due to falling bond prices and shrinking freight rates.
Though the world’s third largest carrier has reported significant profit this year, the company has also been penalized by the U.S.government for violating trade sanctions against Iran, Cuba and Sudan. It is also feeling the pinch from the plunge of the price of its $475 million in 8.5 percent notes due 2017 to 47.25 cents since April.
Bloomberg said in a report on the bonds on September 5 that the credit-default swap prices signal a 9 in 10 chance that the shipping line would fail to meet its obligations within five years.
CMA CGM replied through Financial Dynamics, a Paris-based communications firm, that “there is absolutely no liquidity on CMA CGM’s credit default swaps.” It called the swap price “a theoretical calculation,” adding that even on the group’s bond, “there is a very limited liquidity.”
Photo by PhillipC
