Yildirim backs CMA CGM as box line sector prospects worsen
Moody’s has placed the French group’s credit rating under review, but the Turkish businessman who bailed out CMA CGM a decade ago says there is no cashflow squeeze, after recent asset sales
Many industries, including aviation, are going to be severely affected in the long-term by the lockdowns in Europe and North America, but the chairman of the Yildirim Group of Companies says he expects shipping to be relatively less hard-hit than other sectors ‘because goods will still have to move from one continent to another’
CMA CGM shareholder Robert Yildirim has voiced firm support for the French group, which faces a downgrade by a major credit-rating agency amid growing concern about prospects for the whole container shipping industry as consumer demand slumps across Europe and North America.
Mr Yildirim, who came to the rescue of CMA CGM a decade ago, said he would “of course” pump more money into the group if required, but stressed that there was no need for such help right now.
CMA CGM has ample cash reserves, he said, after the recent sale of some of its port assets to Terminal Link, the group’s joint venture with China Merchants. This will generate an eventual $1bn, while more money has been raised through ship sale and leaseback transactions. The group has also negotiated a three-year extension to the maturity of $535m worth of credit lines due in 2020.
“There is no cashflow problem at the moment,” he said. Profit-wise, “January was slow, but February went well and March is going to be good”. Ships loading in Asia are now about 80% full as factories in China reopen.
Looking ahead, though, numerous industries are going to suffer badly from the lockdowns in Europe and North America, Mr Yildirim acknowledged. However, he expects shipping to be less hard-hit than many “because goods will still have to move from one continent to another”.
Mr Yildirim’s comments came a few hours after Moody’s placed CMA CGM’s B2 corporate family rating on review for downgrade, and downgraded the rating of the group’s CEVA Logistics subsidiary.
That reflected the rapid spread of the coronavirus outbreak, the deteriorating global outlook, falling oil prices, and declines in asset values, with CEVA also suffering from its exposure to the automotive and consumer goods sectors, Moody’s said.
Mr Yildirim, who is chairman of the Istanbul-headquartered Yildirim Group of Companies and also chief executive of its Yilports division, said that shipping was in much better shape fundamentally than the aviation industry, which now faces a very bleak future.
The same goes for seaports which are likely to fare better than airports in the coming months and further ahead.
Even if there is a global recession, the world will still need food provisions and other supplies, he pointed out in a telephone interview with Lloyd’s List.
“If shipping stopped tomorrow, the world is dead,” said Mr Yildirim.
He described CMA CGM as “a very good company”, while conceding that the investment in CEVA Logistics was proving difficult.
Nevertheless, he echoed the views of CMA CGM chief executive Rodolphe Saadé that the group needed to provide end-to-end logistics services, and not just port-to-port deliveries. CEVA is central to that ambition.
Mr Yildirim now has a 24% shareholding in CMA CGM after pumping $600m into the French group in 2010 and 2011 as it accrued huge losses. The French state also provided financial support.
Mr Yildirim’s original investment through convertible bonds was only meant to be a short-term arrangement but has now turned into a much more permanent commitment.
Although all container lines face some challenging months, he said the situation now for CMA CGM was very different from a decade ago when the group lost heavily through oil price hedging that backfired, and financial institutions were reluctant to provide a bailout.
Should CMA CGM need to turn to its banks, the group was likely to find a more sympathetic ear this time, said Mr Yildirim, particularly with shareholders from outside the Saadé family, including himself and the French sovereign fund.
CMA CGM’s debt has jumped from $7.7bn at the end of 2018 to almost $17.7bn a year later, but Mr Yildirim noted that this partly reflected new global accounting rules that had inflated the figure.
He also pointed out that group earnings before interest, taxes, depreciation and amortisation more than tripled to $3.8bn in 2019.
Even though the pandemic will have far-reaching consequences for businesses the world over, Mr Yildirim said that overall, he remained “very optimistic for shipping”.