CMA CGM rejects Qatar loan

Jacques Saadé

CMA CGM rejects Qatar loan

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Jacques Saade says conditions of the terms the investors were asking were ‘too difficult’

HEAVILY indebted CMA CGM has rejected a loan from Qatar and continues to look for capital from other sources, group chairman Jacques Saadé disclosed this morning.

The terms that Qatari investors were asking were “too difficult”, Mr Saadé told Lloyd’s List during the naming ceremony for the 13,800 teu CMA CGM Christophe Colomb.

He also predicted that 2010 financial results could be one of the best ever for the French line, given the steep recovery in container volumes and freight rates. Nevertheless, the line still needs new loan or share capital to cover its huge newbuilding programme.

News that the Qatar deal had fallen through is likely to come as a surprise to many, as it was seen as almost a foregone conclusion that a loan was imminent.

However, the line was forced to put out a statement two weeks ago denying reports in the French press that it was about to receive $1bn of new investment from the Qatari Investment Authority.

CMA CGM has been looking for ways to raise more capital since last year, with equity stakes among the options under discussion.

CMA CGM chief executive Philippe Soulié said recently that CMA CGM’s debt would still be around $5bn by the year end, although down from the peak of $5.4bn.

Although CMA CGM has gone through a resurgence in business in recent months following a near-death experience and a modest infusion of financing late last year, it still needs additional capital to convince its bankers that it can finance orders slated for deliver through 2012.

“The banks demand it because of the deliveries,” said Mr Saadé. The company must find the financing by the end of July.

The French sovereign fund FSI is prepared to invest in CMA CGM, but only if a second partner is found.

Mr Saadé said there were “many positive discussions” with potential partners, but would not reveal their identities.

Asked if rejecting the conditions attached to Qatar’s loan offer showed confidence that the company’s recent healthy performance might see it through without additional money, he replied again: “We are searching for capital.”

CMA CGM has benefited from this year’s unexpected rebound in the Asia-Europe trade. Mr Saadé said the trade was “going up steadily”, but he nevertheless warned about threats to its sustainability, citing general economic uncertainty such as the nagging European debt crisis.

CMA CGM Christophe Colomb, built by South Korean yard DSME, will be followed by seven other vessels of comparable size, with four slated for delivery in 2010 and another three by 2012.

The ship’s naming ceremony, with fireworks, bagpipes and a speech by French minister of economy industry and employment Christine Lagarde, was clearly an intended show strength for a company that not long ago was on the critical list, and confirmation that the ships in the pipeline would be delivered.

Disclosure that money from the Qatari fund would not be forthcoming after all followed a statement from CMA CGM a few days ago saying it had a few additional weeks in which to complete its capital increase with external investors. The discussions, which are well advanced, “require the preparation of particularly complex documents”, the group said.

CMA CGM’s operational activity has sharply improved since the beginning of the year. Over the first quarter, volumes carried rose 21% compared with the year-earlier period, while earnings before interest, taxes, depreciation, and amortisation stood at $380m, an improvement of $640m from a year earlier and in line with first quarter 2008 results. Quarterly revenue was up by 29% to $3.2 bn, while second quarter profit is forecast to exceed first quarter figures.

Mr Saadé gave an upbeat view of future earnings, saying that gains in the first half of 2010 would more than compensate for losses in the first half of 2009 and predicted that if business continued on its current trajectory, that this year would be “one of the best” the company had experienced.

Additional reporting by Janet Porter.

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