am embarrassed to say i don't read German so am Guessing at what i see on the Bourse. i think CMA debt trades between 9 and 9.40 ish depending on issue. still at modest dollar discounts.
Where are all the (rest of the) veteran GSL followers? Everyone abandon ship? Guess I got snookered, reopened a position on the refi. Not sure if should build it up or just let it be. Sure is curious.
Tradewinds just published an article which mentions how the Yahoo GSL message board is talking about Tradewinds.
I think we've officially created a feedback loop.
Speculation is that they're calling for Michael Gross to be replaced at the next board meeting and adding two new seats. That would give CMA CGM control of the board at that point right?
Even if they get some board members they still wont have the voting power. They would also be sued for breaking fudiciary duties to GSL. I don't see them doing it this route. I still see them purchasing the whole company back at a reasonable price though.
And if any funny business does occur, I would hope that Michael Gross would have our backs since he's also got skin in the game (20% stake in GSL).
I was looking over corporate governance documents earlier today. There are some requirements that interested directors recuse themselves from any board matters with respect to which they are conflicted (which should cover charter renegotiations). How much comfort that gives us in practice is another matter. I suspect CMA CGM has plenty of methods for bringing pressure to bear on GSL. The board appointments are just one more way.
Anyone know when the annual shareholder meeting is scheduled to occur? That's when this is all supposed to go down according to Tradewinds' confidential informant.
What are the chances that once they take over the board, they reduce charter rates across the board and wipe out earnings? As stock price falls, they acquire back their ships at pennies on the dollar?
Well you have to figure net debt would be 420-75 mil of cash. So 216 + 345 mil of debt ~ 560mil. Remember though they have like a ~850 mil obligation of future charters to GSL so it might just make sense for them to buy us out.
In all honesty, the share reduction is so marginal (and exact timing uncertain) that maybe it doesn't mean anything.
As far as the buyout is concerned, keep in mind that CMA CGM would also have to repay/assume GSL's debt. That's an additional $420MM on top of the equity price. That's a lot to pay for boats that are worth around $350MM (according to the latest valuation). Maybe they think it's cheaper to squeeze down on charters once they have people on the board.
I have a lot of shares in GSL, so I really hope that's not what's going on. I'm hoping current selling pressure is just unhappiness about the interest rate on the bonds.
Interesting. I think the public shareholders of GSL would agree to an 8.00 / share buyout by CMA CGM. So they already own 20.5 mil shares and they can by the rest (27*8) for 216 Million and cancel the charters.
It says that an anonymous source said that Saade indicated he planned to request an expansion of the GSL board by two members (to be appointed by CMA CGM of course) and to oust Michael Gross as chairman at the next shareholder meeting.
Note that CMA CGM has incrementally reduced its stake in GSL recently (down to 43% from 46%). Any thoughts on what is going on? A few possibilities I can think of:
(I) set up the board to approve a buyout of GSL by CMA CGM (in which case, why reduce equity position?);
(ii) get board leverage to renegotiate GSL charters at reduced rates (in which case reducing equity exposure makes sense); or
(iii) business as usual, just with more input from CMA CGM by way of the board members.
What do you guys think? Is there something nefarious going on here? Are GSL shareholders going to get squeezed? For those who think CMA CGM's equity holdings align it's incentives with ours, keep in mind that GSL's revenue is entirely derived from bleeding CMA CGM at above market rates.
If Saade took control and tried to get charters renegotiated, would ordinary shareholders have any protections? Any thoughts are appreciated.
I messed up the number- sorry, working on not much sleep this week. Check the Moody's rating release - it specifies that GSL is required to make a tender offer to bondholders of up to $20MM/year based on excess cash flow. So that's $20MM/year more in cash left over than I thought (assuming the bondholders accept the tender offer, which they might not).
yeah but depreciation is a noncash item so using your numbers, free cash flow will be 12.5m per quarter... original question was around the impact to cash flow of this refi, and I think the answer is that the refi is cash flow positive to the tune of $16m/yr (ballpark).
No your math is off. There will be no required amortization of debt now. Int exp is around 20 million now but will go to 42 million if they keep this debt. Debt was around 360 mil before this so they will prob have around 50 million to play around with besides existing cash of 25 million. Now they have:
qtr revenues : 36 mil
op ex: 11.5 mil
depreciation: 10 mil
g & A: 1.5
operating pro 13 mil - 10.5 int exp = 2.5 qtrly income.
Doesn't make sense but hopefully they can refi this brutal debt.