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Global Ship Lease, Inc. Message Board

  • lightforth lightforth Oct 28, 2008 2:12 PM Flag


    Shareholders should study the business of CMA CGM, the main counterparty of GSL.

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    • Sorry -- last link did not post. Just google "CMA CGM subordinated Fitch" and you'll get a press release on Fitch's downgrade.

    • As I posted over at the Seaspan board:

      The main risk for GSL is counterparty. CMA CGM is difficult to get info on but I do know this -- they have plenty of assets around the world including ownership of several ports. Presumably they would have some options before bankruptcy if that was an issue.

      Here is a credit rating press release on CMA CGM from Fitch (downgraded to credit watch negative):

      According to the release, CMA CGM has $800m undrawn on a credit facility and $1.8b of cash. Net Debt to EBITDAR is 2.5x on the high end. Compare that with typical LBOs that go off at 5-6x.

      Remember, it's the senior UNSECURED debt that's rated BBB-. Financing might be obtained at cheaper rates with collateral.

      According to this (dated) Fitch document, CUMULATIVE historic default rates on a BBB rated debt over a 5 year period was 5.75% on average (or just over 1% per year):

      Thus, I'd say, the odds are 90% or greater that CMA CGM will NOT default on its senior UNSECURED debt.

      Lastly, in a worst case scenario they could potentially sell/scrap ships if it came to desparately needing cash.

      Given that CMA CGM is privately held, they may not have the same incentive to let the company default as a publicly traded CEO with little ownership might have.

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