Fantastic news! That is EVERYTHING to GSL. As repeated to death on this site, GSL is a play on CMA CGM's survival. CMA CGM survives, GSL is trading at multiples of where it is now. If CMA fails, game over. This news is confirmation that, while stressful difficult times are not over, CMA CGM survives.
That being said this downturn could actually BENEFIT GSL in that there will be increased scrapping and failures of liner companies/owners and significantly less newbuild ordering than had there been no downturn. Thus when the sector re-emerges, rates should be better than they would have been giving GSL the chance at better lease renewals.
The two Ville ships might have to be put on short term renewals, but then there will be an upturn in the shipping cycle. GSL can then foreseably charge increased rates for long term charters. Combine that with, perhaps, savings on some of the swaps, and this could be generating more cash than we even expected.
yes, and reports of Hanjin following CMA's rate increase and MISC exiting containers altogether.
As an aside, I find it ironic that the EU is fixated on proving anti-trust cooperation between the liners when they've been bled by rate wars in the last few years. EU also imposing emissions tax...it's as if they want to kill their own industry. Meanwhile the Chinese subsidize yards and owners. EU seems to be the poster-child for shooting itself in the face.
On an unrelated note, I found it curious this article wasn't posted here before, which states Maersk will be cutting capacity in the Europe-Asia routes immediately and might consider additional cuts next year:
Contrast this with the CEOs comments two weeks ago, in which he stated ships wouldn't be idled and prices would be dropped instead (destroying the weak carriers essentially):
CMA CGM results are out, but personally I will not post here due to confidentiality issues. Broadly speaking, however, I was quite pleased and think they weathered the tough environment very well. YTD, including asset disposals, they are break-even with positive cash flow from operations.
I just emailed the IR at CMA CGM and they say it will be released soon (so may still be today). I did not receive the subsequent press release about the earnings press release being delayed to tomorrow (12/1), but edge may be right. Will post if they release today.
LONDON, Nov 30, 2011 (GlobeNewswire via COMTEX) -- Global Ship Lease, Inc. GSL -3.51% , a containership charter owner, announced that it had today entered into an agreement with its lenders to waive until November 30, 2012 the requirement under its credit facility to conduct loan-to-value tests.
The credit facility requires that loan-to-value, which is the ratio of outstanding borrowings under the credit facility to the aggregate charter-free market value of the secured vessels, cannot exceed 75%. Due to the current downturn in the containership market and consequent impact on vessel values, the Company previously anticipated that loan-to-value would exceed 75% at the scheduled test date of November 30, 2011. Accordingly, the Company engaged its lenders to waive the loan-to-value requirement.
Under the terms of the agreement, the loan-to-value test has been waived until the test due on November 30, 2012. The credit facility agreement provides that during the period of such a waiver:
-- Amounts borrowed under the credit facility will bear interest at LIBOR
plus a fixed interest margin of 3.50%.
-- The Company will be unable to pay dividends to common shareholders.
-- Cash flow will be used to prepay borrowings under the credit facility;
the amount of cash in excess of $20 million as at November 30, 2011 (and
quarterly thereafter) will be the amount of the prepayment due December
31, 2011(and quarterly thereafter).
If loan-to-value as of November 30, 2012 is not greater than 75%, as provided in the credit facility agreement, the fixed interest margin will become 3.00% (or 2.50% if loan-to-value is no more than 65%), dividends on common shares can be paid and the prepayment of borrowings will become fixed at $10 million per quarter.
Ian Webber, Chief Executive Officer of Global Ship Lease, stated, "Global Ship Lease's long-term time charter contracts generate stable revenues and predictable cash flows, which are largely unaffected by the loan-to-value ratio. The strength of our business model has allowed us to suspend the testing of loan-to-value at a time when containership values continue to experience declines. The waiver insulates the Company, until November 30, 2012, from the volatility of asset values. Further, we are aggressively paying down debt, thus strengthening our balance sheet for the long-term benefit of shareholders. Since August 2009, we have reduced our debt by $100.1 million."
Mr. Webber concluded, "In a challenging global economic environment, our time charters continue to perform as expected. Our fleet of 17 vessels has an average remaining time charter duration of over eight years on a weighted basis, representing total contracted revenue of $1.2 billion. Only two of our 17 charters are due for renewal in the next five years. We maintain a positive long-term outlook on our future business prospects and intend to continue to focus on preserving the Company's financial strength for the long-term benefit of Global Ship Lease and its shareholders."
Unable to pay dividends until Nov.30,2012.Here we go again.Now let`s all try to figure out what amount that dividend will be. For most of last year the consensus was .15 a quarter and then was dropped to .07 as we approached May 2011.Then we were hit with the no dividend announcement when GSL was allowed to pay a dividend.Is anyone willing to hang around till the end of next year?
Looks like we get to keep $20 million in cash. Maybe we can buy a ship at the bottom. Remember that the Lion's Gate Bridge, a ship about the size and age of the Berlioz was sold for $20 million at the bottom of the last downturn....