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Global Ship Lease, Inc. Message Board

  • smcapmachine smcapmachine Feb 13, 2013 7:37 PM Flag

    Euro Pacific Capital Raises Price Target

    Cash Flow Visibility Enhanced into CMA CGM
    Financial Restructuring; Raising TP
    CMA CGM announced completion of its financial restructuring. Yesterday, CMA
    CGM announced the completion of its new bank agreement in addition to the signing
    of a binding agreement with the French Fonds Stratégique (FSI) and the closing of its
    existing subscription by the Yildirim Group (Yildirim). With the new bank agreement,
    CMA CGM enters into a new senior term loan totaling EUR280M with a maturity of at
    least three years. Additionally, CMA CGM will be receiving equity injections of
    US$150M from FSI and US$100M from Yildirim in exchange for 6% and 4% in CMA
    CGM equity, respectively, via convertible debt. As such, we expect CMA CGM to
    have a more flexible balance sheet, greatly supporting its business viability, and more
    specifically enhancing its ability to honor its charter agreements with GSL and
    potentially signing new contracts, under a still challenging container liner market.
    GSL’s cash flow visibility enhanced via CMA CGM capital restructuring . With
    the restructuring of CMA CGM’s balance sheet, GSL’s cash flow visibility is materially
    enhanced as its exposure from CMA CGM of potentially not honoring its charter
    payments on time is significantly reduced, in our opinion. Recall that 100% of GSL’s
    charter contracts depend on the financial ability of CMA CGM to make good on its
    charter payments without material delays over the course of the business cycle. With
    the new capital injection enhancing CMA CGM’s financial flexibility, we believe this
    also raises the likelihood for GSL to further de-lever its balance sheet beyond its debt
    amortization schedule.
    Reduced counterparty exposure raises likelihood of dividend-paying scenario.
    With the reduction of GSL’s counterparty exposure from CMA CGM and its LTV test
    waived until December C14, we believe GSL is in a better position now to potentially
    reinstate dividends by early C14 under a scenario of relatively stable S&P prices
    through C13 and a similar quarterly debt repayment run rate. A capital restructuring
    scenario could accelerate the potential for dividend reinstatement sooner than our
    baseline forecast of early C14 assuming GSL manages to de-levers its balance sheet
    beyond its debt amortization schedule. We would note that during 3Q, management
    alluded to their strong desire to reinstate dividends provided GSL is firmly in
    compliance with its LTV covenant before looking at organic expansion via vessel
    We are maintaining our C13-14 estimates. For C13, we are maintaining our EPS
    estimate of $0.51 off a revenue decline in the mid single-digits, EBITDA margin of
    +64%, and interest savings of roughly $6.5M. For C14, we are also maintaining our
    EPS forecast of $0.56 based on very modest revenue growth, an EBITDA margin of
    +64% and from higher operating days. We expect GSL to partly offset the revenue
    decline in C13 due to a lower average daily charter revenue profile from the three
    fewer planned drydockings versus C12 and from the interest savings off the
    expiration of the interest rate swaps.
    We are raising our TP; BUY rating maintained. We are raising our target price to
    $4.50 (from $4.00) while reiterating our BUY rating recommendation into reduced
    counterparty exposure and increased likelihood of dividend reinstatement in our
    forecast period. Our higher target multiple of 7.1x on our C14 EBITDA estimate of
    $93.3M accounts for GLS’s reduced risk profile and upside potential from a
    sooner-than-expected dividend reinstatement versus our baseline forecast.

5.30+0.04(+0.76%)Sep 2 4:02 PMEDT