CMA CGM admits it underestimated box shipping crisis.
TROUBLED containership owner CMA CGM has acknowledged it completely underestimated the duration and depth of the container shipping crisis, which has left the French line battling for survival.
Now undergoing a painful restructuring of its $5.6bn debt, CMA CGM told its banks in late 2008 that undercutting practices by rivals would not last beyond the first part of 2009.
?We were wrong,? chief financial officer Jean-Yves Schapiro admitted today. ?The industry continued to go down ? and down and down.?
Instead, undercutting lasted until the last half of 2009, and by then, bleeding cash and pummelled by ?a deep, profound crisis?, the overleveraged CMA CGM was unable to raise final instalment payments as the first vessels in its 30-plus boxship orderbook for its own account were delivered from one Chinese and several South Korean yards.
Mr Schapiro gave a rare insight into the company"s problems and restructuring negotiations yesterday at a Hamburg shipping conference. He admitted that difficulties stemmed from easy access to cheap money, overordering mistakes and an industry-wide chase for freight that saw boxes carried ?for the cost of a cinema ticket?.
Appearing at a seminar discussion at Marine Money"s ship finance forum alongside Greek shipping magnate George Economou, Mr Schapiro also attacked Chinese, German and South Korean government support for their national container lines or shipowners.
He hit out at ?greedy? private equity companies circling CMA CGM in December as the world"s third-largest line sought fresh investors to stave off insolvency, naming them as Metaxis, Texas Pacific Co and Apple.
?They were interested in the industry and, seeing that the value of the assets was dropping, thought it was a wonderful opportunity to acquire at very good prices assets that definitely would be worth something if not today then tomorrow.
?Why did they not buy, at least not from CMA CGM? Because they were too greedy. They made offers that were unacceptable.?
Mr Schapiro said the French government would do what it could to stop the family-owned line collapsing but could not provide money or guarantees.
?The only thing it can do is to talk to our bankers to explain how wonderful CMA CGM is ? and they seem to be convinced.? He also said the company was helping a French private equity fund to see that investment in CMA CGM was a ?wonderful opportunity?.
?Where do you see state support comparable to what our competitors were given?? he said.
CMA CGM has made few public comments about its battle, which saw it lose $500m in the first half of 2009.
Last month, George Economou"s Cardiff Marine paid $41m for a 6,500 teu boxship from Hanjin Heavy Industries that CMA CGM had ordered for more than $100m but on which it could not finance the final payments.
?There are opportunities [in our industry] and the winner is George Economou. He took one of our vessels and made a wonderful deal,? Mr Schapiro told the audience, to applause.
Mr Schapiro also signalled that banks were getting more cynical and looking to ?unplug? debtors ?that they think, rightly or wrongly, have no future? and ?that for some owners it may be difficult?.
But he did not elaborate specifically on CMA CGM"s own complex talks with 60-plus banks, which earlier this month brought the line $80m of a promised $500m bridging facility.
With more than 30 ships on order, including super-post-panamax vessels, Mr Schapiro said there had ?been a little movement from yards? on negotiations to delay or cancel orders, while Mr Economou counselled the line and others who could not afford their contracted ships to be humble when negotiating.
Mr Schapiro recalled the halcyon days, saying: ?The yards were experiencing several years when orders were pouring in, prices were going up, owners were lining up to get an order and brokers were making fortunes.?
He saved his strongest criticism for Chinese, South Korean and German state support for their own struggling lines, which had created an uneven playing field.
?I am the one who is questioned French support, but look at China. They are losing more money per box then we are. But they have the support of the Bank of China with a line of credit of $2bn,? he said.
It was a pity Marseilles, where the line is based and employs 7,000 staff, was not as wealthy as Hamburg, he said, referring to the government support for German line Hapag-Lloyd in mid-2009.