German carrier Hapag-Lloyd has raised many eyebrows with its intention to list its shares via a partial initial public offering (IPO) on the Frankfurt and Hamburg Stock Exchanges. Namely, the company aims to raise USD 500 million from the IPO, including USD 100 million of new shares for two of its existing shareholders- Kϋhne Maritime and CSAV by the end of this year.
Reacting to the announcement on Tuesday, Moody’s Investors Service (Moody’s) changed to positive from stable the outlook on the B2 corporate family rating (CFR), the B2-PD probability of default rating (PDR) and the Caa1 senior unsecured rating of Hapag-Lloyd AG. Concurrently, Moody’s has affirmed the ratings assigned to the company, including its B2 CFR, B2-PD PDR and Caa1 senior unsecured rating.
“The change in outlook to positive from stable mainly reflects the company’s improved operating performance since the beginning of 2015, driven by the lower bunker fuel price. The change in outlook also reflects structural improvements in its cost structure following a recent acquisition and the implementation of cost optimisation measures. The change in outlook follows the announcement by Hapag-Lloyd of its intention to undertake an IPO and raise $500 million, which Moody’s considers credit positive,” Moody’s said.
On the other hand the move is surprising, especially because it comes amid a freight rates collapse ahead of October holidays causing dismal market conditions, according to shipping analyst Alphaliner.
“Container freight rates from China have fallen sharply ahead of the Golden Week holidays in early October, as carriers’ efforts to raise rates in anticipation of a pre-holiday cargo rush fell flat. The rate collapse bodes poorly for market prospects in the coming months, as the slack season will hamper any further rate increases initiatives,” Alphaliner said.
The Shanghai Containerised Freight Index (SCFI) tumbled by 8.1% last week to reach 572 points, only 4.2% above its all-time low of 549 points, recorded in July this year, the shipping analyst’s data shows. What is more, freight rates look set to fall further in the next two weeks, as cargo volumes will dip in October, when China shuts down for the week-long National Day ’Golden Week’ holidays.
In addition, rate weaknesses was observed across the board, with freight rates close to record lows on several key tradelanes, including the routes from China to Europe, to North America, to South America and to Australia. Rates to the Middle East even reached an all-time low of USD 329/teu last week.
Because of the very weak freight rate environment, Alphaliner said that the overall carrier profitability is expected to take a hit in the second half of this year – even after accounting for the prevailing low bunker costs.