The corporate family rating of French shipping major CMA CGM has been affirmed at B1, the probability of default rating at B1-PD and the rating of CMA CGM’s senior unsecured notes at B3, Moody’s rating agency said.
Moody’s further assigned a B3 instrument rating to the proposed EUR 300 million senior unsecured notes due 2025.
The rating outlook has been revised to positive from stable.
“Our decision to revise the rating outlook to positive follows CMA CGM’s ability to capitalize quickly and successfully on the recovery in the container market in particular in the second quarter of 2017 as evidenced by its industry-leading EBIT margin of 8.9% as compared to the next most profitable player at 6.6% (Wan Hai Lines, unrated),” Maria Maslovsky, a Moody’s Vice President — Senior Analyst and the lead analyst for CMA CGM, said.
“In addition, CMA CGM has extended its maturity profile with the EUR 650 million bond offering in June 2017 and will further strengthen its liquidity with the proceeds of the terminal sale expected in the fourth quarter of 2017.”
The assignment of a B3 rating to CMA CGM’s proposed senior unsecured notes due 2025, which is two notches lower than the company’s B1 CFR, reflects not only their pari passu ranking with all other unsecured indebtedness issued by CMA CGM, but also their contractual subordination to the secured debt existing within the group. The proceeds of the offering will be applied to pre-funding secured debt maturities.
Moody’s added that the rating action reflects strengthened performance as a result of “improved industry fundamentals and CMA CGM’s quick and effective response to grow profitability” as measured by EBIT margin which rose to 8.9% in the second quarter of 2017 from negative 2.3% in the same quarter the year earlier.
The strong margin performance was driven by 33.4% increase in volume in the LTM Q2’17 and 17.5% increase in freight rates over the same period. These gains were slightly offset by a 5.4% increase in opex largely owing to a 31.3% rise in the bunker costs.