Peter T. Leach | May 12, 2010 1:41PM EDT
CMA CGM, building on a $270 million profit the carrier showed in the first quarter, expects to earn $1.8 billion on its operations for the year as a whole, according to Philippe Soulie, CEO of the French carrier.
Soulie said in an interview Tuesday that cost cuts and a strong recovery in demand and pricing will fuel the strong improvement in earnings before taxes, depreciation and amortization following a $1.4 billion loss last year.
The carrier, the world’s third-largest by capacity, is close to an agreement with outside investors who may take a minority position in the company. “We are making good progress with investors,” said Rodolphe Saade, CMA CGM’s co-executive officer, who was also in the Tuesday interview. He said he hopes to finalize the agreements “in the weeks to come.”
Potential investors include Qatar's sovereign fund, Butler Capital Partners, Apollo, a Lebanese group and industrial group Louis Dreyfus in association with a Goldman Sachs investment fund.
Saade said that as part of any deal it strikes with outside investors, CMA CGM may issue $500 million in convertible bonds that it would sell them and which they could then convert into stock in the company.
CMA CGM has also been talking with FSI, the Fonds Strategique d’Investissement, the sovereign wealth fund established by French President Nicholas Sarkozy, which is half owned by Caisse des Deports, a public financial institution, and half by the government. But FSI will only invest in the carrier if one of the other private investors takes the first step.
"The French strategic investment fund will be present whatever the structure of the deal; it is compatible with all the investors," Soulie said. “I think we will end up with two investors -- one plus the strategic investment fund."
The company is still in discussions with its 75 creditor banks about restructuring the $5.4 billion in long-term loans it borrowed before the Great Recession to finance its new ship orders. The company has asked for a moratorium of 18 months on repayment of principal, but this could change as the carrier’s operating results improve.
“We have been in discussion for nine months or so, but the situation has completely changed from the time we started the discussion with them in the midst of 2009, which was a difficult year for us,” said Soulie.
“Now in May 2010, with a first quarter profit behind us, things are entirely different,” he said. “There was an element of urgency eight or nine months ago, which has disappeared because the company has turned to being cash-positive from the month of January.”
-- Contact Peter T. Leach at pleach@joc.com.