CSAV evades bankruptcy with ship owner cash infusion
Chilean liner carrier CSAV said Thursday it has secured an agreement with German ship owners to inject capital in the struggling carrier, triggering a deal that will see CSAV shareholders swell the line's cash coffers with two sets of capital infusions of their own.
Reports out of Chile and Europe in recent months have indicated the carrier is on the brink of bankruptcy due to slumping revenues and an ambitious but costly fleet expansion program. CSAV is the world’s 16th-largest carrier with 281,796 TEUs of fleet capacity, according to AXS-Alphaliner. But the line has another 169,668 TEUs of capacity on order and has been feverishly trying to delay or cancel orders.
In a statement Thursday, Juan Antonio Alvarez, chief executive of CSAV, said the line could eventually receive $710 million from existing shareholders and Hamburg-based ship owners. Industry press reports this week suggested the ship owners had been offered shares of the Chilean carrier in return for lowering charter rates to ease CSAV's financial outflow.
'We also expect other ship owners to cooperate but will be dealt (with) separately,' Alvarez said. 'The program considers an initial capital increase for $130 million which is underway. Existing shareholders have expressed their willingness and commitment to subscribe and we expect to successfully conclude this first capital increase in June. Afterwards, a second capital increase for $220 million will take place and ship owners coordinated in Hamburg have committed their participation to guarantee a 100 percent subscription of a third capital increase for $360 million.'
Earlier this year, CSAV sought the help of German ship financing house HSH Nordbank to help find investors willing to shore up the carrier's struggling finances.
'It has been a very challenging task during the present economic environment to put in place the described program, particularly considering the multiple parties and interests involved,' Alvarez said.
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As the global economy wreaked havoc on container shipping volumes and rates in the last eight months, CSAV also found itself isolated on core services between Europe and South America, as reported by American Shipper earlier this year.
The carrier's economic situation was complicated by its vessel order program, which includes orders for 20 containerships, four of which were 12,600 TEUs in capacity. CSAV is also heavily dependent on long-term charters, with only 12.4 percent of its fleet capacity owned, according to AXS-Alphaliner.
Alvarez was effusive in his praise of all the parties involved in the deal, suggesting that the carrier was close to the point of no return.
In April, CSAV met with charterers in Hamburg to discuss lowering charter rates to keep the carrier afloat. HSH negotiated the deal with a diverse base of ship owners, all of whom had an interest in seeing CSAV stay solvent to keep their charters alive and prevent those vessels from flooding a charter market already flush with excess capacity, according to a report this week in Lloyd's List.
'We would like to publicly express our gratitude to the ship owners that are part of this plan, who are giving us a crucial support and a vote of confidence in CSAV and its future that we deeply appreciate; and to the banks financing ship owners and CSAV, without their support this effort was just not possible,' Alvarez said.
'It is often said that severe difficulties either kill you or strengthen you. CSAV has experienced difficulties and after this process will no doubt be in the latter case. We are still far from achieving our goal, but we have taken a gigantic step forward to get closer to it. In times when a lot is said about partnership and cooperation, sometimes little is done, but in this case, all stakeholders have demonstrated that it is necessary and possible to make it real. CSAV is now financially much better prepared for this complex period, but most important its spirit has been strengthened and will enable us to successfully face future.' ' Eric Johnson