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CMA CGM bonds tumble to near-record lows on earnings collapse

[LONDON] CMA CGM SA bonds plunged to near-record lows after the container-shipping line's quarterly profit collapsed on lower freight rates.

The company's 725 million-euro (S$1.1 billion) bonds due January 2021 fell 4 cents on the euro to 74 cents, according to data compiled by Bloomberg.

Fourth-quarter earnings before interest, tax, depreciation and amortisation tumbled 72 per cent to US$115.7 million, said Arndt Muthreich, an analyst at Stifel Nicolaus in London. He derived the numbers from full-year results reported by Marseille-based CMA CGM late yesterday.

The world's third-largest container line is adding debt to support the pending S$3.38 billion acquisition of Singapore-based Neptune Orient Lines Ltd, even as a prolonged slump in shipping rates weighs on earnings.

Market voices on:

Container lines are struggling to raise fees after a boom in Chinese shipbuilding led to a capacity glut.

"The outlook remains bleak, at least until this summer, while the group is wrapping up the biggest acquisition in its history," said Delphine Chauvin, an analyst at Oddo & Cie in Paris.

"Given continued pressure on freight rates, we anticipated a sharp fall in results."

The shipping line didn't reply to an e-mail request for comment on the earnings.

The company plans to pay for the purchase of Neptune Orient through cash and financing from a group of banks, according to a Dec 7 statement. It intends to raise more than a US$1 billion through steps including cost-cuts and asset sales within two years of closing the deal.

The shipping line's 300 million euros of notes due December 2018 lost 2 cents to 87 cents.

Annual Ebitda fell 2.8 per cent to US$1.3 billion, according to the earnings statement. Revenue dropped 6.4 per cent decline to US$15.7 billion, even with a 6.3 per cent increase in container volumes.