CMA CGM SA bonds are firming in the secondary market today amid active trading, following an upgrade to its ratings by S&P Global Ratings.
The borrower's 7.5% notes due 2026 traded at 108.2 early in today's session (London time), rose to 108.60 by mid-morning, and are now quoted at 109/109.25, according to data from Refinitiv Eikon. Its 5.25% notes due 2025 changed hands at 101.30 in early trading, and were up at 101.84 by late morning.
On the upgrade to the company's long-term issuer credit rating to BB- from B+, and its unsecured debt to B from B-, S&P Global Ratings said: “Stronger-than-expected cash flows, largely deployed to reduce adjusted debt, have helped to increase the cushion under the improved credit measures for future fluctuations in EBITDA and unforeseen operational setbacks.”
S&P now expects the France-based container line operator to outperform its October 2020 base-case, adding that “EBITDA in 2021 is likely to exceed the strong level achieved in 2020 because of record-high freight rates, recovering global trade, and our expectation of the container-shipping industry's continued tight capacity management.”
The outlook is stable, with the ratings agency noting that it could raise the rating if CMA CGM improved and sustained its adjusted FFO-to-debt ratio above 25%, for example by consistently applying excess cash flows for debt reduction, while also being convinced that management would stick to a financial policy that would constrain financial leverage at the current lowered levels or below.
S&P also comments that it could lower the rating if CMA CGM's EBITDA plunged below $5 billion — for example, if trade volumes were much lower than S&P anticipates, and the industry's measures to adjust capacity to sluggish demand were ineffective.
In May 2020, CMA signed a €1.05 billion, 70% state-guaranteed syndicated loan provided by BNP Paribas, HSBC and Societe Generale, according to a statement. The news sent the shipper's bonds higher, with its 5.25% notes due 2025 rising by roughly 3 points into a 69.75/72.25 market at the time.
CMA CGM is the fourth-largest provider of container-shipping services in the world.