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October 31, 2012 5:22 pm
Hapag-Lloyd has been downgraded by Moody’s, the credit rating agency, amid concerns over the prospects for its balance sheet as the global shipping industry struggles with a capacity glut.
The German container shipping line, majority-owned by the Albert Ballin consortium headed by the company’s home city of Hamburg, was facing falling freight rates because of weakening demand, said Moody’s. Profits this year were likely to be “materially lower” than anticipated, according to the agency.
The economic downturn that is depressing freight rates is being exacerbated by oversupply in container shipping and, although companies are trying to cut capacity, ships ordered in better times will add to the global fleet next year. Freight rates “might not fully recover for a prolonged period of time” while fuel costs could also stay high, Moody’s said.
The rating agency previously had Hapag-Lloyd at a speculative, or junk, B1 rating and had said it could downgrade the company if it failed to lower its leverage or improve its ability to cover interest payments.
“Today’s rating action reflects our view that, over the next 12-18 months, Hapag-Lloyd is unlikely to achieve a consolidated financial profile that would be commensurate with its B1 rating,” Moody’s said.
However, Hapag-Lloyd had a stable financial position and flexibility from chartering, rather than owning, most of its fleet while it also had shareholder support, Moody’s said. Moody’s also downgraded the rating on €480m and $250m of unsecured notes maturing in 2015 and 2017.
Hapag-Lloyd was sold to Albert Ballin by Tui, the travel group, which retains a 22 per cent stake.
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