CSAV seeks strategic partner amid cash injection
Liner carrier CSAV said Friday its board of directors has agreed to inject $1.2 billion into the company amid plans to split CSAV's liner shipping business from a subsidiary unit that focuses on marine services and find a 'strategic partner for the container shipping business.'
Chile-based CSAV, the world's 10th-biggest liner carrier by fleet size, has struggled to emulate its strong 2010, having retreated from some of the trades it entered in 2010. The carrier recently announced operational tie-ups with Mediterranean Shipping Co. on a handful of trades (including Asia/Africa) and also with CMA CGM on an Asia/West Africa service.
The marine services subsidiary that it intends to spin off, South American Air and Maritime Agencies (SAAM), is involved in a number of businesses, notably ship agency work, operation of tugboats, running container depots and repairing containers, stevedoring (including operation of Florida International Terminal in Port Everglades), bulk terminals, running dry and refrigerated warehouses.
The cash injection, according to CSAV, is intended to 'to strengthen its financial, operational and commercial position in the medium to long term.' Meanwhile, CSAV said the goal of splitting SAAM away from the liner shipping business is to 'propel its growth.'
The company said the latest cash injection 'complements the investment plan launched in 2010, which was fully subscribed in its first phase in July 2011 raising a total of $500 million, to reduce results volatility and improve competitiveness by increasing the owned fleet proportion matching average industry level.'
American Shipper reported on the $500 million injection in March.
The line operates the smallest owned fleet, by far, of any of the world's top 20 container lines. Only 53,632 TEUs of the 463,187 TEUs (11.6 percent) it operates are owned, according to maritime consultant Alphaliner. What's more, CSAV has one of the smallest order books among the top 20 lines.
The Chilean carrier expanded quickly in late 2009 and the first half of 2010 via chartered vessels, rising to become the eighth-largest carrier. It has since retrenched on capacity and services.
Francis Phillips, chief analyst for American Shipper affiliate ComPair Data, has noted CSAV's vulnerability of late.
'It attracts keen attention to find that of all the major carriers MSC should be the one providing an across-the-board helping hand to CSAV of Chile,' he wrote in a July 28 commentary. 'It appears a very one-sided deal given MSC's global strength and CSAV's retreating stance in a waning global market. This year CSAV has already unilaterally shut down its standalone Asia/Med Mare Nostrum loop and the transpacific ASIAM service. It now only remains in the Asia/Europe and Asia/Black Sea trades through a slot swap deal with Evergreen.
'The European majors have shown themselves to be patient over the years, but it is obvious they would all stand to gain from CSAV's departure from the global scene and as a center of independent liner management expertise in Latin America.'
CSAV, meanwhile, said the move to spin off SAAM and find a strategic partner for the liner unit would protect its viability and that the cash injection is a sign of confidence in the company's future.
'This plan is consistent with the measures that the company has already been implementing to reduce exposure, improve cost structure and risk diversification.' ' Eric Johnson