Terminal Link to acquire some of CMA CGM’s port assets - Cargo volumes expected to increase at Kingston Freeport
Terminal Link, the joint venture entity with CMA CGM which won the Jamaican government’s 30-year concession agreement to operate the Kingston Container Terminal, will be acquiring some of the assets the France-based shipping company is divesting to raise US$2 billion.
Divestment of the assets could result in more business for Jamaica in that there could be an increase in cargo volumes at Kingston Freeport Terminal.
The CMA CGM group has embarked on a programme to raise the money to finance its takeover of CEVA Logistics, the Switzerland-based global logistics and supply chain company which it bought earlier this year.
The shipping company also aims to use some of the funds to extend the group’s debt maturities and pay down US$900 million of its US$11 billion debt.
CMA CGM, the world’s fourth-largest container shipping company, bought the loss making CEVA to expand in land logistics.
It is seeking to raise US$860 million from sale and leaseback of eight vessels. Arrangements for US$650 million of that amount have already been completed and the remaining US$210 million is scheduled to close in the coming weeks, according to CMA CGM’s financials for the nine and three month periods ending September 2019.
CMA CGM said the proceeds are primarily used to pay down the bridge loan contracted to acquire CEVA Logistics, with the balance now standing at less than US$200 million.
Under an agreement with China Merchants Port Holding to help finance the CEVA deal, CMA CGM will also sell investment stakes in 10 port terminals for US$968 million to Terminal Link, a joint venture in which it holds a 51 per cent stake. The other 49 per cent is owned by China Merchants Port Holdings, a Chinese state-owned enterprise with strategic port interests worldwide.
Kingston Freeport is the vehicle being used by the Terminal Link-CMA CGM consortium to operate the Kingston Container Terminal under a deal signed with the Port Authority of Jamaica in April 2015 to finance, expand, operate and maintain the port.
The Terminal Link deal with respect to CEVA is expected to be finalised in the first half of 2020 and will be partly financed by a US$468 million capital increase by the joint venture and by an eight year loan from China Merchants that would be converted into another capital increase after eight years, CMA CGM said in its financials.
The ownership of Terminal Link, in which CMA CGM holds a 51 per cent stake and China Merchants has 49 per cent, will not change.
The transaction is subject to antitrust and other regulatory approvals.
CMA CGM also plans to raise US$93 million from selling a logistics platform in India and another US$100 million from a securitisation programme relating to customer receivables at CEVA.
For its third quarter, CMA CGM reported net profit of US$45.4 million, reversing losses posted in the first half.
Contacted for comments, Chief Executive Officer of Kingston Freeport Terminal, Johannes de Jong said “it would not be appropriate for KFTL’s management to comment prematurely in the media as the CMA CGM top executives are in contact with priority stakeholders for each terminal.”
He also pointed out that the transaction is still subject to the completion of regulatory processes.
He said the shipping company has clearly stated that the intended transaction is a minority shareholding and does not affect the daily management of terminals.
However, de Jong said “they will ensure that any clarification and reassurances are communicated, including in Jamaica.”
He added that “in general terms, I do believe the future will be better as the intended new minority shareholders will not just bring a financial injection but have the ability to add/complement in areas of volume growth and terminal expertise.”
President and Chief Executive Officer of the Port Authority of Jamaica, Professor Gordon Shirley said he was not aware of any direct implication of the CMA CGM decision for the concession agreement with KFTL.
“Our information is that there will be no change in control with respect to the ownership structure of KFTL. We also confirm that there are no changes in the provisions of the Concession Agreement,” he said.
As regards any expected impact on Jamaica’s port operations, Professor Shirley said “we anticipate that cargo volumes to the Port should increase with the new arrangement.”