Yang Ming shares set to resume trading tomorrow

5/4/2017

Shares in Taiwanese container line Yang Ming will resume trading tomorrow on the Taiwan Stock Exchange at more than twice their value before their suspension two weeks ago, the company has said, thanks to progress in its financial restructuring.

In a customer advisory note earlier this week, Yang Ming Marine Transport Corp. said: “On May 4 (local Taiwan time), Yang Ming’s shares will resume trading on the Taiwan Stock Exchange in accordance with Yang Ming’s capital reduction (recapitalization) plan. It is expected that Yang Ming's shares will trade at a value exceeding twice its value before the suspension.

“Additionally, Yang Ming is expected to complete the second stage of its recapitalization by June 2017. At that time, Yang Ming will be announcing the identities of the investors who participated in this round of issuance, as well as the details of this offering.”

As reported on 21 April in Lloyd’s Loading List, Yang Ming on 20 April suspended trading in its stocks on the Taiwanese stock exchange until 4 May, to enable it to reduce its equity capital by more than 50%. The drastic step followed years of losses and the January announcement that the Taiwanese line was pursuing a number of strategies including seeking government and private investment in a bid to recapitalise after losing more than $650 million in less than two years.

Following the suspension of Yang Ming share trading two weeks ago, container shipping analyst Drewry had told Lloyd’s Loading List that Yang Ming’s stock trading suspension was unlikely to lead to a repeat of last year’s Hanjin Shipping bankruptcy, which left global supply chains in disarray.

The analyst said it did not anticipate any knock-on effects in terms of services, in part because it expected the Taiwanese government to intervene and bail out Yang Ming, if necessary. Drewry had also pointed to the decision by Yang Ming and its fellow partners in the new container shipping consortium The Alliance (Hapag-Lloyd, K Line, MOL, NYK and Yang Ming) to create an independent trust fund to safeguard cargo in the event of any member lines going the same way as Hanjin.

Yang Ming released few details of the restructuring sought during its share suspension, but the rationale behind its capital reduction was to make up for its heavy previous losses. In 2016, Yang Ming lost $492 million, a result Lars Jensen, chief executive and partner at SeaIntelligence Consulting, described as “very negative”. By contrast, he pointed out that Maersk Line lost $384m and CMA CGM lost $452m over the same period but “CMA CGM is almost four times larger than Yang Ming in terms of capacity and Maersk Line is almost six times larger”.

Jensen told Lloyd’s Loading List last month that Yang Ming’s stock trading suspension “appears to be a move to secure some room to manoeuvre while restructuring the finances”. He said previous indications from the Taiwanese government strongly suggested they would not let one of their main lines falter.

Earlier this year, Drewry declared Yang Ming the most leveraged container operator in its coverage universe after Yang Ming had issued an advisory reiterating its financial recovery plan backed by a government $1.9 billion assistance programme, and its intention to raise $54 million through a privately placed rights issue with six Taiwanese investors, including the state-owned National Development Fund of Taiwan, thereby increasing the government’s share from 33% to around 37%.

“The move was aided by cost optimisation measures including a drastic cut in wages; it slashed the pay of its senior executives by 50% and the salary of its line managers by up to 30%,” said a Drewry Maritime Financial Research note issued last month.

However, despite taking such drastic steps, Yang Ming’s balance sheet remained “worrisome” at the end of FY16, according to Drewry, which said subsequent stock price gains had not reflected the company’s true fundamentals. 

Drewry said that in its view, and despite the current capital reduction and the government’s bailout package of US$1.9 billion, which was targeted towards rescuing the entire local industry and not just YMM, the latest measures would likely be insufficient unless YMM could raise more equity.

Earlier this week, Lloyd’s List reported that one of Yang Ming’s major suppliers, the containership owner Seaspan, expressed confidence in its major customer Yang Ming, despite the suspension of Yang Ming’s shares to raise additional capital. New York-listed Seaspan has a series of 14,000 teu ships on long-term charter to Yang Ming, nine of which are in service, and with the final one due to be delivered this year.

The Taiwanese line is committed to pay $46,800 per day for 10 years, with an option for another two years. The carrier has also taken a 10,000 teu ship formerly on charter to Hanjin Shipping, and now called Seaspan Yangtze, for a short period.

Yang Ming is one of the smallest global carriers and the subject of considerable speculation in recent months about its future.

In a conference call following publication of Seaspan’s first-quarter results a day earlier, chief financial officer David Spivak said the company was “quite comfortable” with Yang Ming and its other counterparties. He said all customers were up to date with charter fees, and the fact that accounts receivable were down showed that lines were paying on time

Seaspan chief executive Gerry Wang expressed confidence that the first quarter was a turning point for container shipping after one of the worst downturns it had ever experienced, with both charter and freight rates rebounding.