CMA CGM’s bonds have taken a hit that analysts attributed to uncertainty caused by the coronavirus.

The impact means the French carrier may experience difficulty in refinancing debt this year, making its plans to raise liquidity all the more important.

CMA CGM’s senior unsecured bonds due in January 2021 have slumped by about €0.10 ($0.11) on the euro over the past month to €0.88, according to ICE data on Wednesday.

Of this drop, €0.04 on the euro has been lost this week.

Yield driven up

This has driven up the yield for the €725m bond issue to around 24%, which means that a refinancing would be prohibitive even if markets were receptive. The coupon rate is 7.75%.

Its January 2021 notes have fallen steadily since 17 January, when pricing peaked at €1.012, trading with a yield of just over 7%.

“CMA CGM’s bond yields have increased on the back of the spread of the coronavirus,” said Rob Sommers, a distressed debt analyst who covers CMA CGM for Reorg, a financial intelligence provider.

“In the short term, a refinancing of the company’s 2021 notes is unlikely.

"However, it is no doubt prepared to quickly take advantage of even a brief change in market sentiment and issue new debt before any such window closes.”

The Marseilles-based group has $1.7bn in bank debt due to mature by 30 September, alongside SGD 280m ($200m) in bonds due the same month, according to data as of 30 September 2019.

It also has an additional SGD 300m of notes due in June next year.

Focus on refinancing plan

CMA CGM told TradeWinds that it is focusing on the refinancing plan it announced in November and will release details in March, when its 2019 financial results are published.

“Leveraging its strong operating model, the CMA CGM group is focusing on the delivery of its efficiency and cost-reduction plan, which will enable it to further improve its margins,” the company said on Tuesday.

The plan aims to strengthen the group’s liquidity by more than $2bn by mid-2020, extend its maturities and reduce its debt by over $900m.

The carrier plans to generate $968m by selling 10 container terminals and raise $860m from a vessel sale-and-leaseback programme.

Downgraded outlook

Credit ratings agency Moody’s downgraded its outlook for CMA CGM from stable to negative on 4 February.

Moody's said this is because the carrier's plan to enhance its liquidity could be at risk, should the container market weaken further.

"Although cash flow generation should be stronger in 2020 compared to 2019, the company faces sizeable debt maturities during the next 18 months that could be a drag on liquidity should refinancing prove to be difficult," Moody's said in its credit opinion, published 4 February.

Moody's long-term rating for the carrier was downgraded from a B1 to a B2 rating in September.

Factories in China have been forced to close for a prolonged period to mitigate spread of the virus, which has resulted in cancelled containership sailings.

Last week, Danish carrier Maersk said it had been forced to cancel 50 sailings this year.

Alphaliner has estimated that 46% of scheduled departures on the Asia to North Europe route were dropped between mid-January and mid-February and expects more in the coming weeks.