Comment / Analysis: DSV & CMA CGM ahead – pick the jockey dumped by the horse

10/07/2020

Gone are days like at the end of the last summer when too many, me included, were slightly worried about the financial health of French carrier CMA CGM whose rally on the bond market of late has been one of the most remarkable, let alone impressive and memorable, in recent times.

It was almost as good as DSV Panalpina’s, in fact, on the equity markets.

Is that right?

The CMA CGM performance reads: +75% or so from the mid-March lows, which isn’t far off ...

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aa d
July 11, 2020 at 2:25 am
Nice Analysis Thk you.
I have no competence on Panalpina.
On CMA , the 2021 bond recent movement is over. It trades at 100 because the company has already more than enough cash to reimburse it even without issuing a bond to replace it. It has actually started doing so at the end of June. The bond was partially called at par for approx 200 meuros.
The real action now on CMA EUR bonds is on the January 2025 one. It trades at approx 87, which means a spread in the 950 range. The question is whether it will be able to get back to where CMA was trading when things were good, ie in the 600 range for the spread. Which would mean a price closer 97/100.
Given the current market conditions with high selling prices and low bunker values, it is quite possible that CMA will produce one of its best quarter in the last 5 years with Q2 2020 on the shipping side. Ceva may be a drag but it is not sufficient to change the picture much. We shall know at the end of August.
And given that Q3 starts also on a very firm ground, it would not be surprising if it stays this way that Q3 is also very good and that the 2025 Bond is firmly around 100 at year end. At which point CMA will be able to issue again. Unless they manage to upgrade their ratings by one or two notches, it seems unlikely that they can go below 500 of spread. No idea when this could happen.

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- Alessandro Pasetti
  July 11, 2020 at 6:18 am
  Many thanks for the nice feedback and comprehensive comment, decitre.
  
  Yes, well, clearly the 2021’s gone now, same (almost) for the 2022, with the 2025 left to trade – I think you are bit bullish on Q2/Q3 but I also agree that – after a likely retracement, possibly below 80 – the 2025 may end up being a decent deal.
  
  Best,
  
  A.
  
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