Comment / Analysis: Hapag-Lloyd – the gift that keeps on giving... to the bankers

12/11/2018

I often think I have landed on a planet where the words count, but the numbers don’t, when I read of shippers and freight forwarders complaining about the bad attitude of ocean carriers when it comes to passing on rapidly rising input costs.

What the whiners seem to forget is that a major bankruptcy in the container shipping industry – however remote a possibility it might be in the short term – could be the black swan event that rocks the ...

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NAIM JADUE
November 12, 2018 at 3:56 pm
why you don t count that the company this year will pay 500 millions euros of debt. they are saying that ebdta debt ratio will be at 3,5 times, that implies a Ebdta of 1.7 billion for 2019, why you dont believe that?

if you tessis is right can you explain me why the happag bonds are at 102 and the industry its an avarage of 84 ? don ´t seem that the market its expecting any problem with the debt of happag as you are trying to implie

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- Ale Pasetti
  November 13, 2018 at 10:08 am
  Hi NAIM,
  
  Thanks for your comment.
  
  Re: “why you don t count that the company this year will pay 500 millions euros of debt.”
  
  You can find two charts in the story (debt profile, cash flow from financing) that clearly show how much debt HL has redeemed so far this year, as well as the amount of debt outstanding in Q4.
  
  Re: “they are saying that ebdta debt ratio will be at 3,5 times, that implies a Ebidta of 1.7 billion for 2019, why you dont believe that?”
  
  You are right by saying HL is looking to de-lever the balance sheet, but 3.5x on a forward basis is highly optimistic over the short term and through to 2021. What kind of scenarios you have in mind for revenues, COGS, additional synergies and operating costs – based on its existing assets base – that could mean boost its Ebitda to €1.5bn+, say, by 2020? As you surely know, it terms of de-leveraging, it’s not been lucky since 2013.
  
  Re: “if you tessis is right can you explain me why the happag bonds are at 102 and the industry its an avarage of 84 ? don ´t seem that the market its expecting any problem with the debt of happag as you are trying to implie”
  
  You really need to check the composition of your peer group (please clarify the break-down), because I do not recognise your numbers (84 vs 102) at all. Its mid-terms debt is little changed in value since it was issued…
  
  https://www.hapag-lloyd.com/en/ir/creditor-relations/bonds-trading-chart/eur-bond-2024.html#tabnav
  
  … and its YTM is ok-ish for the risk embedded in its operations, but truth is Hapag next year might have to decide whether to repay all its maturing debts, pay them partly or pay a dividend as soon as 1H19.
  
  Both maturities (2022 and 2024) currently imply significant paper losses since their previous highs. My guess is HL will try to roll over most of its upcoming 2019 debts to 2021 and > 2023, and that is one of the reasons why the bonds are up since the trough in July –> if it doesn’t refinance on good terms, though, be prepared to pray, under a base-case scenario according to which not even at 90/95 its debts might attract your interest.
  
  That is to say, the next couple of quarters are pretty important.
  
  Best,
  
  Ale
  
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