Review of business plan to obtain refinancing
Client: A top 5 global shipping line
To strengthen its negotiation position and obtain more favourable lending conditions, a top 5 global shipping line required an independent assessment from a reputable source of their future volumes, freight rates and revenues.
- A top 5 global container shipping line was re-negotiating its financing arrangements with banks and other financial institutions following a breach of its commercial terms due to the 2009 global financial crisis and the resulting worsening shipping market characterised by adverse demand trends, falling revenues and over-capacity.
- To strengthen its negotiation position and obtain more favourable lending conditions, the shipping line required an independent assessment from a reputable source of their future volumes, freight rates and revenues.
- Drewry provided 5-year freight rate and revenue forecasts for the client’s 10 most relevant trade routes under base case, low case and high case scenarios.
Using our proprietary databases, Drewry forecast the drivers of future freight rates, including lay-ups (voluntary or forced), carrier behaviour, fuel prices and the supply-demand balance.
Based on these drivers and Drewry’s professional judgement, Drewry supported the freight rate forecast with:
- A comparison of cost break-even points and assessment of uncompetitive ship sizes and carriers;
- An overview of the cash burn and cash reserves of 10 major carriers;
- A review of different carrier responses to the container market downturn and expected capacity changes;
- An assessment of the ability of carriers to cascade ships to non-east/west routes, including Asia-Middle East;
- A view on whether cash pressures will force some carriers to lay up capacity.
- The client was able to convince its financial partners about its ability to outperform the market, retained their support and renegotiated more favourable financial terms.