Shipping: "Following Hanjin’s Collapse, Heavily Indebted Yang Ming at Risk of Financial Trouble"

From gCaptain:

Following the bankruptcy of Hanjin, Taiwan’s Yang Ming is now the container line in the greatest financial danger, according to a research paper published today.

Drewry Financial Research Services (DFRS) says the line has the industry’s most leveraged balance sheet, with a net gearing of a massive 437% at the end of Q3.

The figure soars above the industry average of 124% and is nearly five times that of its closest regional peer, Evergreen.

The report says: “Yang Ming’s high debt is a great cause for concern for us, given the heightened financial risks. Even with recovery in the underlying freight market, the debt burden without a restructuring is a red flag and a clear sell signal for us.”

DFRS noted that Yang Ming had accumulated NTD38.4bn ($1.2bn) in losses since 2009, with its net loss for 2016 at around $400,000 by the end of the third quarter.

The analyst believes the carrier’s high cost structure, combined with its debt mountain, will “keep Yang Ming in the red in 2017”, despite an improved outlook for freight rates.

In November, the Yang Ming board announced it would slash executives’ pay by 50% and the salaries of senior line managers by 30%, among a raft of desperate measures to stop the rush of red ink.

The Taiwan government owns a 33% stake in Yang Ming and will need to support the debt-ridden carrier, suggests DFRS....MORE