Move to sell terminal raises questions in shipping circles

Friday, November 29, 2019

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News that French container shipping giant CMA CGM is planning to raise more than US$2 billion through vessel sale-and-lease-back deals and by selling port assets, including in Jamaica, has raised questions in shipping circles as to which company did the Port Authority of Jamaica (PAJ) reach a concession agreement to develop and operate Kingston Container Terminal Ltd four years ago.

The shipping company's decision was reported in Lloyds List Maritime Intelligence on Monday this week.

According to the report, CMA CGM said the funds will help finance the acquisition of logistics operator CEVA Logistics, which the French company bought earlier this year.

“It will raise US$968 million through the sale of its stake in 10 port terminals to Terminal Link, its joint venture with China Merchants Port (CM Port),” the Lloyds List report stated.

“Hong Kong-listed CM Port said in an exchange filing that the two parties have signed a memorandum of agreement on the proposed acquisition, which consists of 10 container terminals located in Asia, Europe, Middle-East and the Caribbean that are owned by CMA CGM or its affiliates,” Lloyds List reported.

According to the report, in an effort to finance the deal, “the State-owned port giant has agreed to subscribe mandatory convertible bonds of up to US$468 million to be issued by Terminal Link, and at the same time, to provide the joint venture an eight-year loan of up to US$500 million. Both facilities carry an annual interest rate of six per cent”.

In a Ministry Paper dated April 20, 2015, then Transport, Works and Housing Minister Dr Omar Davies had told the House of Representatives that the Port Authority had “entered into a long-term concession with Kingston Freeport Terminal Ltd (KFTL), a special purpose vehicle formed by the preferred bidder, the Terminal Link Consortium, to finance, operate, maintain and transfer the Kingston Container Terminal”.

Davies had also explained that KFTL is jointly owned by Terminal Link and CMA CGM with equity interests of 40 per cent and 60 per cent, respectively.

Yesterday, in response to questions from the Jamaica Observer, Port Authority President and CEO Professor Gordon Shirley said the concession had been provided to KFTL, which he described as a special purpose vehicle owned 60 per cent by CMA Terminal Holdings and 40 per cent by CMA CGM.

CMA Terminal Holdings is owned 100 per cent by CMA CGM. On the other hand, Terminal Link is owned 51 per cent by CMA CGM and 49 per cent by China Merchants Port Holdings.

Professor Shirley also confirmed that the concession agreement provides that a change in control requires prior written approval of the PAJ.

“Our information is that there has been no change in control of the ownership structure of KFTL nor transfer of ownership otherwise,” Shirley said.

However, last night a shipping industry analyst argued that, “If the information contained in the Hong Kong regulatory filing is correct, CMA CGM and its wholly owned subsidiary CMA Terminal Holdings will be transferring the Kingston Container Terminal, renamed KFTL, to Terminal Link, a separate legal entity. If this deal goes through, there would be a change in ownership”.

In response to the Observer's question as to whether the PAJ had been approached for approval of the sale, Shirley said: “KFTL/CMA CGM have informed the PAJ of the proposed change in shareholding.”


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