Disposal of boxes cuts firm's exposure in weakening sector
Cosco Pacific, the majority owned terminal operating arm of China Cosco Holdings, yesterday pocketed more than $6.75 billion after selling almost 60 per cent of its container stockpile in a deal that will lessen its exposure to a weakening maritime trade sector and rising interest rates.
The deal, which sees the parent book a profit of US$51 million after taxes but before expenses, will free up capital for its international terminal investment arm. But it also cuts the revenue potential of a core earnings vehicle for Cosco Pacific, the container lessor Florens Container Services and its subsidiaries.
Kelvin Wong Tin-yau, Cosco Pacific's deputy managing director, said the deal should in no way be seen as a sign China's biggest shipping firm was losing confidence in the container shipping market.
'It just allows us to run our business as an agent as opposed to a pure owner so that we can decrease our financial commitment [to the container stocks] and trim our exposure to any depreciation that may result,' he said. 'If we stick to an owner business model, our scope of business would be confined by our balance sheet.'
The deal sends 600,468 20-foot containers - or 59.6 per cent of its stock, the portion that had been leased to third parties - to a specifically constructed German fund under a sale-and-lease-back arrangement from which Cosco will continue to receive a management fee. It held on to the stock currently leased to its sister firm, Cosco Container Lines, which is under pressure as freight rates fall on the world's major trade lanes.
Just over US$343 million from the proceeds would be used to pay debt, US$111.8 million would go against taxes and US$100 million to replenish container stocks, company secretary Zhang Yongjian said in a statement to the exchange.