Yang Ming Announces State-Led Recapitalization Plan
On Monday, the indebted Taiwanese container carrier Yang Ming told investors that the Taiwanese government is planning to substantially increase its 33 percent ownership stake, and that the line expects significant state support for a recapitalization plan.
"The first stage of this injection of capital will be from various government and private entities, including banks and financial institutions," the firm said in a note to shareholders. "Yang Ming will issue new stock to these investors, and with the new capital Yang Ming expects immediate benefits to its balance sheets. With this strong showing of government support, it is also expected to help enhance additional private sector investment." In addition, Yang Ming said that it will have access to a $1.9 billion government funding pool.
Drewry Financial Research said last week that after the collapse of Hanjin Shipping, Taiwanese carrier Yang Ming has taken pole position as the most debt-burdened container line in the industry. Its net gearing ratio stands at about 440 percent, well above the average for its peers. Drewry suggested that government-led restructuring might be the next logical step for the line.
In its response Monday, Yang Ming emphasized that it was in no danger of a default and did not expect to renegotiate its obligations. "As it has been repeated in early advisories, Yang Ming has never approached its creditors with any demands to restructure any part of its debt, and Yang Ming does not have any intentions to do so going forward. Yang Ming has never failed to deliver in difficult times, even in the wake of the largest carrier bankruptcy," the line said.
In an update Monday, Drewry director Rahul Kapoor wrote that "[Yang Ming] has been forthcoming and transparent," but he reserved making any changes to Drewry's outlook for the line until a later date. "We await further actions to review our stock recommendation on YMM, expecting a highly dilutive and large equity injection," he said.
Yang Ming is a smaller operator in an industry that thrives on scale, and some observers have speculated that it could merge with another line – perhaps domestic competitor Evergreen – in order to boost its market share. It has firmly denied any intentions of entering into a merger or acquisition.