World's biggest container line Maersk scales down bond-market reliance

Maersk will be reducing the need for new bond sales amid plans to sell off its energy business.
Maersk will be reducing the need for new bond sales amid plans to sell off its energy business.PHOTO: REUTERS

COPENHAGEN - The world's biggest container shipping company and Denmark's largest issuer of corporate bonds may rely less on debt markets soon.

AP Moller-Maersk has ample liquidity and plans to cut capital expenditure, both of which reduce the need for new bond sales, according to chief financial officer Jakob Stausholm. He also pointed to the century-old conglomerate's plans to sell its energy business as a complication that makes now an awkward time to tap debt markets.

"It's a bit complicated issuing bonds at the moment because you need an open window and right now there are a lot of things we are working on so finding an open window isn't easy," CFO Stausholm said in a phone interview. "We are well financed with a long maturity profile on our debt so our financing doesn't require a lot of new issuance."

Maersk issued five bonds in the first half of 2016, but has not sold any since. Instead, the company has turned to banks for financing. Last month, the Copenhagen-based company announced it has established a syndicated loan facility to finance a US$4 billion (S$5.61 billion) acquisition of container line Hamburg Sued.

"The bank facility was the right solution," Mr Stausholm said. "We could tailor-make it so it fitted precisely the cash flow we expect in connection with the acquisition, which we couldn't do with a bond. As we are working on so many changes, it's convenient to get financing in place that fits the acquisition in exactly the right way."

The conglomerate has given itself an end-of-2018 deadline to come up with a plan to list, sell or find another way to split off its energy units, which include Maersk Oil, and focus on its transport operations. These are led by Maersk Line, which carries more freight on its container liners than any other company on the planet.

Shares in the company rose 2.2 per cent about 30 minutes after the market opened in Copenhagen on Monday (May 15). That followed a 3.8 per cent gain on Thursday, when the company reported first-quarter earnings. Friday was a public holiday in Denmark.

To be sure, Mr Stausholm says the bond market will remain an "important" source of financing for Maersk, and reiterated a commitment to keeping the company's investment grade rating.

S&P Global Ratings has assigned Maersk a BBB grade, which is two steps above junk, but the grade carries a negative outlook. Maersk has a similar Baa2 grade with a negative outlook at Moody's Investors Service, which in December downgraded the company from Baa1.

Maersk has 16 bonds out, totaling about US$7 billion with a weighted average maturity of just over four years, according to data compiled by Bloomberg. That makes it the biggest non-financial Danish issuer of company bonds.

"It's very difficult to predict" how many new bonds Maersk will issue over the next two years, the CFO said. "The separation of the energy divisions could play a part, although it's too early to say. We need to make some choices first." Maersk's first-quarter results showed that the energy unit it plans to divest contributed most to profits.