The Chilean liner shipping company CSAV said shareholders meeting in Valparaiso this week approved a plan to increase capital by $500 million that will be used to purchase seven 9,300-TEU ships and prepay a loan from American Family Life Assurance Company (AFLAC) at a 46 percent discount.
The company said it will raise the funds through the issue of 6.75 billion shares.
(The company has about 8.7 billion shares outstanding. They were selling at around 42 Chilean pesos this morning and have sold for between 63.4 Chilean pesos (about 13.4 U.S. cents) and 41 Chilean pesos (about 8.7 U.S. cents) during the past year on the stock exchange in Santiago. The company said the large number of shares that it plans to sell "provides a cushion should it be necessary to absorb exchange rate and stock market volatilities.")
Francisco Pérez, chairman of CSAV, said the investment in new ships will increase its owned fleet from 37 percent to 55 percent, placing the company in line with the industry.
The company said the new vessels, which will be delivered at the end of 2014, will reduce fuel and chartering expenses.
Oscar Hasbún, the company’s chief executive officer, said “with this investment, CSAV will have one of the most efficient fleets in the industry and its implementation is intended to reinforce our strategy of strengthening our policy of joint operations and the generation of economies of scale. Having vessels of large capacity and efficient in fuel consumption, at a cost that can be considered to be very attractive compared to the standards of the competition, enables us to build a competitive advantage in the medium and long term”
The capital increase will also permit the prepayment of the debt drawn by the company in early April from Banco Latinoamericano de Comercio Exterior (Bladex) for $140 million. That loan enabled CSAV to prepay a debt of $258 million to AFLAC.
Hasbún said after seven quarters of losses the company was able to reverse that trend and report a profit in the second half of 2012.
“The operational, financial and corporate restructuring plan, which we consider was completed in March, has transformed us into a new company with a more efficient costs structure,” he said.
“The results have already evidenced the changes we have made. In the second half of 2012 we reached an equilibrium in the context of an industry which still shows tariffs much below historic levels, which tells us that we are going along the right road,” Hasbún said.
CSAV said earlier this month the credit-rating agency Feller Rate changed from "stable" to "positive" the outlook for the ratings of CSAV’s solvency and bonds. It also maintained the company’s BB+ rating and 2nd Class for its rating of the shares. - Chris Dupin