STANDARD & POORS, one of the big three credit ratings agencies, has downgraded the world's third biggest carrier CMA CGM to B++, explaining its outlook for the French shipping giant has turned negative because of its deteriorating profitability and the declining value of its bonds.
"We now believe that CMA CGM will report weaker operating results for full-year 2011 than we originally expected, leading to a further deterioration in cash flow protection measures and financial covenant headroom," said S&P, Reuters reported.
"The negative outlook also reflects our view that CMA CGM will likely need to take preventative action to avoid breaching its financial covenant tests, due in December, and that a failure to do so well ahead of time is likely to adversely affect our rating."
The agency firm believes container carriers are suffering from higher operating costs but lower freight rates, particularly on Asia-Europe routes.
The downgrade announcement came after a Bloomberg report warning that CMA CGM has a 90 per cent chance to default on its debt repayment within five years.
