Earlier last week, we highlighted YMM’s debt burden with the most leveraged balance sheet in the industry.
YMM has now issued an advisory reiterating its financial recovery plan.
The broad plan outlines what we continue to expect for the company, a multi-pronged action backed by government support in the form of a large capital infusion to bring the debt levels to a more sustainable level.
Key points mentioned in the release are as below.
- “Since the announcement of the Taiwanese government’s massive US$ 1.9 billion assistance program for the country’s shipping industry, Yang Ming has been proceeding with its own plans to improve on its competitiveness. Lead by its management team, Yang Ming has instituted a recapitalization plan aimed to provide immediate benefits to its balance sheets and improve on its liquidity.”
- “While the predictions for 2017 appear to show some improvements for carriers, Yang Ming remains prepared to take any measure necessary to maintain its competitiveness,”.
- “Yang Ming will continue to take a conservative approach in its actions, but Yang Ming is fully aware of and prepared to exercise on its option to draw on the $ 1.9 billion in government-backed funding should circumstances in the market arise requiring for such assistance.”
- “The first stage of this injection of capital will be from various government and private entities, including banks and financial institutions, 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 Yang Ming.”
- “It is also anticipated that the recapitalization plan will result in a larger percentage of government owned and controlled interest in Yang Ming, well beyond the current approximate 33.3 percent held by the Ministry of Transportation and Communications of Taiwan.”
- “Yang Ming has never approached its creditors with any demands to restructure any part of its debt, and Yang Ming does not have any intention to do so going forward.”
We believe the company has been forthcoming and transparent and are appreciative of the company’s quick and clear response. This should likely soothe both the customers and investors’ nerves. However, we await further actions to review our stock recommendation on YMM, expecting a highly dilutive and large equity injection.
Source: Drewry Financial Research Services