Sale of Port Akdeniz Important But Insufficient to Refinance Global Liman’s Eurobond

Global Ports Holding Plc’s (GPH) agreement to dispose of Ortadogu Antalya Liman Isletmeleri (Port Akdeniz) to QTerminals W.L.L. is an important step on the way to refinancing Global Liman Isletmeleri A.S.’s USD250 million bullet Eurobond due in November 2021, Fitch Ratings says. However, the expected net proceeds will not be sufficient to fully cover the refinancing needs and the group will need to find other sources to bridge the funding gap at a time when the issuer will become effectively a pure cruise ports operator.

Refinancing could face challenges due to the pandemic, which is severely affecting travellers’ mobility and passenger numbers at cruise ports, with very limited visibility on the recovery path.

GPH is the world’s largest independent cruise port operator. On 21 October 2020, following of a period of strategic review, it entered into a sale and purchase agreement to sell Port Akdeniz to QTerminals, a Qatari commercial port operating company, for an enterprise value of USD140 million. Port Akdeniz is a Turkish-based commercial port focused on cargo containers and general and bulk cargo; Port Akdeniz contributed 45% to group segmental EBITDA in FY19.

Fitch estimates the net proceeds to be of around USD100 million and expects the funds to be used to partially cover the refinancing needs of GPH’s subsidiary Global Liman Isletmeleri in 2021 when the USD250 million senior unsecured notes become due. The Eurobonds are rated ‘B’ by Fitch and have been placed on Rating Watch Negative due to the pending conclusion of the sale of GPH’s commercial ports activities and limited visibility on the upcoming refinancing.

Fitch understands that the sale is still conditional on obtaining certain regulatory clearances and approvals from various Turkish governmental authorities and that the timing of the closing of the transaction is uncertain but could be achieved towards the end of 2020 or at the beginning of 2021.

Fitch expects to undertake a review of the credit profile of the new group after the completion of the transaction, as GPH will effectively become a pure cruise ports operator after having disposed of almost all its commercial ports operations. Cruise ports volumes and capacity expanded rapidly before the pandemic but could be inherently linked with higher cash flow volatility given exposure to discretionary leisure demand.

The pandemic and related government containment measures worldwide have severely reduced passenger volumes at cruise ports compared to pure cargo or container ports. The cash flow-generating ability of cruise ports is very low. Fitch expects the EMEA traffic at cruise ports to recover to pre-pandemic levels by the end of 2024 and for cargo or container ports by the end of 2021. The agency understands that the cruise port operators and the industry anticipate a faster recovery.
Source: Fitch Ratings

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