Research Update: Taiwan-Based Shipping Firm Wan Hai Lines Ltd. Outlook Revised To Negative On Weak Demand, Rising Debt; Rating Affirmed

Taiwan-based container shipper Wan Hai Lines Ltd. operates globally but earns the majority of its revenue from intra-Asia routes. Wan Hai had funds from operations (FFO) of NT$7.4 billion in 2019. Shrinking international trade due to the global COVID-19 pandemic is likely to weaken Wan Hai's cash flow materially in 2020 and lead to a highly uncertain pace of recovery in 2021. These factors combined with significant growth in Wan Hai's planned capex will increase the company's debt significantly in 2020 while at the same time narrowing the rating buffer against potential downside risk from COVID-19. On April 14, 2020, we revised our rating outlook on Wan Hai to negative from stable. At the same time, we affirmed the 'BB+'

...- Taiwan-based container shipper Wan Hai Lines Ltd. operates globally but earns the majority of its revenue from intra-Asia routes. Wan Hai had funds from operations (FFO) of NT$7.4 billion in 2019. - Shrinking international trade due to the global COVID-19 pandemic is likely to weaken Wan Hai's cash flow materially in 2020 and lead to a highly uncertain pace of recovery in 2021. - These factors combined with significant growth in Wan Hai's planned capex will increase the company's debt significantly in 2020 while at the same time narrowing the rating buffer against potential downside risk from COVID-19. - On April 14, 2020, we revised our rating outlook on Wan Hai to negative from stable. At the same time, we affirmed the '##+' issuer credit rating on Wan Hai. - The negative outlook reflects our view of the elevated risk that Wan Hai may take longer to restore its cash flow than we currently predict and that debt leverage could remain elevated with a ratio of FFO to debt below 45% for...

Research Update