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Chiquita sells remaining Great White Fleet
[May 02, 2007]

Chiquita sells remaining Great White Fleet

(Lloyds List Via Thomson Dialog NewsEdge) FRESH food giant Chiquita Brands International has drawn a line under a century of maritime tradition with the sale of the famous Great White Fleet to Eastwind Maritime and NYKLauritzenCool, writes Rainbow Nelson.

The Cincinnati-based shipper told investors that it had agreed to sell the company's remaining 12 vessels for $227m, posting a $100m profit on the sale.

Eastwind and NYKLauritzenCool will become Chiquita's 'preferred supplier in ocean shipping to and from Europe and North America' as a result of the sale and leaseback deal due to be completed within the next 45 days, the company said.

Shipping has been a core part of its business since 1899 when the fleet first earned its name after United Fruit Company founder, Minor C. Keith, painted the company's ships white to reflect the tropical sun.

In the 108 years it has operated, the company has changed its name several times but the Great White Fleet has remained a constant reminder of the influence of 'the Octopus' as the company has become known in its producing heartland, Latin America.

Chiquita said it would charter 11 of the vessels back on seven-year contracts with an option to extend the contracts for another five. One of the vessels will be leased back for a period of three years with an option for two more.

'The transaction will significantly reduce our debt, and the alliance will better position us to adapt our shipping services as we grow our business over time,' said Fernando Aguirre, Chiquita's chairman and chief executive.

The sale, he said, would allow the company to repay $170m of debt, including $90m of outstanding ship mortgage debt and $80m in term loan and revolving credit borrowings.

The company's total debt-to-capitalisation ratio of 55% will be cut to 51%.

After a $4m one-time cost for severance and the write-off of deferred financing costs, which will be felt in the second quarter, 'the remainder will be retained for general corporate purposes, including growth investments', said Mr Aguirre.

A switch from ownership to chartering will result in a negative impact of $12m and $14m on earnings before interest, taxation, depreciation and amortisation in 2007 and 2008 respectively.

Gains on the sale, reduced depreciation and synergies of approximately $2m in 2007 and $4m in 2008, however, will result in an overall positive effect on net income. The company forecasts the sale will boost net income by $1m in 2007 and $11m in 2008.

'Our people did a wonderful job in securing terrific rates over the next three years,' said Mr Aguirre. 'Rates are comparable with what we are paying today.'

The move was not, said Mr Aguirre, a signal that the world's second largest banana shipper was planning to reduce shipments from current levels of 144.1m boxes a year.

'One of the interesting things is that these guys are very capable of increasing the number of ships that we may need in the medium- to long-term,' he said.

'This deal predicts future growth rather than the opposite.'

The agreements provide for its new partners to service the remainder of Chiquita's core ocean shipping needs for North America and Europe through time charters for another seven reefer vessels beginning in 2008.

The vessels to be sold consist of eight reefer ships and four container ships, which collectively transport approximately 70% of Chiquita's banana volumes shipped to core markets in Europe and North America.

Copyright 2007 Informa Martime Trade and Transport

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