APAC: COSCO engage JP Morgan to sell Long Beach Container Terminal lease

03 October 2018 - 12:00 am UTC

Chinese ports group COSCO has engaged JP Morgan to sell the lease on Long Beach Container Terminal, Inframation has learned.

COSCO committed to the auction this past summer as a result of deal struck with US regulators to allow it to proceed with its USD 6.3bn acquisition of Orient Overseas International (OOCL).

An OOCL spokesperson declined comment on the mandate, but noted that the company is working on hiring various advisors including financial, legal, technical and environmental advisors, adding that some of them have already been mandated. OOCL, a long-term lease holder at the port, is involved in the auction process. 

JP Morgan declined comment on the situation. COSCO did not return calls seeking comment.

LBCT is one of the world’s most automated shipping facilities and among the busiest terminals in the San Pedro Bay Port complex, which houses the Port of Los Angeles and the Port of Long Beach in southern California. In 2012, Hong Kong-based OOCL agreed to lease the terminal at the Port of Long Beach for USD 4.6bn over a 40-year period, marking one of the biggest US port deals ever. 

The terminal’s Pier E facility opened in April 2016 and is scheduled to complete construction in late 2019. LBCT owns berths 22 through 26, with 4,200 feet of wharf line and the deepest dredged dockside of any US Pacific Coast port. 

COSCO, meanwhile, runs the Pacific Container Terminal at the Port of Long Beach under a lease expiring in 2022 as well as the West Basin Container Terminal at the Port of Los Angeles whose concession ends in 2038. 

A consortium of EQT Infrastructure III and P5 Infrastructure acquired 90% of Global Gateway South (GGS) terminal at the Port of Los Angeles for USD 820m.

CMA CGM, OOCL, COSCO, members of the OCEAN Alliance do business with both ports, said a source familiar with the situation. But there has been concern in the past about counter-party risk as some of the shippers in that consortia are junk bond rated.

Ratings agency S&P however noted that “significant consolidation in the container liner industry could help CMA CGM to achieve less volatile profits through the industry cycle and to sustainably improve its credit measures to be commensurate with a higher rating,” according to an 24 April research note. S&P affirmed its B- rating on the issuer and revised its outlook to positive from Stable.

The note continues that the combined share of the top-five players has risen to around 65% this year from 30% about 15-years ago.

Read more