The Chinese quotient behind the financing of the world’s longest undersea tunnel – To be uploaded

The Chinese quotient behind the financing of the world’s longest undersea tunnel – To be uploaded

The Chinese quotient behind the financing of the world’s longest undersea tunnel

The Tallinn tunnel, connecting the Estonian capital with Helsinki, the Finnish capital, has secured funding to the tune of $17 billion. The tunnel will run through the Gulf of Finland for about 60 miles, and would be the longest undersea rail tunnel once construction is completed. And due to the considerable distance covered, the tunnel necessitates the creation of at least one artificial island along its length.  

Today, transit between the two coastal cities is possible via a 30-minute flight, or by the numerous ferries that shuttle between the borders. A tunnel between the two capitals is mutually beneficial, not just making it easier for people to transit faster, but by increasing the efficiency of freight transport. Finland is currently Estonia’s largest export partner, with the trade portfolio being Estonia’s most diversified as yet.

Over the last few years, Estonia’s export market share in Finland has been see-sawing, possibly because Finland’s ability to manage to curb the growth of its unit labor costs this decade, taking some gleam off Estonian goods that are sometimes equally priced to local products. This apart, Finland had a brief economic slowdown last year, which could have taken a slight toll on the growth of Estonia’s exports to its neighbor. Expediting the Tallinn tunnel’s construction is expected to help foster export relations between the two countries.

FinEst Bay Area Development is heading the tunnel development project, and it announced its funding raise from China’s Touchstone Capital Partners Ltd., that would cover the entire cost of construction.

In South Asia and Africa, the Chinese have been systematically driving “modern colonization,” through its debt-trap diplomacy – by providing billions of dollars to countries in dire need of infrastructure financing, and turning predatory when various states cannot repay the debt in time. This has enabled China to capture Sri Lanka’s deep-sea Hambantota port and it is on the verge of taking control of Kenya’s strategically important Mombasa port as the country is at the brink of defaulting on its $2.25 billion debt to China.

The Chinese footsteps into European territory have also been well-documented. The Chinese shipping giants Cosco Shipping and China Merchants Port Holdings have opened up their deep pockets to take over the terminal in Zeebrugge, the second-biggest port in Belgium after Antwerp. The Chinese also operate the Greek port of Piraeus, one of the largest ports in the Mediterranean region and the maritime gateway to Europe.

China is now financing the construction of a high-speed railway between Budapest and Belgrade, the capitals of Hungary and Serbia respectively. The multi-billion dollar investment across Europe’s most impoverished region could possibly be another episode in the debt-trap diplomacy series, unless the European Union (EU) bails out the countries in the event of a financial catastrophe.

Meanwhile, the governments of Finland and Estonia have mentioned that they will keep working to secure EU funds for the tunnel. This would reduce the control that Chinese companies have on the project, and prevent the two countries from risking the surrender of the tunnel to the Chinese due to an unexpected financial meltdown.

Indonesia and Australia sign new free trade agreement – To be uploaded

Indonesia and Australia sign new free trade agreement

Trade ministers from Indonesia and Australia signed a new free trade agreement (FTA), the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), in Jakarta, Indonesia, on March 4. The are a wide range of beneficial outcomes from the agreement. For instance, the new agreement allows 99 percent of Australia’s goods to enter Indonesia tariff-free, or under “significantly improved or preferential arrangements,” and 100 percent of Indonesia’s goods to enter Australia tariff-free.

A wide variety of non-trade barriers will also be removed. For instance, Indonesia will also guarantee the automatic issue of import permits for a wide variety of products including live cattle, meat, feed grains, rolled steel coil and some fruit and vegetables.

Both governments must now ratify the free trade agreement before it enters into force.

Russell Wilkinson, a customs expert and the founder of World Customs Portal, tells FreightWaves: “It’s a great strategic initiative by the Australian Government to secure the IA-CEPA, on top of the current ASEAN FTA (mainly for the goods trade), providing increased access of goods and services to an economy boasting 262 million people and circa 1 Trillion in GDP. The low base of export services of A$1.6b is set to increase dramatically in many key areas such as Education, Health, Tourism, Mining Services, Architecture and Engineering and a range of other knowledge-intensive Business Services. Ecommerce set to increase, and Start-Ups should assess the country’s future potential.”

Also voicing his support was Innes Willox, the CEO of the Australian Industry Group, the leading business advocacy and representative organization, who commented that: “members often nominate at the border and behind the border barriers as the biggest obstacles to expanding in to the Indonesian market.  The ground breaking agreement to dedicate an entire FTA Chapter to non-tariff measures, as well as streamlining the export documentation requirements, will give Australian exporters the confidence to have another look at this growing market.”

According to the Australian Department of Foreign Affairs and Trade, Indonesia is “one of the world’s fastest-growing emerging economies.” By 2050 it is forecast to become the world’s fourth-largest economy as measured by nominal gross domestic product (GDP).

Two-way trade between Australia and Indonesia in goods and services stood at AU$16.8 billion in 2017-2018, according to the Australian Department of Foreign Affairs and Trade, which is up 1.6 percent over a five-year period. Australia exported AU$8.4 billion in goods to Indonesia in 2017-2018, which is up 5.9 percent over five years. Australia imported AU$8.4 billion in goods from Indonesia in 2018-2018, which is down 1.9 percent over a five-year period.

Major Australia exports to Indonesia include crude petroleum – AU$1.3 billion; wheat – AU$950 million; live animals – AU$575 million; and coal – AU$572 million. Indonesia’s major exports to Australia also include crude petroleum – AU$1.02 billion; refined petroleum – AU$376 million; worked wood products – AU$206 million; and tobacco – AU$160 million.

A study into the effects of FTAs by the Asia-Pacific Economic Cooperation organization in 2015 found that they do increase the volume of trade by a statistically significant amount.

“Preliminary analysis of the effects of FTAs on exports showed that the average exports five years after an FTA is enforced is higher and statistically significant vis-à-vis the average exports five years before… Results demonstrated that FTAs are correlated positively and significantly to real exports. Specifically, regional, North-South and ‘modern’ FTAs are correlated positively and significantly to real exports while the correlations are not significant for bilateral and ‘older’ FTAs. Moreover, these FTAs also significantly reduce the cyclicality effect of importer GDP on exports,” the report reads.

It also added that the “quality” of the FTA matters. FTAs that address non-tariff barriers to trade were noted as being trade boosters.

Trucking Freight Futures contracts are strictly financially settled (meaning a truck never will show up) and were developed in partnership with Nodal Exchange and DAT. The CFTC-regulated tradable futures contracts are built to help participants in the market de-risk their exposure to the volatility of trucking spot rates. The contracts will help companies with exposure to the $726 billion trucking market hedge their exposure to massive volatility and will provide forward pricing and market health transparency.

 “FreightWaves combines powerful industry-specific data and analytics with fresh commentary, unique insights and risk management solutions that help decision makers across the freight ecosystem make better operational decisions,” said Hearst Ventures Managing Director David Famolari.

FreightWaves secures $20 million in Series B funding from corporate and strategic investors – to be uploaded

FreightWaves secures $20 million in Series B funding from corporate and strategic investors

FreightWaves closes $20 million Series B funding round

FreightWaves, the leading provider of data and news for global freight markets, announced that it has successfully raised $20 million in a Series B financing round, bringing its total funding to nearly $40 million. The round was led by 8VC, the Silicon Valley venture capital firm that has participated in FreightWaves’ capital raises beginning with its seed round in late 2017 when the company began commercial operations.

“This round was entirely opportunistic and was initiated because we had a great deal of strategic interest from very important partners,” said Craig Fuller, founder and CEO of FreightWaves. “Our cash position was very healthy before the round, boosted by the growth of our operating cash flow due to the performance of the business over the past year. Our SONAR SaaS product continues to grow at monthly double-digit rates as clients experience the value of fast data and increasing visibility into the transportation and freight markets.”

The company will deploy the funds to expand data and transparency products beyond trucking to include global air, rail, maritime, port, and warehousing. FreightWaves combines fundamental data from hundreds of unique sources and creates machine learning-powered indices that are actionable for clients. FreightWaves SONAR offers unprecedented speed in terms of insight (most data is less than 24 hours old) and provides a market dashboard that includes technical charting, heat/geo maps, watchlists, and data visualization and modeling tools.

FreightWaves has 15 full-time data scientists and six PhDs on staff. Data comes from hundreds of sources, including transportation management systems, load boards, electronic logging device (ELD) providers, telematics, on-board truck data from original equipment manufacturers, trailer and container tracking and sensors, port schedules and management systems, payment companies, factoring companies, freight payment and auditing firms, fuel vendors and refineries, warehouse operators, trucking companies, third-party logistics providers (3PLs), shippers, airlines and air cargo data aggregators, IoT providers and messaging companies, weather forecasting services, DOT highway cameras, federal and state governments, social media and other sources.

FreightWaves has, or is working to develop, partnerships with the companies that are sources of data regarding the state of the global freight economy. The data is often “uncleansed and unstructured”; the data science and market expert team come together to develop sophisticated machine learning models that help interpret the data.

While the data comes from many sources, much of the data that FreightWaves publishes is proprietary. Over 93 percent of the more than 120,000 time-series indices published by FreightWaves can only be acquired through its proprietary SONAR platform.

The company is also not involved in matching freight, leaving that to many of its clients and partners. FreightWaves sells data and analytics to most of the digital freight brokers in the market, and to the largest 3PLs, trucking companies and shippers. To help mitigate freight market pricing volatility, FreightWaves is developing a financially settled Trucking Freight Futures contract that will be launched in late March 2019.



Australia’s National Freight and Supply Chain Strategy is an initiative that was launched by the government in May 2018. The aim of the strategy is to make it easier, quicker and cheaper to move goods and to increase the competitiveness of Australian business. 

A large part of the essential freight framework is the Inland Rail project. Historic progress has been made as the Inland Rail project has now been worked on in earnest: construction began in December 2018, with the first trains expected to operate in 2024 or 2025. This behemoth venture is the largest infrastructure project in Australia and will comprise 1,700km of freight rail infrastructure upon completion. The project has had $9.3 billion of funds dedicated to it but is predicted to be well worth the investment, with an economy boost of $16 billion. 

The Inland Rail venture is itself divided into 13 separate and distinct projects, each of which was assessed and analyzed for its economic benefits. The project should create an estimated 16,000 jobs – 700 of those ongoing upon the project’s conclusion. One of the most significant benefits is the lightening of road freight and congestion, creating additional capacity for Sydney’s road and rail infrastructure in particular. Another key benefit of the project will be to better connect cities and farms to markets, enabling further development of vital industry such as agriculture, manufacturing and mining. 

The design of this project couldn’t be produced by government alone, so there were a number of focus groups held in December 2018 which resulted in tweaks being made to the programme, its implementation and a breakdown of how industry would support the initiative. 

At the last count in 2017, 14.1% of the Australian population live in rural locations, and there has been significant pressure to ensure that these communities are better provided with access to the freight industry. One of the outcomes of the National Freight and Supply Chain Strategy focus groups was to take further consideration of first-mile and last-mile issues, for this very reason. It certainly is a key point when Australia’s agricultural sector is worth an estimated $60 billion and would benefit hugely from enhanced rural connections.

Australia’s rail safety regulator said each derailing incident involved unique circumstances and cautioned against trying to link them.  

Global logistics giant Toll unveils two new Bass Strait ships

Global logistics giant Toll unveils two new Bass Strait ships

Global logistics player, Toll, has officially launched two new roll-on, roll-off (ro-ro) ships for the carriage of trucks and containers across the Bass Strait between mainland Australia and the island of Tasmania. Extra capacity is sorely needed on this growing trade. The first commercial sailing begins in just a few days, on March 1.

The two new ships, the Tasmanian Achiever II and the Victorian Reliance II, are bigger and faster than their predecessors. They have a different internal configuration too, which should speed up load and discharge times.

Toll’s two new ships are near-identical sister ships. The two new vessels will sail between the port city of Melbourne on the southern Australian coast and the town of Burnie, located on the northern shore of Tasmania. They will have an estimated average speed of 21 knots and are forecast to sail the 251-mile (403.66 km) Bass Strait in about 12 to 13 hours, about an hour or two quicker than the predecessor vessels. They will provide a twice-daily service that runs Monday to Saturday. The service offered by the ships will also offer later cut-off times and receivals.

“Faster means it handles the weather conditions better. It means improved, sustained on-time arrival, it means shippers’ cargo gets into the market quicker. We have to connect with interstate, we have to hit that connection. With that extra hour, it’s what the truck drivers need to get up the road on time,” Steve Borg, Toll’s executive general manager – Tasmania & shipping, explained to FreightWaves.

The new ships are greener than their predecessors too. They will plug into the local power grid while at berth, rather than running their own engines for power. The vessels have also been built to comply with the IMO 2020 sulfur emissions standards and feature on board scrubbers for emissions filtering.

Toll intends to sell the predecessor vessels, the Tasmanian Achiever and the Victorian Reliance, on the second-hand market.

Hundreds of millions of AU$ in upgrades

In total, Toll is investing AU$311 million to upgrade its Bass Strait capacity. The new vessels cost AU$86 million each. Deploying larger ships required an infrastructure upgrade at the McGaw wharf, Burnie and also at Webb Dock, Melbourne. Those construction projects are underway; there is a process in place to allow cargo operations during the construction disruption.

At Burnie, upgrades include the replacement of new shore-side ramps, improvement of the mooring system, upgraded wharf-fenders and new concrete dolphins to take longer mooring lines. Dredging also took place, with 8,500 cubic metres of silt, clay and sandstone removed from the berth. A new shore-to-ship ramp will be installed which is 27 metres wide and 24 metres long. It weighs just under 170 tonnes.

Borg gives some insight into the nature of the trans-Bass Strait trade. He explained to FreightWaves that ro-ro cargoes include mining equipment, dry bulk minerals, scrap metals, fast-moving consumer goods for retail, time-sensitive perishable reefer cargoes (dairy, seafood, stone-fruit) and “lots of inputs to manufacturing.

Los Angeles box volumes are high, but so is trucker dissatisfaction

Container volumes remain strong, but delays mean fewer overall pickups; drivers also not pleased with new fees for flipping containers.

Port of Los Angeles container volumes hit record

The Port of Los Angeles finished up a strong 2018 for container moves, and 2019 is starting out strong as well. But the volumes coming through the port might be too much of a good thing for drayage carriers in the region, who report ongoing delays in moving containers in and out of the Port’s terminals. The Port of Los Angeles reported handling 9.458 million twenty-foot equivalent (teu) in containers last year, a 1.2 percent gain over the previous year. January volumes are shaping up as strong as December, according to local trucking companies.

This, despite concerns of a slowdown after the tariff-driven surge in imports last year. “We’re still getting far more opportunities to do dray than we have capability, and it’s been the same for our competitors,” said one executive with a local drayage operator who spoke on condition of anonymity. He says truck turn times at the Port reached 90 minutes last month, up near the highest of the year. “The fleet can’t pull out as many containers as they can when turn times are 70 minutes,” the executive said. At the largest of the port’s terminals, particularly the Maersk-owned APM Terminal, trucks can face two-hour turn times. “Some drivers just refuse to go there,” the executive continued.


Trucking companies not pleased with new fees

One way to reduce congestion at the ports is to bring an emptied container immediately to an exporter, without returning the container to the marine terminal. A “street turn” for a container makes four-legged trip into a three-legged one, thus saving a driver’s time, reducing emissions and lower the number of trucks getting in and out of port gates. Just recently, Maersk says it plans to automate street turn requests for North American shippers. Even so, it wants to be paid $30 just for making that request. Other ocean carriers are introducing fees of $40 to $75 as well for street turning containers. But those fees are not sitting well with trucking companies who say it penalizes them for a move that costs the ocean carrier nothing. The Agriculture Transportation Coalition says “penalizing street turns threatens one of the only measures available to shippers, carriers, terminals, truckers to address the unending congestion. . . street turns are supported by Amazon, Lowe’s and many exporters such as the AgTC members, as a means to reduce trucking costs, the number of truck moves, and congestion which is choking the terminals.”


Ports worldwide set to earn $25 billion for 2018

Estimated operating profit comes after 800 million teu year of throughput. (Hellenic Shipping News)

Natural gas-fueled ships expected to boom

Korea’s shipbuilders expect strong 2019 demand for LNG-fuelled ships. (Safety4Sea)

Ocean Alliance plans new service this April

Alliance partner CMA CGM says it will be ‘largest service offer’ on trans-Pacific. (T&L)

Fire-struck Hapag-Lloyd ship gets tug assist

Containership off coast of Canada remains at sea and awaiting tow. (Seatrade Maritime)

Chinese port becomes third largest globally

Ningbo-Zhoushan port follows Shanghai and Singapore in volume. (Seatrade Maritime)

U.S. government shut-down slowing goods

The now-longest shutdown of the U.S. federal government is rippling through supply chains, according to the Wall Street Journal, as limited staffing at various government agencies slows the flow of goods. Customs and Border Protection agents largely remain on the job despite not getting paid. But customs approvals from other government agencies are facing delays due to limited staffing. Arye Sasson, head of logistics for Signal Brands, told WSJ that it’s experiencing serious delays at the port . . . I honestly couldn’t tell you how much of it is from the shutdown, but it certainly doesn’t help.”

Etihad’s Abdulla Mohamed Shadid on the carrier’s transformation

Etihad’s Abdulla Mohamed Shadid on the carrier’s transformation

Abdulla Mohamed Shadid, managing director cargo and logistics at Etihad Aviation Group, provides an analysis of 2018 events and a foretaste of 2019 at the the Middle East carrier.

The last 12 months have witnessed record yields not seen in our industry in over a decade, combined with volume growth on the back of strong global economic recovery. It is therefore safe to say that 2018 has been a very successful one for the air cargo industry as a whole, both for the carriers and forwarders, and a rewardingly transformational one for Etihad Cargo in particular.

Having taken up my post in March this year, I can certainly say that the last nine months have been a steep learning curve regarding the opportunities and challenges in this unique and special industry.

Seen not only as an important division of the Etihad Aviation Group, but a major catalyst in the development of Abu Dhabi’s ambitious logistics strategy, Etihad Cargo began the year of our 15thanniversary with the biggest challenge yet: to implement a major transformation leveraging its foundations to evolve into a more sustainable and agile business.

To do this, we had to define and play to our many strengths whilst introducing new ideas, redefining our commercial approach to market whilst getting closer to our customers, taking advantage of new technologies by betting heavily on digitalization, and streamlining our freighter operations and service delivery. All of these combined to create a more efficient enterprise that delivers a better value proposition to our partners and clients.

This of course meant some fundamental change to our operating model, starting with our fleet and network strategy. 2018 saw this strategy play out positively, with the simplification of our fleet to focus on the Boeing 777 freighter, whilst refreshing our freighter network to focus on key trade lanes leveraging Abu Dhabi’s geographical positioning to maximize freighter to bellyhold flows.

Since October, this saw us improving connectivity across our network via Abu Dhabi while introducing key additional capacity into markets like China, India, Vietnam and Spain. We also extended our key partnership with Trinity Logistics in the US to continue our three weekly services into Rickenbacker (LCK), Columbus, in a multi-year agreement.

These changes bore fruit immediately, with each of our freighter load factors, our freighter-to-bellyhold flow ratios, and our freighter profitability at an all-time record high.

We also introduced a number of new initiatives targeting product verticals across different industry segments, and these have delivered some record results for Etihad Cargo in 2018.

Although general cargo is the beating heart for our industry and has witnessed steady growth over the past year, premium product verticals have outpaced general cargo in terms of growth, and we have seen it through the flows at our hub in Abu Dhabi. We project this trend will continue, especially with cool chain products.

Pharmaceuticals have witnessed the fastest growth and will continue to do so over the coming period, whilst a similar trend is seen in perishables, for which we recently launched our FreshForward service, designed to ensure items such as fresh fruit, vegetables, dairy, fish, meat and flowers move seamlessly across Etihad Cargo’s global network until they reach their final destination.

Others include VAL (valuables and precious metals) for which Abu Dhabi has become a global centre and Etihad Cargo a key player in this field since we entered this segment almost 5 years ago with our SafeGuard product.

The recent emergence of the cultural district on Abu Dhabi’s Saadiyaat Island has further introduced a flow of valuable art and musical instruments that we carry to and from our hub in Abu Dhabi.

There has also been a steady increase in the transportation of motor vehicles by air which historically was previously confined to sea travel, and we also saw growth in luxury cars transportation over the past years which led to the launch of our FlightValet product in July 2018, which carried a record number of vehicles in 2018.

Finally, live animals continue to take a larger share of the air cargo growth and of remarkable note is our SkyStables equine product, which saw us carry a record 2,000 horses in 2018.

On the partnerships front, Etihad Cargo is rethinking our global approach which historically was limited to interline arrangements only. While partnerships are not necessarily a focus for all cargo carriers, they will continue to be a major driver for growth for Etihad Cargo and we will see a lot of progress in this area over the coming 12 months, particularly for commercial and operational partnerships, codeshares and interlines.

A successful example of this was our commercial tie up with Emirates SkyCargo during the summer which saw an increased flow of volumes between our hubs in Dubai and Abu Dhabi.

A similar approach will see us deliver deeper ties with 5-6 select global carriers over the coming period, a couple of which are in advanced stages and we hope to be able to share more about over the coming months.

The year has also been the beginning of a ‘digital revolution’, with our full migration to ‘SPRINT’, the IBS iCargo fully integrated technology platform as the digital answer to our evolving cargo management needs, and this is one of the key areas we’ll see ongoing transformation over the next year, not just at Etihad but across the industry as a whole.

Already three months into the new system cut-over, we see a remarkable shift in the way we use data to manage our business and make commercial decisions.

Online bookings have also proved to be an instant success with more of our customers (especially in Asia) choosing it as their preferred booking channel. 2019 will see us start to roll out direct system interfaces between our iCargo platform and those of our major clients to allow seamless integrated bookings without having to pick up a phone, send an email or log online. Ten years from now this will become the industry norm.

This projected digitisation is fundamental for the industry. IATA has already signalled the direction our industry is headed, with their recent announcement that the electronic Air Waybill (e-AWB) will become the default contract of carriage for all air cargo shipments on enabled trade lanes starting 1st January 2019.

Like all technology, some markets have naturally embraced it faster than others, but the efficiency and opportunity of the streamlined process that e-AWB provides means it will continue to be adapted globally at a rapid pace, to near 100 percent adoption within a very short time.

At Etihad Cargo, although we offer both e-AWB as well as conventional paper-based AWB stock to our customers, we will be actively rolling e-AWB to our Customers on all our enabled trade lanes starting in January, to both support the IATA initiative as well as a natural step to offer a better service offering.

This digitisation will work hand-in-hand with more traditional initiatives to bring standardisation to the industry. Cargo IQ is a prime example of the future of the industry and while not everyone has adopted it yet, I see that changing steadily as we move forward, given the transparency and consistency it provides; it will very soon become the industry standard.

At Etihad Cargo we are proud to be one of the very first members, and we will actively support its growth and implementation.

Finally, from a Hub and infrastructure perspective, Etihad Cargo will continue to be a key part of Abu Dhabi’s ambitious economic development plans and there are numerous cross-Abu Dhabi entity initiatives that will make Abu Dhabi a world class hub for logistics.

Considering that high value product segments such as pharmaceuticals, perishables and valuables are growing faster than general cargo in our hub, a suite of considered investments will be made in our hub to better position us to cater for those segments.

These will include expansion of our dedicated cool chain rooms, as well as a new pharma build and break zone within the existing cargo facilities. A forward handling pharma storage zone is being considered for shorter dwelling transit units, as well as expanded delivery docks to facilitate quicker customer deliveries, including perishables.

These projects have already commenced, and majority of the works will be completed in 2019. And this is all but a stepping stone for a calculated long-term plan that will see Etihad Cargo move its hub operations to a new state-of-the-art facility within 5-6 years, the details of which will be defined before 2020.

At the end of 2018, it’s humbling to look back over these twelve months (or nine months for me personally); our team has worked incredibly hard to execute the strategic change we have undertaken, and I am proud of the positive steps forward we are taking.

We have achieved so much in a limited space of time, and can proudly say that we have developed the best year yet in the history of Etihad Cargo. But this is the start of our journey, and I look forward to both the opportunities and challenges ahead, and how we will see our industry evolve over the coming year.  

Roadrunner rights offering OKd; Elliott Management likely to end up owning almost all of it

Roadrunner rights offering OKd; Elliott Management likely to end up owning almost all of it

Among the carnage in the trucking stocks during the latest stock market collapse, one stock has stood out for its stability: Roadrunner Transportation (NYSE: RRTS) , solidly at a bit above 50 cts per share.

That is because last week, the company said its stockholders had confirmed what is known as a rights offering, giving shareholders the ability to purchase shares of the rebuilding Roadrunner at a price of 50 cts per share.

The rights offering and its details were announced several months ago as Roadrunner, beset by financial scandals in recent years, attempts to recapitalize the company. As of now, there are approximately 38.5 million shares outstanding; when the rights offering is completed, that number will be closer to a billion (depending on the timing of a likely reverse stock split) and the company will be effectively owned by Elliott Management.

FreightWaves sought clarification on details of the rights offering from investor relations personnel at Roadrunner but the company did not respond.  However, there is a tremendous amount of detail on the offering in the company’s proxy statement filed with the SEC in mid-November.

Under the rights offering, current Roadrunner stockholders will be given the right to purchase shares of the company at 50 cts per share. The amount of shares in the rights offering is 900 million. At 50 cts per share, that’s $450 million, which Roadrunner sees as necessary to change the capital structure of the company.

What is not clear is whether the current holders of the existing base of 38.5 million shares will actually take up the offer. If they don’t, Elliott Management has agreed to “backstop” the transaction and pick up the rest of the shares that were not purchased by existing shareholders. Elliott Management now owns about 9.6% of the company’s outstanding shares.

“If Elliott is the only holder of rights who exercises its rights in the rights offering…and Elliott provides the backstop commitment, we will issue an aggregate of 900 million shares of common stock to Elliott, which would increase Elliott’s ownership percentage of our common stock to approximately 96% after giving effect to the rights offering,” the proxy statement said.

That would mean Roadrunner as a widely-owned stock, albeit one with a price history that has seen its shares sink from a little less than $30 per share at the start of 2014 to its current near 50-cent level, would effectively end. “(W)e will be a ‘controlled company’ within the meaning of the NYSE listing standards, which could lessen protections afforded to our stockholders,” the proxy statement said. “Our status as a controlled company could also make our common stock less attractive to some investors or otherwise harm our stock price.”

But what the proceeds from the purchase of 900 million shares at 50 cts each would also do would be to eliminate the preferred stock ownership of Elliott that alternatively kept the company alive when it was made last year but is also burdening it with significant interest expenses. The preferred stock carries an interest rate in excess of 15%. The preferred stock would be closed out with the proceeds from the $450 million.

And what would Elliott Management be getting for approximately $450 million? (The number is approximate because it can’t be known how many other shareholders might take advantage of the rights offering, though at an open market price of just over 50 cts, using a rights offering to buy more stock at 50 cts does not hold any obvious upside). A company that is sending a lot of money out the door in interest expenses for its preferred shares, which would be disappearing; a company that had profitable nine-month EBITDA in its truckload segment of $26.5 million in the third quarter and EBITDA of $25 million in its Ascent Logistics division in the same quarter, with a negative EBITDA of $14.7 in its LTL division; and a company that had $1.66 billion in revenue for the first nine months of the year, compared to $1.53 billion in the first three quarters of 2017, revenue that included a now-divested unit. Elliott would be getting its preferred shares redeemed, but it would also be giving up a 15%-plus yield investment though one that is ultimately not sustainable.

What Elliott Management won’t be buying is a company that would stay as one with a shareholder base of 900 million shares. The proposals approved by shareholders in their recent vote included authorization for a reverse stock split of anywhere from 1:35 up to 1:100. Roadrunner, in the proxy statement, said it is in violation of current NYSE rules to maintain a share price in excess of $1 for 30 consecutive days and the reverse split would be intended to overcome that status.

In the company’s latest earnings call, CEO Curt Stoelting had the floor mostly to himself and other Roadrunner management. Only one other identifiable analyst, Bruce Chen of Stifel, was on the call. Two other questioners were unidentified and the questions asked by one of them indicated he had not read the news about the Elliott backstop agreement.

On the call, Stoelting said adjusting the company’s capital structure—by replacing preferred shares with common equity—“will support our longer-term business plans and increase the speed and likelihood of a full operational recovery, especially as it relates to obtaining cost-efficient financing for required fleet replacement and expansion as we move forward.”



The Maersk Mc-Kinney Moller arrived at DP World London Gateway today, the first vessel on the AE7/Condor service to call at the port.

The flagship Maersk Line vessel, which is 399 metres long and able to hold 18,270 twenty-foot equivalent container units, berthed on the River Thames in the early hours of Thursday morning.

2M, the largest container shipping alliance in the world, announced earlier this month that this particular Asia-Europe service would begin calling at DP World London Gateway Port on a weekly basis.

The AE7/Condor service is operated by Maersk Line and MSC, with Hamburg Sud and HMM taking slots on the service.

It carries cargo between the Chinese mainland, Hong Kong, North Africa and Northern Europe and on vessels which have capacity ranging between 17,500 and 19,500 TEU (twenty-foot equivalent units). In the past, the port has handled several of the vessels operating on this loop, including the 19,224 TEU vessel MSC Tina and the 18,270 TEU vessel Madison Maersk.

The announcement that the service would begin calling at DP World London Gateway came as the port celebrated its fifth anniversary on Tuesday, November 6.

During those five years, both MSC, Maersk and Hamburg Sud have become valued customers of the port, carrying UK trade in and out of the facility from countries in South and Central America, the Mediterranean, South Africa, Pakistan, India and more.

Since opening, the port has grown to handle a total of 22 weekly services which link London to more than 115 ports in over 61 different countries.

A combination of cutting-edge automated technology, hard work from a dedicated, customer-focussed team and will to constantly refine and improve operations at the port has contributed to the River Thames facility being one of the fastest growing ports in the world, by percentage TEU growth.

Gateway, which will continue to offer market-leading landside connections and direct sailings to Jebel Ali in 20 days, and Salalah in 18 days.

“We’ve worked closely with DP World for a number of years, so we’re delighted to see even more customer interest in services calling at the port.”

Brian Godsafe, Managing Director UK & Ireland, Maersk Line, said:

“In order to serve the transportation needs of our customers in the best possible way and optimise our offering in the UK, we have decided to change to port rotation of the AE7 service, as part of Asia-Europe network.

“We expect that with this change, our customers will experience a reduced number of schedule changes and unexpected disruptions, all while enjoying the usual service level provided by Maersk.”

Chris Lewis, UK Chief Executive Officer, DP World, said: “We are delighted that the AE7 has started its regular call at London Gateway and we are grateful to MSC, Maersk Line, Hamburg-Sud and HMM for backing us to deliver fast, efficient and reliable services to them and their customers.

Michael Collins, Commercial Director, MSC UK, said:

“In order to maintain the highest level of service for our customers in the UK, we have welcomed the change of the Condor service to DP World London 

“It is five years since the port was formally opened and in that time DP World has remained steadfast in its determination to develop a global hub (port and logistics park) for UK trade. By investing in the latest technology and employing the best people in a location that reduces carbon emissions and cost in the supply chain, we have turned this vision into reality and we will continue to innovate and improve our services for customers going forward.”