Operating surplus was $32.8 mill, which is $2.4 mill lower than the $35.2 mill recorded in 4Q15 but $2.9 mill higher than the $29.9 mill reported in 1Q15.
The board decided to put aside $14.6 mill in capital reserves for 1Q16, a level that is expected to be maintained for the foreseeable future.
Total revenues for 1Q16 reached $58 mill, compared to $48.9 mill during 1Q15, corresponding to an increase of 19%. The rise was mainly due to the increased size of the Partnership’s fleet.
As of 31st March, 2016, the partners’ total capital amounted to $918 mill corresponding to a decrease of $19.8 mill from the capital as of 31st December, 2015, which amounted to $937.8 mill.
As of 31st March, 2016, the Partnership’s total debt increased by $30.8 mill to $602.4 mill, compared to $571.6 mill as of 31st December, 2015. The increase was due to the $35 mill drawdown under the senior secured credit facility with ING Bank to fund the acquisition of a containership, partially offset by $4.2 mill of scheduled loan principal payments during 1Q16 under the same credit facility.
In a comment, the management said; “The board of directors have announced the creation of a capital reserve, a related reduction in available cash distributable on common units and the resetting of the common unit distribution level to a new sustainable path. Accordingly, our Board has fixed our common unit distribution for the first quarter of 2016 at $0.075 per common unit and issued a new annual distribution guidance of $0.30 per common unit, with the expectation to maintain that annual distribution level through 2018.
“Over the last few quarters, the Partnership has experienced a significant deterioration in the trading price of its common units and, as a result, a sharp increase in its cost of capital. This deterioration has occurred against the backdrop of a severe equity and debt market pricing dislocation for a number of publicly traded master limited partnerships.
“In practice, this means that our ability to access capital markets is currently severely restricted. In addition, following a prolonged downturn in the container and drycargo shipping markets, Hyundai Merchant Marine Ltd (HMM), one of our largest charterers in terms of revenues, has engaged in a restructuring process, which, even if completed successfully, could potentially result in a substantial loss of revenues for the Partnership.
“In the context of high capital costs and a potential decrease in revenues, one of our credit facilities has started amortising in the first quarter of 2016, while our three other credit facilities will start amortizing in the fourth quarter of 2017. As a result, we are due to repay approximately $175.7 mill of debt during the period between the first quarter of 2016 and the end of 2018.
“In the past, we successfully managed to extend the non-amortising periods and maturities of our credit facilities, which is not practicable today in a cost effective manner. In light of these circumstances, the Board of the Partnership has decided to reserve approximately $14.6 mill on a quarterly basis to fully provide for the debt repayments coming due in the next three years, up until the end of 2018.
“We expect that these actions and our new annual distribution level will allow us to maintain a strong balance sheet. We also expect the new distribution level to be sustainable, even if the attempted restructuring of HMM is unsuccessful and we are forced to re-deploy the five vessels under charter with HMM in the currently weak container market.
“Based on our contracted cash flow in the coming years, we expect the new distribution level to provide a healthy common unit distribution coverage ratio after giving effect to the new reserves, even allowing for the adverse events mentioned above.
“We intend to revisit our annual distribution guidance from time to time, including if the Partnership’s access to the capital markets improves, if we are successful in refinancing our debt obligations in the coming years under favourable terms or if we are able to pursue accretive transactions by expanding our asset base and increasing the long term distributable cash flow of the Partnership,”the statement said.