Capital Product Partners sees improved results and updates tanker spin-off plans

Feb 01 2019

Capital Product Partners has announced that net income for the fourth quarter of 2018 was $13.2 mill, compared with $6.8 mill for the fourth quarter of 2017 and net loss of $22.6 mill for the previous quarter ended 30th September, 2018.

The 4Q17 and 3Q18 net income included a non-cash impairment charge of $3.3 mill and $28.8 mill, respectively, in connection with the sale of the tankers ‘Aristotelis’ and ‘Amore Mio II’.

Operating surplus prior to allocations to the company’s capital reserve and distributions to the Class B Units for 4Q18 amounted to $33.4 mill, compared to $30.3 mill for 4Q17 and $27.4 mill for 3Q18. The company allocated $13.6 mill to the capital reserve in 4Q18, in line with the previous quarter.

Total revenue for the fourth quarter was $74.8 mill, an increase of 16.7% compared to $64.1 mill reported for 4Q17. This increase was primarily due to the increase in the number of days the vessels were employed under voyage charters during the period and the increase in the average charter rates earned by some of the vessels, compared to 4Q17.

As of 31st December, 2018, total partners’ capital amounted to $881.3 mill, a decrease of $52.1 mill on the $933.4 mill recorded at the end of 2017. The decrease was primarily due to the distributions declared and paid in the total amount of $52.6 mill during the year ended 2018.

At the same date, the Partnership’s total debt was $445.9 mill, a decrease of $29.9 mill, compared to $475.8 mill as of 31st December, 2017.

On 27th November, 2018, the Partnership announced that it entered into a definitive transaction agreement with DSS Holdings, a private company and one of the world’s largest owners and operators of MRs and Suezmaxes, by which it has agreed to spin off its crude and product tanker business into a separate publicly listed company, which will merge with DSS in a share-for-share transaction.

The new company, Athena Spinco, to be called Diamond S Shipping, will benefit from a balanced and large-scale portfolio of vessels, strong management leadership and a cost-efficient commercial platform, Capital said.

Its portfolio will consist of the combined product and crude tanker fleet of CPLP and DSS, totalling 68 tankers, with an average age of 7.8 years. The new company is expected to be listed on the New York Stock Exchange.

The transaction’s is expected to close by the end of the first quarter of 2019 and is subject to certain conditions, including the effectiveness of Diamond S Shipping’s registration statement, the approval of its listing application, the ability of Diamond S and CPLP to draw the amounts required to consummate the deal under their respective committed debt financing and the consent of CPLP’s banks to the partial prepayment and amendment of CPLP’s existing credit facilities.

Athena Spinco - to be called Diamond S Shipping - has filed a preliminary joint Form 10 / information statement with the US Securities and Exchange Commission

Jerry Kalogiratos, CEO of the Partnership’s General Partner, commented: “We are pleased to see rates for crude and product tankers have been registering a strong recovery since 4Q18, which is partly reflected in our increased operating surplus compared to the previous quarter.

“We see this as a further affirmation of our decision to pursue the spin-off of our tanker assets and merger with a more spot oriented company, such as DSS, as announced on 27th November, 2018. The long-term fundamentals of the product and crude tanker market remain strong in view of the underlying demand, the declining orderbook, as well as the changing regulatory environment, including the implementation of IMO 2020 regulation. In this context, we expect that the transaction will provide our unitholders with an enhanced exposure to the crude and product tanker markets through DSS, while our unitholders will continue to receive meaningful distributions on their common units from CPLP, which will be well underpinned by the long-term charter coverage of our remaining fleet.

“Additionally, we expect that the transaction will give the Partnership new momentum to grow its asset base of modern vessels employed under medium- to long-term charters and grow our long-term distributable cash flow,” he said.


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