CPP looking for further acquisitions

Feb 02 2018

Capital Product Partners (CPP) has announced that net income for the fourth quarter of last year was $6.8 mill, compared with $13.7 mill for 4Q16 and $9.7 mill for 3Q17.

Net income for 4Q17 included a non-cash impairment charge of $3.3 mill from the sale of the ‘Aristotelis’. 
Operating surplus prior to allocations to CPP’s capital reserve and distributions to the Class B Units for the quarter amounted to $30.3 mill, compared to $34 mill for 4Q16, and $30.3 mill for 3Q17. 
Around $13.2 mill was allocated to the capital reserve during 4Q17, which was $1.4 mill less than allocated in the previous quarter. The decrease in the quarterly allocation to the capital reserve reflected the reduction in the overall level of debt and the amortisation payments under the credit facilities, following the partial prepayment and successful refinancing of substantially all of CPP’s debt in 4Q17. 
Operating surplus after the quarterly allocation to the capital reserve and distributions to the Class B Unitholders was $14.3 mill. This is a non-GAAP financial measure used by certain investors to measure the financial performance of CPP and other master limited partnerships. 
Total revenue for 4Q17 reached $64.1 mill, corresponding to an increase of 2.7% compared to $62.4 mill during 4Q16. The increase was primarily a result of the higher number of voyage charters performed by the vessels, compared to 4Q16 and the increase in the number of operating days in 4Q17, partially offset by lower charter rates earned by some of the vessels during the period, compared to the average charter rates earned during the corresponding period in 2016.
Total expenses for 4Q17 were $51.4 mill, compared to $43.2 mill in 4Q16. Total vessel operating expenses amounted to $23 mill, an increase of 12.7% compared to $20.4 mill during 4Q16. This increase mainly reflected the increase in the number of vessels in the fleet incurring operating expenses, following the redelivery of the ‘Aktoras’ and ‘Aiolos’, which were previously employed on bareboat charters and the acquisition of ‘Amor’ in October, 2016. 
The 4Q17 expenses included vessel depreciation and amortisation of $18.4 mill in line with 4Q16 and an impairment charge of $3.3 mill in connection with the sale of the ‘Aristotelis’. 
As of 31st December, 2017, total partners’ capital amounted to $933.4 mill, an increase of $5.6 mill, compared to $927.8 mill as at the end of the previous year. The increase primarily reflected net income for 2017 and the net proceeds from the issuing of common units under CPP’s at-the-market equity offering, partially offset by distributions declared and paid during the year of $51.6 mill.
Total cash as of 31st December, 2017 amounted to $81.3 mill, of which restricted cash (under our credit facilities) amounted to $18 mill.
CPP’s total debt was $475.8 mill, a decrease of $129.2 mill, compared to $605 mill as of 31st December, 2016, due to the partial prepayment of $116.2 mill in connection with the refinancing of a majority of the Partnership’s debt during 4Q17 and scheduled loan principal payments during the first nine months of 2017.
On 17th January, 2018, the Partnership acquired the 2017-built Suezmax ‘Aristaios’ for $52.5 mill from the Partnership’s sponsor, Capital Maritime & Trading Corp. ‘Aristaios’ is currently employed under a timecharter to Tesoro Far East Maritime at a gross daily rate of $26,400. This charter commenced in January, 2017 with duration of five years +/- 45 days. 
On 22nd December, 2017, CPP agreed to sell the 2013-built MR ‘Aristotelis’ to an unaffiliated third party for $29.4 mill. Upon entering into the sale, the Partnership classified the vessel ‘as held for sale’ and thus recognised an impairment charge of $3.3 mill. Her delivery to the buyer is expected in March, 2018, before the vessel’s scheduled special survey.
In addition, the Partnership has agreed to acquire, conditional upon the successful completion of the sale of the ‘Aristotelis’, the 2016-built MR ‘Anikitos’ for about $31.5 mill from Capital Maritime. She is currently employed by Petrobras at a gross daily rate of $15,300 with earliest charter expiry in June, 2020. The charterer has the option to extend the timecharter for another 18 months (+/-30 days) at the same gross daily rate.
Jerry Kalogiratos, CEO and CFO of the Partnership’s General Partner, commented: “We are pleased to have completed the acquisition of the ‘Aristaios’, soon after refinancing the majority of our indebtedness in the fourth quarter of 2017. The acquisition of the ‘Aristaios’ provides good cash flow visibility to our unit holders underpinned by another four years of remaining employment to a solid counterparty.
“Moreover, towards the end of the fourth quarter, we took advantage of an opportunity in the secondhand market to sell the ‘Aristotelis’ to an unaffiliated third party at an attractive price and committed to replace her with a younger, second generation eco MR product tanker, the ‘Anikitos’ with long term employment in place. 
“The net cash outflow for the intended replacement is currently estimated to be less than $2 mill. As such, we believe that this is an excellent trade for the Partnership and together with the acquisition of the ‘Aristaios’, this further contributes towards our long term goal of replenishing our fleet.
“We are also pleased to see the Partnership continue to deliver strong common unit distribution coverage after accounting for our debt amortisation and the Class B Unit distributions. It is worth highlighting here that during the fourth quarter we have seen signs of improvement in the product tanker space, where we have most of our short- to medium-term re-chartering exposure.
“In these circumstances and subject to market conditions and availability of financing, we continue to aim to take advantage of a range of acquisition opportunities, whether from Capital Maritime or in the secondhand market, with the objective of further increasing the long-term distributable cash flow of the Partnership,” he concluded.

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