Impairment charge takes Capital into the red

Nov 03 2018

Capital Product Partners has announced a net loss for the third quarter of this year of $22.6 mill.

This included a non-cash impairment charge of $28.8 mill from the sale of the Suezmax ‘Amore Mio II’ to an unaffiliated third party for $11.2 mill.

Excluding this impairment charge, the Partnership’s net income for 3Q18 was $6.2 mill compared with net income of $9.7 mill for 3Q17 and $4 mill for the 2Q18.

Operating surplus prior to allocations to the capital reserve and distributions to the Class B Units for the quarter amounted to $27.4 mill, compared to $30.3 mill for 3Q17, and $24.9 mill for 2Q18. For 3Q18, Capital allocated $13.6 mill to the capital reserve, an increase of $0.4 mill, compared to the previous quarter.

Total revenue for 3Q18 was $73.4 mill, an increase of 17.1% compared to $62.7 mill during 3Q17. This increase was primarily as a result of the increase in the average number of vessels in the fleet following the acquisition of the ‘Aristaios’ in January, 2018 and the higher number of voyage charters performed, compared to 3Q17.

This was partially offset by lower average timecharter rates earned by certain of the vessels compared to the corresponding period in 2017 and by an increase in off-hire days in connection with certain of the vessels passing special surveys.

As of 30th September, 2018, total partners’ capital amounted to $881.2 mill, a decrease of $52.2 mill compared to $933.4 mill as of 31st December, 2017. The decrease was primarily due to the net loss of $13.3 mill for the first nine months of 2018 and the distributions declared and paid in the total amount of $39.5 mill for the period.

Total cash, including restricted cash under the credit facilities, as of the same date amounted to $47.3 mill. Restricted cash under the credit facilities amounted to $18.5 mill.

The Partnership’s total debt was $465.1 mill, a decrease of $10.7 mill compared to $475.8 mill as of 31st December, 2017, which was attributed to the scheduled loan principal payments during the first nine months of 2018 and the mandatory prepayment of $14.4 mill made under the 2017 credit facility in connection to the sale of the ‘Aristotelis’ in 2Q18. This was partially offset by the assumption of a $28.3 mill term loan in relation to the acquisition of the ‘Aristaios’ and a $15.6 mill term loan in connection to the acquisition of the ‘Anikitos’ in the first half of 2018.

The Partnership is planning to install scrubbers on up to 14 of its larger vessels, comprising 10 containerships, three crude tankers and one bulk carrier.

Jerry Kalogiratos, CEO of the Partnership’s General Partner, commented: “As a general note, the overall weakness of the tanker market this quarter, which continued to experience multi-decade lows, and the off hire and expenses related to certain of our vessels undergoing special survey continued to adversely affect our financial results. However, we are pleased to see our common unit distribution coverage increase to 1.1x in this quarter, as our cash flow generation improved on the back of increased revenues, as certain of our vessels entered into previously secured long term charters.

“Furthermore, we believe that our decision to equip part of our fleet with scrubbers is an important and necessary decision in view of the IMO 2020 regulation, whose effects on our underlying markets remain widely debated in the industry. We believe that this move can help increase the appeal of the Partnership’s larger vessels to period charterers post January 2020, but also potentially allow us to capture meaningful premiums, such as that negotiated with one of our charterers for five of our vessels,” he said.



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