Capital Product and HMM Agree On Charter Rate Cuts

Athens-based Capital Product Partners has agreed to lower the rates for five of its 5,023 TEU container ships currently on long-term charters with Hyundai Merchant Marine by 20 percent until December 2019, as part of the South Korean carrier’s restructuring plans.

Capital’s vessels, Hyundai Prestige, Hyundai Premium, Hyundai Paramount, Hyundai Privilege and Hyundai Platinum, are each under time charters with HMM which expire in 2025.

This agreement provides for the reduction of the charter rate from USD 29,350 to USD 23,480 per day gross for a three-year period starting in July 2016 and ending in December 2019.

The total charter rate reduction for the three-year period aggregates to approximately USD 37 million. The charter restructuring agreement further provides that at the end of the 2019, the charter rate under the respective charter parties will be restored to the original daily rate of USD 29,350 until the expiry of each charter in 2025.

In exchange for the charter reduction, Capital will receive shares in HMM that are expected to be freely tradable on the stock market division of the Korean Exchange, and/or an unsecured loan to HMM in an aggregate amount initially equal to the charter reduction. The charter reduction compensation is expected to be delivered by July 23, 2016.

“We are pleased to see that the out-of-court restructuring of HMM — one of the largest charterers of the Partnership in terms of revenues — has been successfully agreed with the participation of HMM’s key financial creditors together with the announcement that HMM intends to join the ‘2M Alliance’ — the world’s largest container shipping alliance, which comprises Maersk Line and Mediterranean Shipping Co.,” Jerry Kalogiratos, Chief Executive and Chief Financial Officer of the Partnership’s General Partner, said.

”While the impact of the HMM Vessels charter rate reduction will adversely affect our cash flows until the end of 2019, when the charter rate under the respective charter parties is expected to be restored to the original rate, we believe that the reduced charter rate and the Charter Reduction Compensation that we expect to receive represents a more favorable outcome given the alternative employment opportunities in the current depressed container charter market.”

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