Tanker owner and operator Teekay Tankers has signed a term sheet for a sale-leaseback financing transaction for seven tankers.
These include three Suezmax tankers, two Aframax tankers and two LR2 product tankers.
Under the terms of the deal, structured as 10- to 12-year bareboat charters, Teekay Tankers will hire back the seven ships for USD 7,200 per day and has options to buy back all seven ships throughout the lease term after year three.
Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer, said that the deal is expected to provide approximately USD 36 million in additional liquidity and extend the company’s debt maturity profile.
“Should the tanker market remain under pressure, we have several options available to continue strengthening our balance sheet, including further sale-leaseback transactions which are currently under discussion,” he noted.
“In addition, we have decided to eliminate our minimum dividend payment, which will result in retaining approximately USD 32 million of cash flow annually, but maintain the variable portion of our dividend policy, which will provide investors with the ability to directly participate in a tanker market recovery.”
The company is reporting its results for the first time since closing the merger deal with Tanker Investments Ltd (TIL).
The company ended the quarter with a GAAP net loss of USD 9.2 million and adjusted net loss of USD 22 million, substantially up from last year’s equivalent of USD 1.8 million loss.
During the quarter, Teekay Tankers secured time charter-in contracts for two Aframax vessels, with an average rate of approximately USD 11,900 per day, and firm periods of 45 days to six months.
“Since reporting our fourth quarter earnings, we have continued to take proactive steps to further strengthen our balance sheet to better position Teekay Tankers during this cyclical low point in the tanker market,” commented Mackay.
“While OPEC supply cuts and an oversupply of tanker tonnage continued to weigh on crude tanker rates during the first quarter of 2018, our fixed charter cover and growing full-service lightering business continued to provide strong results during this time of tanker market weakness.”
Looking ahead, Teekay Tankers expects the tanker market to remain under pressure in the near-term.
“We remain encouraged by the significant increase in tanker scrapping and strong global oil demand forecasted through the rest of this year and into 2019, which in combination with more moderate fleet growth, should lead to a tanker market recovery during the latter part of 2018 and into 2019,” Mackay added.
On a consolidated basis, Teekay Corporation booked a net loss of USD 20.6 million for the quarter, down from last year’s loss of USD 25 million, primarily driven by higher cash flows from Teekay Parent’s directly-owned FPSO units.
“We believe that our LNG and offshore businesses are at a positive inflection point and we remain encouraged by the improving fundamentals in our tanker business as we approach 2019,” Kenneth Hvid, President and Chief Executive Officer, said.