Monaco-based tanker owner and operator Scorpio Tankers has agreed to acquire subsidiaries of Trafigura Maritime Logistics, which have leasehold interests in 19 product tankers, for an aggregate value of USD 803 million.
The acquisition of the leasehold interest in the vessels includes a finance lease arrangement with a financial institution under a bareboat contract arrangement.
After the assumption of the present value of the finance lease arrangement of around USD 668 million, the company will issue 4.7 million shares at USD 29 per share to Trafigura for an aggregate market value of USD 135 million. The shares will be subject to a customary lock-up through December 31, 2019.
Additionally, Scorpio Tankers revealed private placements with Trafigura for USD 35 million and Scorpio Services Holding Ltd., a related party, for USD 15 million for an aggregate of USD 50 million or 1,724,137 shares at USD 29 per share. Both transactions are expected to close before September 27, 2019.
“This fleet of 19 ultra-modern product tankers is a singular opportunity in an otherwise diminished global orderbook. The average age of our fleet will be reducing (from 4.1 to 3.7 years) and our fuel efficiency is expected to increase with the addition of these modern scrubber fitted vessels. At the same time, IMO 2020 and other demand drivers are set to increase ton-mile demand significantly over the coming months,” Emanuele A. Lauro, Chief Executive Officer of Scorpio Tankers, said.
“Today’s decision completes a strategic decision to crystalize financial benefits now and to move long term leasing obligations into leading shipping equities, a place where we see significantly more value and upside potential in the period ahead,” Rasmus Bach Nielsen, Global Head of Wet Freight at Trafigura, noted.
“In our view, minimal supply growth and an expected demand spike through oil market disruption and bunkering inefficiencies, are making product tanker market fundamentals look healthier than we’ve seen for many years,” Nielsen added.
The acquisition consists of leasehold interests in four LR2s and 15 MRs. Fifteen of the vessels are currently on the water with an average age of 0.5 years, and the remaining four MR vessels will be delivered in 2020. Upon delivery to the company, all ships will be fitted with scrubbers. The commercial and technical management of the vessels will be transitioned to Scorpio Tankers following the closing of the transaction.
Finance lease arrangement
Under the terms of the finance lease arrangement, each of the vessels will be bareboat chartered to one of the acquired companies pursuant to an eight-year charter that commenced, or will commence, upon delivery of the respective vessels. The company will assume a principal balance of around USD 530 million for 15 vessels on the water and USD 138 million for the four vessels under construction, or USD 668 million in the aggregate.
Charterhire under each bareboat charter will be comprised of a fixed monthly payment and a variable monthly interest payment equal to the three-month LIBOR plus 3.5% of the remaining principal balance of the finance lease. Scorpio Tankers will also have the option to purchase some or all of the vessels at intervals throughout the term of the arrangement.
Separately, Scorpio Tankers said it intends to establish an “at the market” offering program pursuant to which the company may sell up to USD 100 million of its common shares, par value USD 0.01 per share.
The company expects to enter into an equity distribution agreement with a sales agent, pursuant to which sales of the common shares may be made from time to time in transactions by means of ordinary broker transactions through the New York Stock Exchange or in negotiated transactions at market prices prevailing at the time of sale.