Capital Product Partners L.P. (Nasdaq: CPLP) is an international, shipping company engaged in the seaborne transportation of a wide range of cargoes, including dry cargo and containerized goods. As a publicly traded master limited partnership, CPLP has elected to be treated as a C-Corp. for tax purposes which is most beneficial for U.S. investors (as they receive the standard 1099 form). The Partnership is well-positioned to benefit from the long-term growth dynamics of the global shipping industry and to capitalize on potential acquisition opportunities in the fragmented shipping market. CPLP benefits from the commercial and technical management agreement with Capital Ship Management Corp. (‘CSM’), an established and reputable diversified shipping company.
On March 27, 2019, the Partnership consummated the spin-off and merger of its tanker fleet with DSS Holdings L.P. forming one of the largest publicly traded tanker companies, Diamond S Shipping, Inc. (NYSE: DSSI). CPLP shareholders received approximately 32% of DSSI’s shares while retaining their ownership in CPLP.
Modern High Specification Fleet
The CPLP fleet currently consists of eleven high specification vessels; ten Neo Panamax container carrier vessels and one Capesize bulk carrier.
The average age of the CPLP fleet (weighted by dwt) is 7.1 years (as of May 31, 2019).
CPLP vessels have been designed and equipped to the highest specification and are compliant with current regulatory requirements.
The International Maritime Organization (IMO) new regulations, effective January 1, 2020, will limit the sulfur in fuel used by ships to 0.5% from 3.5%. In consideration of these new regulations, the Partnership announced a plan to equip all of its fleet with exhaust gas cleaning systems (“EGCS”), also known as scrubbers, comprising ten containerships and one bulk carrier. The installation of the scrubbers is expected to be completed throughout 2019 and 2020.
Fleet Employment -- Visible & Stable Cash Flows with High Quality Counterparties
CPLP’s modern containership assets and multi-year time charters are highly suitable for the MLP model.
CPLP vessel charters have an average revenue weighted remaining term of 5.1 years (as of March 31, 2019), with staggered expirations. The Partnership’s charter coverage is 94% for 2019 and 76% for 2020 (as of March 31, 2019).
CPLP vessels are chartered under medium- to long-term, fixed-rate time charters with reputable counterparties worldwide including major operators and liner companies. Over the years, CPLP vessels have secured long term employment among others with Andeavor, BP Shipping, Cargill, Petrobras, Repsol, Shell, Total, CMA-CGM, HMM, Maersk Lines, MSC and COSCO.
Sustainable Distribution – Growth Strategy & Financial Strength
The Partnership’s common unit distribution for the first quarter of 2019 was $0.315 per common unit.
The common unit distribution coverage for the three month period ended March 31, 2019 was 1.4x after accounting for Class B distributions and the capital reserve.
Strong balance sheet with net debt to capitalization ratio at 29.8% as at the end of the first quarter of 2019. Part of the debt proceeds raised by DSS for the acquisition of the CPLP tankers were used to fully redeem the CPLP Class B Unit series outstanding at 100% of its redemption value ($116.8 million) and to reduce the Partnership’s indebtedness to $285.5 million compared to $445.9 million as of December 31, 2018.
Following the consummation of the spin-off of our Crude and Product Tanker Business and depending on our access to the financial markets, our objective is to pursue additional accretive transactions going forward and expand our asset base, with a view to further increasing the long-term distributable cash flow of the Partnership.
Capital Maritime & Trading Corp. (“Capital Maritime”), CPLP’s sponsor, owns significant tanker, LNG and container tonnage which could potentially be dropped down to the Partnership comprising of, among others, 6 LNG ships, 10 VLCCs, 4 Chemical/Product tankers and 2 10,000-teu containerships, some of which are contracted under medium to long term charters ranging between 3-7 years.
Strong Sponsor Qualified for Long-Term Charter Business with Major Industry Charterers
CPLP’s sponsor, Capital Maritime, is a large, financially strong and diversified shipping company with a long, successful track record operating across all major shipping segments.
Capital Maritime owns a 16.3% stake in the Partnership (as of March 31, 2019).
Capital Maritime has an extensive network of relationships with oil majors, traders, liners and other major charterers.
CPLP has entered into management agreements with Capital Ship Management Corp. (CSM) that provides commercial and technical management for all of its vessels.
CSM manages the CPLP fleet and the 25 crude and product tankers that were contributed by CPLP to Diamond S Shipping Inc. CSM has passed rigorous operational, safety and environmental audits and its numerous accreditations and accolades include the: “Green Environmental Achievement Award” 2014 by the Port of Long Beach in Southern California; QualShip 21 awards in 2014 & 2015, repeated Amver Awards and the Amver ‘Special Rescue Award’ 2014 by the U.S. Coast Guard; “Tanker Company of the Year 2009” Lloyd’s List Greek Shipping Award.
CSM has a Safety Management System in compliance with the IMO’s ISM code, the Quality Assurance Standard ISO 9001, the Environmental Management Standard ISO 14001, the Occupational Health & Safety Management System (“OHSAS”) 18001 and the Energy Management System ISO 50001. All are certified by the Lloyd’s Register of Shipping.
CSM was the first company worldwide in 2014 to receive independent verification and certification by Lloyds Register of Shipping for its business strategy in accordance with the “IMO Strategic Concept of a Sustainable Shipping Industry”. CSM has established a task force to implement specific actions addressing Sustainability.
Last updated May 31, 2019