Capital Product Partners L.P. (Nasdaq: CPLP) is an international, shipping company engaged in the seaborne transportation of containerized goods and dry cargo. 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.
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 fourteen high specification vessels: thirteen Neo Panamax container carrier vessels and one Capesize bulk carrier.
The average age of the CPLP fleet is 7.8 years (as of January 31, 2020).
CPLP vessels have been designed and equipped to the highest specification.
The International Maritime Organization (IMO) new regulations, effective January 1, 2020, have limited the sulfur in fuel used by ships to 0.5% from 3.5%. In consideration of these new regulations, the Partnership has equipped five of its vessels with an exhaust gas cleaning system (“scrubber”) and has commenced the process of installing scrubbers on two more of its containers with scrubbers. The installation of the scrubbers is expected to be completed by the end of the first quarter of 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 Partnership’s business model.
CPLP vessel charters have an average revenue weighted remaining term of 4.6 years (as of December 31, 2019), with staggered expirations. The Partnership’s charter coverage for 2020 and 2021 currently stands at 92% and 73%, respectively (as of December 31, 2019).
CPLP’s vessels are chartered to reputable counterparties worldwide including major operators and liner companies. Over the years, CPLP vessels have secured long term employment among others with CMA-CGM, Hapag-Lloyd, HMM, Maersk Lines, MSC and COSCO.
Sustainable Distribution – Growth Strategy & Financial Strength
Acquired three 10,000 TEU sister container vessels in January 2020 for a total consideration of $162.6 million from Capital Maritime & Trading Corp. (“Capital Maritime”). The vessels, the M/V ‘Athos’, the M/V ‘Aristomenis’ and the M/V ‘Athenian’ built in 2011 at Samsung Heavy Industries, are employed under long-term time charters with Hapag-Lloyd which will expire in April 2024.
In view of this acquisition the Partnership increased its common unit distribution by approximately 11% and set a new quarterly distribution guidance of $0.35 per common unit.
The common unit distribution coverage for the twelve-month period ended December 31, 2019 was 1.7x.
CPLP maintains a strong balance sheet and capital structure with net debt/capitalization of 29.7% (as of December 31 2019).
Quarterly capital reserve in place intended to address our principal amortization requirements. For the fourth quarter of 2019, we allocated $7.7 million to the capital reserve in line with the previous quarter.
Entered into a term sheet with ICBC Financial Leasing Co., Ltd. (“ICBCFL”) for the sale and lease back of three vessels currently mortgaged under our 2017 credit facility, namely the ‘CMA CGM Amazon’, the ‘CMA CGM Uruguay’ and the ‘CMA CGM Magdalena’, for a total amount of $155.4 million. The estimated repayment amount required to release these three vessels under the 2017 credit facility is $119.9 million. Total estimated debt amortization after the partial refinancing under the ICBCFL lease and the 2017 credit facility will amount to $27.4 million per year compared to $30.8 million annual debt amortization currently paid under the 2017 credit facility.
CPLP’s sponsor, Capital Maritime, is a large, financially strong and diversified shipping company with a long, successful track record.
Capital Maritime owns a 14.4% stake in the Partnership (as of December 31, 2019).
Capital Maritime has an extensive network of relationships with oil majors, traders, liners and other major charterers.
Last updated February 5, 2020