During LISW, Scorpio Tankers managing director David Morant was asked where he would invest. “I would buy modern MR or newbuild resales..." he replied, which is exactly what the company has done
Investing in modern tonnage and resales appears to be what Scorpio Tankers had in mind during LISW, when only a few days later the company announced it has acquired subsidiaries of Trafigura Maritime Logistics, which have leasehold interests in 19 product tankers for an aggregate value of US$803M.
For Trafigura, it represents more assurance to stakeholders that it has security of tonnage supply in place ahead of the chaos and potential disruption of IMO 2020. The Scorpio Tankers, the product tanker sales and leaseback deal come only a few weeks after John Fredriksen’s Frontline took on up to 10 Suezmax tankers from Trafigura and ahead of an earlier bunker trading joint venture with the same partner.
The leasehold interest in the product tankers includes a lease arrangement with a financial institution under a bareboat contract arrangement. The value of the 19 tankers is US$803M and the value of the finance lease arrangement is approximately US$668M. Scorpio Tankers will issue 4.7M shares at US$29.00 each to Trafigura for a market value of US$135M.
Scorpio Tankers also announced private placements with Trafigura for US$35M and Scorpio Services Holding Ltd, a related party, for US$15M for an aggregate of US$50M or 1,724,137 shares at US$29.00 per share.
Scorpio Tankers chief executive Emanuele A Lauro commented “This transaction represents a close alignment between Scorpio Tankers and Trafigura, a strategic customer and now a valued shareholder. 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 old) 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 tonne-mile demand significantly over the coming months.”
Trafigura global head of wet freight Rasmus Bach Nielsen, commented “Trafigura enjoys a close working relationship with Scorpio Tankers, a company that we consider to be very well run. Today’s decision completes a strategic decision to crystalise 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. We are delighted that through these agreements Trafigura has become a significant shareholder in Scorpio Tankers. 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.”
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 Scorpio Tanker, all the tankers will be fitted with scrubbers. The commercial and technical management of the 19 product tankers will be transitioned to Scorpio Tankers following the closing of the transaction.
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