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 eleven high specification vessels: ten Neo Panamax container carrier vessels and one Capesize bulk carrier.
The average age of the CPLP fleet is 7.4 years (as of October 31, 2019).
CPLP vessels have been designed and equipped to the highest specification.
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 has equipped the M/V ‘Agamemnon’ with an exhaust gas cleaning system (“scrubber”) and has announced a plan to equip six 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 4.8 years (as of September 30, 2019), with staggered expirations. The Partnership’s charter coverage for the remainder of 2019, 2020 and 2021 currently stands at 100%, 90% and 67%, respectively (as of September 30, 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, HMM, Maersk Lines, MSC and COSCO.
Sustainable Distribution – Growth Strategy & Financial Strength
The Partnership’s common unit distribution for the third quarter of 2019 was $0.315 per common unit.
The common unit distribution coverage for the twelve-month period ended September 30, 2019 was 2.2x.
Strong balance sheet with net debt to capitalization ratio at 30.5% as at the end of the third quarter of 2019. As of September 30, 2019, the Partnership’s total debt was $270.1 million, reflecting a decrease of $175.8 million compared to $445.9 million (including discontinued operations) as of December 31, 2018. The decrease is attributable to the prepayment of our debt of $146.5 million in connection with the DSS Transaction and scheduled principal payments during the period.
Long-term distributable cash flow growth is enhanced by the Partnership’s commitment to an accretive growth strategy as it builds on its financial flexibility.
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, LNG ships, VLCCs, Chemical/Product tankers and Neo-Panamax containerships, some of which are contracted under medium to long term charters ranging between 3-7 years.
CPLP’s sponsor, Capital Maritime, is a large, financially strong and diversified shipping company with a long, successful track record.
Capital Maritime owns a 16.3% stake in the Partnership (as of October 31 2019).
Capital Maritime has an extensive network of relationships with oil majors, traders, liners and other major charterers.
Last updated October 31, 2019