CPLP to Spin Off Its Crude and Product Tanker Business and Merge It with DSS Holdings L.P.’s Business and Operations
CPLP Will Continue as a Master Limited Partnership Supported by Medium- to Long-Term Charters with a Stable Distribution Base Well-Positioned for Growth
The new company, to be called
This transaction represents a strategic step for CPLP to unlock unitholder value by combining its tanker business with a highly regarded pure-play tanker company. CPLP intends to continue as a master limited partnership (“MLP”), with a modern fleet under medium- to long-term charters producing stable cash flows in the container sector complemented by one drybulk vessel. CPLP expects to be well positioned going forward to engage in asset acquisitions across different shipping segments with the aim of growing its per unit distributable cash flow.
The transaction is valued on an NAV-to-NAV basis with CPLP receiving
- Diamond S Shipping Inc.’s asset portfolio will consist of the combined product and crude tanker fleet of CPLP and DSS, totaling 68 high-quality tankers, with an average age of 7.8 years, including 52 product tankers and 16 crude tankers, positioning the new public company to capitalize on the improving fundamentals in the tanker market on a greater scale.
Diamond S Shipping Inc.is expected to be the third largest publicly traded product tanker operator and the fifth largest public tanker company worldwide.
- The new company is expected to be well capitalized, with post-close net debt to fleet value of approximately 60% and total liquidity in excess of
- The new company will be led by DSS’ management team, which has an established track record of growth and successful commercial operations.
Diamond S Shipping Inc.’s Board and Management
Craig Stevenson, Jr., CEO of DSS, will serve as the CEO of Diamond S Shipping Inc. Mr. Stevenson has over 40 years of experience in the shipping industry and previously served as the Chairman and the Chief Executive Officer of OMI, a NYSE-listed tanker company. The Diamond S management team will continue to serve in senior management positions.
- The new company’s board of directors will consist of seven members, a majority of whom are expected to be independent. DSS will initially nominate three board members,
Nadim Qureshi, who will serve as the Chairman, Hal Malone, and Kate Blankenship, and CPLP will initially nominate two board members, Jerry Kalogiratos and Gerry Ventouris. The board of directors will further include Mr. Stevenson and Bart Veldhuizen. Diamond S Shipping Inc.will combine the technical expertise of Capital Ship Management Corp., the current manager of CPLP’s fleet, and the cost effective operating structure of DSS. Capital Ship Management Corp.will continue to provide commercial and technical management for the crude and product tankers contributed by CPLP to Diamond S Shipping Inc.
Mr. Stevenson commented:
“Our organization is pleased to create with CPLP one of the world’s largest public company tanker operators. This transaction will occur at an opportunistic time in the cycle and creates one of the largest, highest quality fleets and best capitalized public shipping companies in the market. We are confident that this unique combination will create significant shareholder value through the cycle by using our cash flow to invest in the business via acquisitions and returning capital back to our shareholders. We look forward to leveraging CPLP’s outstanding expertise and industry reputation as we work to grow the business together.”
Diamond S Shipping Inc.’s Shareholders
It is expected that, among other significant shareholders, funds affiliated with
CPLP Following the Spin-Off
This transaction will realign CPLP with a modern containership asset base (with an average age of 6.6 years) operating under medium- to long-term charters (5.3 years of remaining charter duration) and thus enhancing cash flow visibility for CPLP unitholders. CPLP will continue to maintain a strong balance sheet, as part of the debt proceeds raised by DSS for the acquisition of the CPLP tankers will be used to fully redeem the CPLP Class B Unit series outstanding at 100% of its redemption value (
CPLP expects to adopt a new annual common unit quarterly distribution guidance of
Gerasimos (Jerry) Kalogiratos, Director and Chief Executive Officer of
“We are excited about this transaction, which marks a strategic step to drive value creation for our unitholders, as we expect the sum of the parts following this transaction to exceed the current equity valuation of CPLP. The Partnership’s common unitholders will not only receive
Mr. Kalogiratos added:
“This transaction also enables CPLP to combine its tanker assets with DSS, a market leader that will be led by an accomplished management team with an excellent industry track record.”
“Finally, this transaction allows CPLP to reshape its business with a modern fleet that has a remaining average charter duration of 5.3 years, providing CPLP unitholders with more stability and cash flow visibility. This should well underpin the new quarterly common unit distribution guidance of
Transaction Details and Conditions to Close
CPLP will contribute its product and crude vessels,
The distribution is expected to be made on the basis of one
Immediately following the spin-off,
After the spin-off, CPLP contemplates effecting a 1-for-5 reverse unit split of its outstanding units. The reverse split is intended to bring CPLP’s common unit trading price more in line with that of peer companies.
The initial Form 10 registration statement relating to the spin-off is expected to be filed with the
The transaction close is subject to certain conditions, including the
It is expected that for U.S. federal income tax purposes the spin-off will be treated as a non-taxable return of capital to the extent of each CPLP common unitholder’s tax basis, and thereafter as capital gain.
The board of directors of CPLP delegated to a special committee consisting solely of independent board members the full power, authority and responsibility to, among other things, evaluate, negotiate and determine whether to approve the transaction. The special committee, after consultation with its independent legal and financial advisors, has unanimously approved the transaction. The transaction was also approved by the conflicts committee of the CPLP board of directors. Following the determinations of the special committee and the conflicts committee, the CPLP board of directors unanimously approved the transaction.
Financing of the Transaction
DSS has entered into several firm commitments for a syndicated five-year term loan and revolving credit facility (the “credit facility”) of up to
Conference Call and Webcast
A presentation about the transaction will be posted to the Investor Relations section of CPLP’s website at www.capitalpplp.com/investor-relations.
Individual investors are invited to listen to the interactive conference call. Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1 (877) 553-9962 (US Toll Free Dial In), 0 (808) 238-0669 (UK Toll Free Dial In) or +44 (0) 2071 928592 (Standard International Dial In). Please quote “Capital Product Partners.”
There will also be a simultaneous live webcast over the Internet, through the
The investor presentation and this press release have also been furnished to the
CPLP (NASDAQ: CPLP), a
DSS, a private shipping company incorporated in the
The statements in this press release that are not historical facts, including, among other things, the expected financial performance of the combined company and any remaining business of CPLP and the consummation of the transaction, are forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended). These forward-looking statements involve risks and uncertainties that could cause the stated or forecasted results to be materially different from those anticipated. These risk and uncertainties include, among others: (1) the risk that the transaction may not be completed on terms or in the timeframe expected by DSS or CPLP or at all; (2) the possibility that various closing conditions to the transaction may not be satisfied or waived; (3) the risk that committed financing may not be available or may not be available in an amount sufficient, together with cash to be procured by DSS, to complete the transaction; (4) risks and uncertainties related to the expected tax treatment of the spin-off; (5) the possibility that third-party consents will not be received; (6) failure to realize the anticipated benefits of the transaction; (7) the impact of the spin-off on the business of CPLP and (8) the potential impact of major shareholdings on the trading price of the new company shares. For further discussion of factors that could materially affect the outcome of forward-looking statements and other risks and uncertainties, see “Risk Factors” in CPLP’s annual report filed with the
Tel. +30 (210) 4584 950
Tel. +30 (210) 4584 950
Investor Relations / Media
Source: Capital Product Partners L.P.