UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
Date of Report: November 28, 2018
COMMISSION FILE NUMBER: 001-33373
CAPITAL PRODUCT PARTNERS L.P.
(Translation of registrant’s name into English)
3 Iassonos Street
Piraeus, 18537 Greece
(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .)
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press release issued November 27, 2018, announcing the transactions. | |
| 99.2 | Investor presentation dated November 28, 2018. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CAPITAL PRODUCT PARTNERS L.P. | ||||||
| Dated: November 28, 2018 | By: | Capital GP L.L.C., its general partner | ||||
| /s/ Gerasimos (Jerry) Kalogiratos | ||||||
| Name: | Gerasimos (Jerry) Kalogiratos | |||||
| Title: | Chief Executive Officer of Capital GP L.L.C. | |||||
Exhibit 99.1
|
CPLP to Spin Off Its Crude and Product Tanker Business and Merge It with DSS Holdings L.P.’s Business and Operations
$1.65 Billion Transaction Involving 68 Tankers Is Expected to Create the Third Largest Publicly Traded MR and Product Fleet in the World, and One of the World’s Largest Public Mixed Product and Crude Fleet Operators
CPLP Will Continue as a Master Limited Partnership Supported by Medium- to Long-Term Charters with a Stable Distribution Base Well-Positioned for Growth
ATHENS, GREECE and GREENWICH, CT, USA — November 27, 2018 — Capital Product Partners L.P. (NASDAQ: CPLP) (“CPLP”) and DSS Holdings L.P. (“DSS”), a privately held company and one of the world’s largest owners and operators of medium-range product and Suezmax crude tankers, have entered into a definitive transaction agreement pursuant to which CPLP has agreed to spin off its crude and product tanker business into a separate publicly listed company, which will merge with DSS’ businesses and operations in a share-for-share transaction.
The new company, to be called Diamond S Shipping Inc., will be a market leader in the crude and product tanker markets, benefitting from a balanced and large-scale portfolio of vessels, strong management leadership and a cost-efficient commercial platform. The transaction reflects DSS’ strategic initiatives to access public markets with enhanced scale at a cyclically opportune time to create one of the world’s largest shipping companies well positioned for future industry consolidation. The new company is expected to be listed on the New York Stock Exchange and will be headquartered in Greenwich, Connecticut.
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 $23 million in consideration in the form of approximately 3% incremental ownership in Diamond S Shipping Inc. related to certain transaction benefits including access to public markets and enhanced scale. The transaction results in CPLP unitholders initially owning approximately 33% and DSS equity owners initially owning approximately 67% of the new company (all ownership percentages are subject to closing adjustments). CPLP unitholders also will continue to own their CPLP units. CPLP intends to effect a reverse unit split promptly after the closing of the transaction.
About Diamond S Shipping Inc. and the Transaction
| • | 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 $90 million. |
| • | 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 WL Ross & Co. LLC, the private equity division of Invesco Ltd., and First Reserve, two major shareholders of DSS, will hold approximately 24% and 20%, respectively, of the new company. Capital Maritime & Trading Corp., CPLP’s sponsor and the parent of CPLP’s general partner, and its affiliates are expected to hold approximately 5% of the new company. All ownership percentages are subject to closing adjustments.
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 ($116.8 million) and to reduce the Partnership’s indebtedness to $290.0 million or less compared to $459.1 million as of September 30, 2018.
CPLP expects to adopt a new annual common unit quarterly distribution guidance of $0.045 going forward in view of this transaction. CPLP also intends to pursue growth opportunities that are accretive to its distributable cash flow across different shipping segments with the aim of growing its long-term distributable cash flow over time.
Gerasimos (Jerry) Kalogiratos, Director and Chief Executive Officer of Capital GP LLC (CPLP’s general partner), commented:
“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 $23 million in consideration which implies an approximate 10.8% premium to the NAV contributed as part of this transaction, but will also retain exposure to the product and crude tanker markets at greater scale, while continuing to receive a meaningful common unit distribution from CPLP post transaction.”
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 $0.045. After the transaction, we believe that we will be uniquely positioned to grow our asset base again with modern vessels employed under medium- to long-term charters both from our sponsor as well as the second-hand market with a view to growing our long-term distributable cash flow.”
Transaction Details and Conditions to Close
CPLP will contribute its product and crude vessels, $10 million in cash and associated inventories to Diamond S Shipping Inc. and distribute Diamond S Shipping Inc.’s common shares on a pro rata basis to all record holders of CPLP’s common and general partner units.
The distribution is expected to be made on the basis of one Diamond S Shipping Inc. common share for every 10.19149 CPLP common units or CPLP general partner units.
Immediately following the spin-off, Diamond S Shipping Inc. will merge with subsidiaries of DSS. In the mergers, the new company will issue shares of common stock to shareholders of DSS in such amount as to reflect the relative net asset values of the respective businesses and the agreed premium.
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 Securities and Exchange Commission (the “SEC”) in December 2018, and the distribution and combination are expected to be completed in the first quarter of 2019.
The transaction close is subject to certain conditions, including the SEC declaring effective Diamond S Shipping Inc.’s registration statement, filing and approval of Diamond S Shipping Inc.’s listing application, the availability of net proceeds from committed debt financing in the amount, combined with cash to be procured by DSS, if any, required to consummate the transaction and the consent of CPLP’s banks to the partial prepayment and amendment of CPLP’s existing credit facilities. The transaction does not require a vote of the holders of CPLP’s common units.
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 $360 million with a syndicate of global shipping banks. Net proceeds from the credit facility will be used to partially prepay a portion of the loans outstanding under CPLP’s existing credit facilities, redeem CPLP’s Class B Units and fund transaction expenses. A portion of the net proceeds of the credit facility will also be used to refinance certain existing indebtedness of DSS.
Conference Call and Webcast
Tomorrow, November 28, 2018, CPLP and DSS will host an interactive conference call to discuss this announcement at 8:30 a.m. Eastern Time.
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 Capital Product Partners website, www.capitalpplp.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast. In addition, a replay will be available beginning shortly after the call has ended.
The investor presentation and this press release have also been furnished to the SEC in a current report on Form 6-K.
About CPLP
CPLP (NASDAQ: CPLP), a Marshall Islands master limited partnership, is an international owner of tanker, container and drybulk vessels. CPLP currently owns 36 vessels, including 21 modern medium-range product tankers, three Suezmax crude oil tankers, one Aframax crude/product oil tanker, ten Neo Panamax container vessels and one Capesize bulk carrier.
About DSS
DSS, a private shipping company incorporated in the Marshall Islands and headquartered in Greenwich, Connecticut, is an international owner of product and crude tankers. DSS currently owns 43 vessels, including 31 modern medium-range product tankers and 12 Suezmax crude oil tankers.
Advisors
Evercore and Stifel are serving as financial advisors and Sullivan & Cromwell LLP is serving as legal advisor to CPLP. DVB Capital Markets LLC is serving as financial advisor and Fried, Frank, Harris, Shriver & Jacobson LLP is serving as legal advisor to CPLP’s special committee. Moelis & Company LLC is serving as the financial advisor and Jones Day is serving as legal advisor to DSS. Clarksons Platou is serving as industry advisor in connection with the transaction.
Forward-Looking Statements
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 SEC on Form 20-F. Unless required by law, each of DSS and CPLP expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, to conform them to actual results or otherwise. Neither DSS nor CPLP assumes any responsibility for the accuracy and completeness of the forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. All subsequent written and oral forward-looking statements attributable to DSS or CPLP or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
Contact Details
CPLP-F
Capital GP L.L.C.
Jerry Kalogiratos
CEO
Tel. +30 (210) 4584 950
E-mail: j.kalogiratos@capitalpplp.com
Capital GP L.L.C.
Nikos Kalapotharakos
CFO
Tel. +30 (210) 4584 950
E-mail: n.kalapotharakos@capitalmaritime.com
Investor Relations / Media
Nicolas Bornozis
Capital Link, Inc. (New York)
Tel. +1-212-661-7566
E-mail: cplp@capitallink.com
Investor Presentation Spin-off and Merger of CPLP’s Tanker Business with Diamond S Shipping and Repositioning of Existing CPLP www.capitalpplp.com November 28, 2018 Exhibit 99.2
Forward Looking Statements Forward-Looking Statements The statements in this presentation 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 transactions described herein, 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 transactions may not be completed on terms or in the timeframe expected by Diamond S Shipping or CPLP or at all; (2) the possibility that various closing conditions to the transactions 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 Diamond S Shipping, to complete the transactions; (4) risk 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 transactions; (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 SEC on Form 20-F. Unless required by law, each of Diamond S Shipping and CPLP expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, to conform them to actual results or otherwise. Neither Diamond S Shipping nor CPLP assumes any responsibility for the accuracy and completeness of the forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements. All subsequent written and oral forward-looking statements attributable to Diamond S Shipping or CPLP or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Non-GAAP Measures This presentation contains non-GAAP measures. Operating Surplus is a quantitative measure used in the publicly traded partnership investment community to assist in evaluating a partnership’s financial performance and ability to make quarterly cash distributions. Operating Surplus is not required by accounting principles generally accepted in the United States and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity. i
Presenters i Jerry Kalogiratos 2015 – Present CEO and Director of Capital Product Partners L.P. 2005 – 2015 COO of Capital Product Partners L.P., CFO of Crude Carriers Corp., and Finance Director of Capital Maritime & Trading Corp. Craig Stevenson 2007 – Present CEO, President, and Director of Diamond S Shipping 1993 – 2007 Former Chairman of the Board and CEO of OMI
Transaction Overview
Transaction Description CPLP’s tanker fleet to be spun-off and merged with DSS Holdings’ business in a share-for-share transaction to form one of the largest publicly traded tanker companies (“Diamond S Shipping Inc.” or “DSSI”) DSSI will have a large and modern tanker fleet of 681 vessels and a combined NAV of over $6912 million as of September 30, 2018, and will be well-positioned to benefit from an improving tanker environment CPLP unitholders will receive approx. 33% of DSSI shares3 implying a total equity value of $236 million at NAV Transaction valued on a NAV-to-NAV basis with CPLP receiving a $23.0 million premium DSSI is expected to list on New York Stock Exchange upon closing of the transaction New CPLP will be a highly attractive MLP with a modern fleet of 10 containerships and 1 drybulk vessel, with an average charter duration of 5.3 years Current CPLP unitholders will retain 100% ownership of the entity holding the remaining containerships (“New CPLP”) 1:5 reverse split to be effected on closing of transaction New quarterly distribution guidance: $0.045 per unit Transaction expected to close in early Q1 2019 1 2 3 Pro forma for sale of Alpine Minute and Alpine Magic in Q4 of 2018 Assumes CPLP tanker NAV of $236 million and DSSG NAV of $477 million after premium adjustment and before transaction fees and expenses Based Clarkson’s fleet appraisal value; subject to closing adjustments
Unlocking Value Through This Transformative Transaction 11 total vessels (average age 6.6 years2) 10 containerships 1 drybulk vessel Medium to long term charters 68 tanker vessels (average age 7.8 years2) 52 product tankers 16 crude tankers Market exposure through spot voyages NAV and Cash Flow Valuation Yield and Cash Flow Valuation 100% Owned by CPLP Unitholders 33% Owned by CPLP Unitholders Estimated NAV as of September 30, 2018; based on 7/31/18 Clarkson’s fleet appraisal value; all pro forma ownership percentages are indicative and subject to closing adjustments Weighted by DWT or TEU We expect the transaction will unlock value as the sum-of-the-parts is anticipated to be in excess of the current CPLP implied equity valuation $0.045 per unit quarterly or $23 million expected PF NTM Distribution 33% of $691 million PF NAV1 (i.e. $236 million of NAV to Current CPLP Unitholders) +
Transaction Rationale CPLP’s modern containership assets and multi-year time charters are highly suitable for the MLP model CPLP retains the ability to grow with a broad set of strategic opportunities based on a visible pipeline of dropdowns CPLP unitholders will receive an implied premium on a NAV-for-NAV basis of $23 million that will increase their equity ownership interest in DSSI Implies an approximate 10.8% premium to NAV contributed as part of the transaction CPLP unitholders maintain upside in improving tanker charter market and asset values with the DSSI shares through a larger, dedicated tanker vehicle CPLP’s tanker assets fit better as part of a high quality tanker company, versus as part of an MLP 1 2 3 4 6 5
New CPLP Overview
New CPLP Investment Highlights Maritime MLP with modern fleet of 11 vessels: 10 containerships and 1 drybulk capesize Strong Charter Coverage: All vessels employed under period contracts with remaining charter duration of 5.3 years and with 95% charter coverage for 2019 and 75% for 2020 High Quality, Scrubber Fitted, Modern Fleet: Average vessel age of 6.5 years, including 8 wide beam, eco container vessels already fitted with BWTS. Intention for all 11 vessels to be scrubber fitted Conservative Coverage Ratio: Quarterly common unit distribution of $0.045 (representing a PF implied coverage ratio of 1.30x1 for the LTM period ended 9/30/18) Strong Balance Sheet: Pro forma net debt / LTM 9/30/18 EBITDA of 3.1x2 Visible Growth Opportunities: Dropdown opportunities from Sponsor and potential for secondhand market acquisitions Committed Sponsor: Capital Maritime & Trading Corp. has consistently supported CPLP dropdowns and has participated in most equity offerings Calculated as 12 months ended 9/30/18 distributable cash flow attributable to the 10 containerships and 1 drybulk vessel, divided by $23.3 million of expected distribution during the same time period per updated distribution guidance of $0.045 per unit per quarter and adjusted for post transaction debt of $290 million and related interest expense and capital reserve equal to expected quarterly debt amortization of $7.8 million Represents pro forma gross debt of $290 million as of 9/30/18 divided by LTM 9/30/18 EBITDA $74.2 million attributable to the 10 containerships and 1 drybulk vessel comprising New CPLP
Strong Charter Coverage Charter Profile Rates Expiry of Current Charters Vessel Type Containership Containership Eco Containership Drybulk Eco Containership Eco Containership Eco Containership Containership Containership Containership Containership Gross Rate Per Day $20,000 $18,000 $39,250 $42,200 $39,250 $39,250 $29,350 / $34,2501 $29,350 / $34,2501 $29,350 / $34,2501 $29,350 / $34,2501 $29,350 / $34,2501 1. $23,480pd between July 18, 2016 to December 31, 2019. Further upward adjustment by $4,900pd from January 2020 or fitting of scrubber, whichever is later, until charter expiry. Strong charter coverage on CPLP assets 10 containerships and 1 drybulk vessel with 5.3 years remaining on charter on average 95% and 75% charter coverage for 2019 and 2020, respectively Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23 Nov-24 Nov-25 High Quality Customer Base
Conservative Capital Structure Supports Future Growth Based on LTM 9/30/18 EBITDA of $74.2 million attributable to the 10 containerships and 1 drybulk vessel comprising New CPLP. Transaction Sources & Uses ($mm) Pro Forma Capitalization ($mm)
New CPLP Compares Favorably to its Peers Net Debt / LTM 9/30/18 EBITDA(1) Average Vessel Age(2) Average Remaining Charter Term(3) Source: Factset, CapitalIQ, Public Filings. Includes preferred equity. Capacity-weighted. New CPLP’s arithmetic average remaining charter term is 3.7 years; its revenue-weighted average is 5.3 years. Peer figures sourced from public investor presentations. LTM 9/30/18 DCF Coverage 3.7 8.7 5.0 3.9 3.9 3.0 5.3 0 1 2 3 4 5 6 7 8 9 10 CPLP HMLP SSW KNOP CMRE GLOP
Dropdown Opportunities from Sponsor Sponsor has variety of vessels that are suitable to be dropped down to New CPLP Vessels where CPLP has current right of first offer 4 ECO Chem/Product tanker vessels (built 2016/2017) with 3 having dropdown debt facility in place. Other potential dropdowns 4 LNG vessels (scheduled for delivery 2020-2021) 4 10,000 TEU container vessels (built in 2011) currently on 3-5 year charter 4 ECO VLCC vessels (2 built in 2016 and 2 to be delivered in 2019) on 5-7 year bareboat charter 2 VLCC vessels (built 2010) on 5-7 year bareboat charter 1 Eco Aframax tanker (built 2017) on 5 year charter
Diamond S Shipping Inc. Overview
Introduction to DSSI Weighted average as of 11/14/18; weighted by DWT 12 Crude Tankers 31 Product Tankers 21 Product Tankers 4 Crude Tankers DSSI 68 Vessels 7.8 Average Age 1 Significant Scale Drives Operating Leverage 1 Balanced Crude and Product Fleet Positioned for Accretive Consolidation 2 Low Cash Breakevens and Strong Financial Flexibility 3 Focus on Return of Capital and Shareholder Returns 4 Experienced Management Team and Board 5
DSSI will Benefit from Significant Scale Average of equity research analysts’ estimates; $ in billions Reflects recent $300mm stock issuance Based on Clarksons fleet appraisal value; post-transaction fees & expenses DSSI will be one of the largest publicly traded shipping companies by overall NAV1, and expected to be the 3rd largest public owner of MR and Product Tanker vessels Combination will create new tanker sector investment opportunity and meaningful trading liquidity for public equity shareholders Ability to leverage scale and fleet quality to increase utilization and maximize growth DSSI positioned for accretive consolidation – Management sees ability to grow NAV and market cap aggressively and responsibly over the near to medium term % Product - 100% 33% - 76% - 72% 16% - 100% 45% 84% % Non-Product 100% - 67% 100% 24% 100% 28% 84% 100% - 55% 16%
Combination Creates One of the Largest Publicly Traded MR Owners and Operators DSSI will be one of the largest publicly traded shipping companies in NAV and the number of vessels owned DSSI will have a balanced crude and product tanker mix, providing meaningful upside opportunities Diversified fleet provides crude upside today and meaningful product potential in the future DSSI will be one of the largest publicly traded owners of MR vessels, which are widely expected to be the leaders in the coming upcycle Crude tankers are expected to offer higher returns in absolute terms Diversified fleet has wider selection of growth opportunities Ability to roll-up and integrate a variety of fleet types Mixed Fleet Balances Consistent Cash Flow with Exposure to Product Tanker Market Upside
Crude Fleet Upside With a large spot-focused crude fleet, and crude dayrates beginning a rapid upswing, DSSI is well-positioned to profit from the upward crude dayrate momentum Source: Clarkson Research Services, J.P. Morgan Upward Crude Dayrate Momentum Crude dayrates are rapidly rising, having increased over 250% in the nine weeks beginning September 7th Large Fleet Results in High Operating Leverage DSSI has 16 Suezmax/Aframax tankers, providing it with significant crude upside exposure Positioned to Capture Rising Rates, with 100% Spot Exposure 100% of DSSI’s crude vessels are currently on spot or other short-term contracts, positing it to capitalize on rising rates, unlike many of its competitors UPWARD MOMENTUM IN THE CRUDE SPOT MARKET IN Q4 2018
Product Fleet Upside Product tankers, and particularly MRs, positioned to benefit from underlying macroeconomic factors and the IMO regulatory changes in 2020 Analysts expect robust growth in the product tanker sector, primarily driven by the following catalysts: Strong oil consumption in near term translating into high product tanker demand growth Orderbook is less than 9% of the fleet and scrapping has been robust IMO emission regulations set to take effect in January 2020 could drive up product tanker demand by potentially 10% Within the product tanker segment, MRs currently have the most favorable supply dynamics MRs are the only vessel type with favorable age profile (i.e., enough vessels aged 20-25 years to maintain a favorable scrapping schedule and to absorb coming newbuilds and maintain supply/balance) Source: Clarkson Research Services, Danish Ship Finance – Shipping Market Review May 2018 “Fundamentally, we believe the market remains primed for a rebound through 2019 and 2020, with the orderbook remaining limited in the product tanker space, particularly for the MR fleet, while IMO 2020 regulations could support utilization trends.” - Clarksons Platou Securities AS (September 2018) AGE DISTRIBUTION OF PRODUCT FLEET (MILLION DWT) WHERE WE ARE IN THE FREIGHT RATE CYCLE The MR sector is ideally positioned to maintain supply / demand parity. There are enough 20yr + old MRs expected to be scrapped with regularity to offset orderbook deliveries and maintain supply/demand balance
A Leader in Operating Leverage and Liquidity ESTIMATED BREAKEVEN RATES PRO FORMA LIQUIDITY AND DEBT MATURITY Low cash breakevens – Forecasted market day rates improvements to translate directly into increased cash flow generation for shareholders Strong liquidity position – DSSI will launch with significant liquidity at close and a favorable maturity profile (no debt maturity until 2021), as well as a favorable net debt-to-value metric Focus on maximizing vessel utilization Average estimate in 2019. Includes daily operating expenses, general & administrative, and debt service Based on management forecast Excludes lines of credit; balance as of 11/15/18; excludes go-forward amortization; $ in millions Based on VesselsValue.com as of 11/19/18; forecast total pro forma DSSI debt of $953 million at close LOW BREAKEVENS ¹ TOTAL LIQUIDITY 2 Total: $90mm DEBT MATURITY SCHEDULE 3 NET DEBT TO FLEET VALUE 4
Highly Experienced Leadership Management, led by Craig Stevenson, Jr., and the Board are highly experienced across shipping, M&A, and all have prior Board experience World-Class Management Team Led by Craig Stevenson, Jr., CEO Craig Stevenson, Jr., CEO and Director of DSSI, has over 40 years of experience in shipping industry and previously served as the CEO and Chairman of OMI, formerly NYSE-listed tanker company, from 1998 through 2007 Highly Experienced Board of Directors Nadim Z. Qureshi, Chairman of DSSI, Managing Partner at WL Ross & Co. LLC, the private equity division of Invesco Ltd., oversees Diamond S Shipping and has significant experience in transformative M&A, investments and operations; previously served as Director of Nexeo Solutions, Inc. Craig Stevenson, Jr. has served as the Chairman of Intermarine Inc., one of the largest project carriers in the world, since 2008 and led successful sale of OMI Corporation to Teekay Shipping and Torm for $2.2 billion Jerry Kalogiratos, CEO & Director of CPLP and Director of DSSI, has served as COO of Capital Product Partners L.P., CFO of Crude Carriers Corp, and Finance Director of Capital Maritime & Trading Corp., and has led numerous shipping and capital markets transactions. Gerry Ventouris is Capital Maritime & Trading Corp. CEO Hal Malone, Director of DSSI, serves as the Head of Shipping and Transportation at WL Ross & Co. LLC, the private equity division of Invesco Ltd., and previously spent over 18 years at Jefferies executing M&A transactions in the industry and is a Director of Navigator Holdings Ltd. and Nautical Bulk Holdings, Ltd. Kate Blankenship has served as an Independent Director of Seadrill Ltd., Ship Finance International Ltd., Frontline Ltd., Avance Gas Holding Ltd., Archer Ltd., and Independent Tankers Corporation Ltd. Bart Veldhuizen is currently a Director of Eagle Bulk Shipping, and formerly served as a Director of Seadrill Partners LLC and Golar LNG Partners LP
Appendix
Common Unit Distribution Outlook Post transaction quarterly distribution of New CPLP expected to be $0.045 per unit 1 New level provides base to build upon as coverage will be robust 9/30/18 LTM PF Operating Surplus calculation ($mm, except per unit figures) Before giving effect to any reverse unit split. Calculated as 12 months ended 9/30/18 distributable cash flow attributable to the 10 containerships and 1 drybulk vessel, divided by $23.3 million of expected distribution during the same time period per updated distribution guidance of $0.045 per unit per quarter and adjusted for post transaction debt of $290 million and related interest expense and capital reserve equal to expected quarterly debt amortization of $7.8million. 2
DSSI Fleet List DSS CPLP’s Former Tanker Fleet 1 1 JV vessels (51% ownership).
Securities Disclaimer This communication is for informational purposes only and not intended to and does not constitute an offer to subscribe for, buy or sell, the solicitation of an offer to subscribe for, buy or sell, or an invitation to subscribe for, buy or sell, any securities in any jurisdiction pursuant to or in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. i
Capital Product Partners L.P.