I.M. Skaugen SE ("IMS") has been working hard to execute on the previously communicated refinancing plan. The intention of this refi - plan has been to make all the financial lenders and vessel leaseholders (operational) whole over time, and to allow the company to better match maturity with its cash flow generating capacity going forward.
IMS has in this connection been in extensive discussions with its vessel lease counterparties with the aim of securing a long-term rearrangement of the relationships. This is after securing an agreement with the bond holders and the secured creditors in May 2017. The IMS groups lease counterparties, with vessels on operational leases, have in this period been paid on a "pay as you earn" rates with a deferment of the unpaid BB hire, which was contemplated to endure until the SSLNG contract was operational. An agreement with these vessel Owners would be part of IMS' ongoing refinancing plan as announced, and to enable the company to further develop its focus on the Small-Scale LNG business.
IMS has in this connection entered into a consensual termination and redelivery agreement with Gasmar AS ("Gasmar") for an 8,556 cbm LPG/Ethylene carrier on lease. The agreement is reached with standard and customary subjects and the vessel will be redelivered to Gasmar AS following completion of its current voyage in December 2017. The termination enables Gasmar to enter into a beneficial new longer-term charter for their vessel, trading in an area and with a cargo which is not in competition with the Norgas Pool (which focus on charters less than 12 months of duration). The vessel was sold to Gasmar in 2014 at USD 24 million, and chartered back on a bareboat basis for 5 years. As part of the termination, the current sellers credit from the sale/lease back of USD 4.8 million will be amortized and offset in full against the deferred hire up to delivery and the difference in economics between the new charter and the old charter for the remaining charter period. IMS has also agreed to cover cost of a part of an upcoming drydocking of the vessel to redeliver the vessel as per our contract. This agreement fits our ambitions as per the announced refi-plan.
IMS has further tried to reach agreements with Teekay LNG Partners L.P ("TGP"), which through six Marshal Island SPVs are the owners of 6 vessels, where 5 are on long term in charter to a 100% owned subsidiary of IMS. The IMS subsidiary has incurred losses of more than USD 100 mill on these 6 vessels leased from TGP since delivery. Until recently the discussions have been constructive in terms of trying to find a consensual solution with TGP and for the benefit of all parties and again with the aim to pay TGP in full. However, the IMS subsidiary has now received termination notices concerning these 6 vessels, and IMS has been informed by media releases that TGP has established its own LPG pool intended to operate these vessels instead of through the Norgas pool. Given the recent developments we need to revert on the economic implication of this unilateral termination when IMS has been able to evaluate the situation further. We regret the development, but respect the fact that TGP may want to operate these loss-making vessels on their own rather than on an operational lease to the relevant IMS subsidiary. The LPG / Petchem transportation business is currently very challenging and scale is needed on the back of consolidation. By establishing a new pool TGP is, according to the media release referred to above, hopeful they alone can achieve such a consolidation.
IMS and Norgas is in the process of ensuring that the redelivery of these 6 vessels, under these in-charters, are done in accordance with the underlying agreements/arrangements. Redelivering these without any disruption to the Norgas Pool operations, nor to IMS ongoing efforts to achieve a refinancing in 2018 on the back of its promising Small-Scale LNG business and contracts agreed to in this respect.
The company's two wholly owned LNG capable vessels are not affected by the changes in the Norgas pool and the Norgas pool will consist of 7 ships after the above-mentioned withdrawals have been accomplished and four of these are SSLNG capable.
If you have any questions, please contact:
Bente Flø, Chief Financial Officer, on telephone +47 23 12 04 00 / +47 91 64 56 08 or by e-mail: bente.flo@skaugen.com.