GasLog Partners' First Option Vessels Acquisition for $328 mi
GasLog Partners LP and GasLog Ltd. (GLOG) announced today that they have entered into an agreement for the Partnership to purchase from GasLog, the sole member of the Partnership’s general partner and the Partnership’s majority unitholder, 100% of the shares in the entities that own and charter the Methane Jane Elizabeth and Methane Rita Andrea, modern liquefied natural gas carriers built in 2006, each with a capacity of 145,000 cubic meters, for an aggregate purchase price of $328 million.
The Acquisition is subject to the Partnership obtaining the funds necessary to pay the purchase price and the satisfaction of certain other closing conditions. The Partnership expects to finance the acquisition with a combination of equity and the assumption of the vessels’ existing credit facilities. In addition, the Partnership has entered into a commitment letter with Citibank for a new $450 million credit facility to refinance the current credit facilities of the vessels currently owned by the Partnership as well as the facilities for the two LNG carriers being acquired.
GasLog acquired the Methane Jane Elizabeth and Methane Rita Andrea from an affiliate of BG Group (BRGXF) (“BG”) in April 2014. GasLog supervised the construction of each ship and has provided technical management for the ships since delivery. The vessels are currently operating under long-term time charters with BG with initial terms of 5.5 and 6 years, respectively (through October 2019 and April 2020). BG has the option to extend either or both of the charters for an additional period of either three or five years following the initial charter period.
The Acquisition is a significant milestone for GasLog Partners and GasLog Ltd. as it marks the first transaction carried out by the two entities since GasLog Partners’ initial public offering (“IPO”) in May 2014. The Partnership believes that the Acquisition is immediately accretive and consistent with its strategy to grow cash distributions for its unitholders through accretive dropdown and third-party acquisitions. The Partnership estimates that the vessels being acquired will annually generate $47.7 million of incremental contracted revenue over their initial charter terms, assuming full utilization, and $34.5 million of EBITDA (1) .
The Board of Directors of GasLog, Board of Directors of the Partnership (the “Board”) and the Conflicts Committee of the Board have approved the Acquisition.
Following the completion of the Acquisition, the Partnership’s management intends to recommend to the Board an increase in the Partnership’s quarterly cash distribution per unit of between $0.05625 and $0.06250, an increase of approximately 15% above the existing minimum quarterly distribution and an annualized increase of between $0.225 and $0.250 per unit. When combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase results in a cash distribution of between $0.43125 to $0.43750 per quarter. Any such increase would be conditioned upon, among other things, the closing of the Acquisition, the approval of such increase by the Board and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.
Andy Orekar, Chief Executive Officer of GasLog Partners, stated, “I am very pleased to be announcing our first dropdown acquisition so soon after our successful IPO. The addition of these two vessels will significantly increase the size of GasLog Partners’ fleet from three to five ships, increasing the scale of the Partnership and diversifying our operations. This acquisition increases the average remaining contract term on our charters to approximately 5 years and adds $262 million of contracted revenue under the initial charter terms of 5.5 and 6 years, assuming full utilization. The remaining pipeline of eligible dropdown vessels at GasLog Ltd. and the potential for further third-party acquisitions provides a highly visible path to sustainable growth over several years. Having now agreed and announced our first dropdown acquisition with GasLog, we believe GasLog Partners is well positioned to execute our strategy and substantially grow cash distributions for our unitholders.”
Paul Wogan, Chief Executive Officer of GasLog Ltd., stated, “This first transaction between GasLog Ltd. and GasLog Partners is extremely significant. It validates the strategy we set out at the time of GasLog Partners’ IPO of recycling capital from the Partnership to continue growing the GasLog fleet and take advantage of what we believe will be attractive markets for LNG shipping. We believe there is significant value to GasLog and its shareholders through GasLog holding the limited partner units, the general partner and the incentive distribution rights in GasLog Partners. In particular, I am very pleased that, upon completion of this transaction, GasLog Partners’ cash distribution per unit is expected to meet or exceed the first incentive distribution right threshold.”