Pegasus Tanker Fleet Is Back In The Game

Friday, April 27, 2001
A crucial Caribbean tanker fleet re-entered the market this week, having been held back for over a month because of a dispute between its owner, Pegasus Shipping, and junk-bond creditors in New York. U.S. brokers said the fleet's return would add surplus tonnage to a market that is already cooling, and would put further downward pressure on freight rates. Fuel oil freight stood at around $1.65 per barrel for 50,000 ton upcoast cargoes on Friday (April 27), compared to about $1.90 per barrel in mid-March, brokers said. Pegasus said the two time-charters and five spot fixtures so far completed were all done at market rate. Chairman Nicos Peraticos has resumed negotiations with bondholders and hopes to complete a buy-back of the $150 million Pegasus debt in June, a spokesman in London said. The 11 tanker fleet had been held back from trading on fears it would be impounded after a bondholder had one of the tankers, the 62,000 tonner Kite, impounded in Jacksonville, U.S. on March 16. The fleet operates in a niche sector of just 100 or so ships carrying 50,000 ton cargoes of crude and fuel oil from Caribbean refineries to the United States. An anticipated freight surge when the fleet was withdrawn never happened, brokers said, but charterers remained edgy while the market imbalance continued. Pegasus is offering bond-holders $75 million cash to write off the $150 million debt, which would leave it with vastly improved finances in a market that analysts have tipped to soar in the fourth quarter of 2001. "Products imports are playing a bigger swing role in the U.S. than ever before," Paul Horsnell of Oxford Energy Studies told a tanker owners' conference in Sydney this week. "Expect a surge in demand for fuel oil imports every fourth quarter." And while demand for this size range of tankers is high, supply is short. "This sector has been neglected in terms of investment in new tonnage in the past decade, which is beginning to result in an acute shortage of modern ships," said London tanker broker SSY. Shipowners tapped the U.S. junk bond markets between 1997 and 1999, and since then much of the debt has been bought back having traded down to less than half its original value. - (Reuters)
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