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Tuesday, June 25, 2024

Capital Product Partners Move Forward with $3.1B Acquisition of 11 LNG Carriers

Maritime Activity Reports, Inc.

December 22, 2023

(Credit: Capital Gas)

(Credit: Capital Gas)

New York-listed shipowner Capital Product Partners L.P. (CPLP) has closed the umbrella agreement from November 2023, moving forward with the $3.1 billion acquisition of 11 newbuild LNG carrier vessels.

CPLP entered into umbrella agreement with Capital Maritime & Trading Corp. and Capital GP on November 13, providing for the acquisition of 11 newbuild liquefied LNG carriers.

Upon the closing of the umbrella agreement on Thursday, CPLP entered into 11 share purchase agreements to acquire 100% of the equity interests in each vessel-owning company.

Each Vessel will have a capacity of 174,000 cubic meters, built or under construction, at Hyundai Heavy Industries Co., and Hyundai Samho Heavy Industries Co. in South Korea.

According to CPLP, it already closed the acquisition of the vessel-owning company of the LNG carrier Amore Mio I, and taken delivery of the vessel. Capital Maritime was paid the aggregate acquisition price of $141.7 million for the vessel.

CPLP said it will continue with the acquisitions of six other vessels, including Axios II, Assos, Apostolos, Aktoras, Archimidis and Agamemnon LNG carriers, upon completion of each vessel’s construction and delivery from the shipbuilder.

Capital Maritime was paid a deposit in the amount of 10% of the aggregate acquisition price of the six vessels, amounting to $174.4 million, and the remainder will be paid upon delivery of each vessel, totaling over $1.6 billion.

CPLP also closed the acquisitions of 100% of the equity interests in each of the vessel-owning companies of the Alcaios I, Antaios I, Athlos and Archon ships. The Marshall Islands master limited partnership paid Capital Maritime close to $1.4 billion for the vessels, taking over the obligations of the respective shipbuilding contracts with Hyundai.

“We expect to pay an additional total amount of $909.9 million to Hyundai in pre-delivery and delivery installments,” CPLP said.

Pursuant to the umbrella agreement, CPLP conducted a rights offering to finance $500 million of the purchase price for the vessels. The rights offering resulted in subscriptions for 445,988 common units representing limited partnership interests in CPLP offered at an exercise price of $14.25 per common unit.

Capital Maritime bought 34,641,731 common units for an aggregate amount of $493.6 million, raising its ownership to 72.3% of the common units outstanding.

Jerry Kalogiratos, CEO CPLP’s General Partner, said: “We are very pleased to see the closing of this very important first step in the transformation of the partnership into a one of the largest U.S. listed owners of two stroke, latest generation LNG carriers.

“Together with the other steps that we have laid out such as the transformation of the partnership into a corporation, we hope to over time attract additional investor interest and allow our equity valuation to move closer to our peers.”

CPLP was also issued an unsecured seller’s credit by Capital Maritime in an amount $220 million to finance a portion of the purchase price for the vessels. The seller’s credit agreement provides for interest at a rate of 7.5% per year and has a maturity date of June 30, 2027.

Following the closing of the umbrella agreement, CPLP plans to explore the disposal of its container vessels and will abstain from acquiring additional container vessels.

Also, the partnership has agreed to change its name, setting out plans to negotiate the terms for the conversion from a Marshall Islands limited partnership to a corporation with customary corporate governance provisions by June 21, 2024.

CPLP currently owns 23 vessels, including eight latest generation LNG carrier vessels, 12 Neo-Panamax container vessels and three Panamax container vessels. It has agreed to acquire an additional 10 latest generation LNG carriers between 2024 to 2027.

In connection with the change of business focus to concentrate on the LNG market, Capital Maritime granted CPLP, beginning on December 21, 2023, rights of first refusal over transfers of LNG vessels, opportunities to order such newbuild vessels, and employment opportunities until 2033.

Also, CPLP will have first refusal option for transfers of two liquid CO2 carriers and two ammonia carriers recently ordered by Capital Maritime for a period ending when Capital Maritime and its affiliates no longer beneficially own at least 25% of the outstanding common units, as well as employment rights if CPLP acquires such vessels on similar terms.