Dynagas LNG Partners Acquires LNG Carrier
Dynagas LNG Partners LP has entered into an agreement with Dynagas Holding Ltd to purchase 100% of the ownership interests in the entity that owns and operates the Lena River, a 2013 built 155,000 cubic meter ice class liquefied natural gas carrier, and the related time charter contract with Gazprom Global LNG Limited, for an aggregate purchase price of $240.0 million.
The closing of the Lena River acquisition is expected to take place on or before December 31, 2015 and is subject to customary closing conditions.
The Lena River is currently operating under the Gazprom Charter, which has an initial term of five years and expires in October 2018.
The $200 Million Term Loan Facility is secured by the Lena River and the Yenisei River and is split in two equal $100.0 million tranches, each comprising of two advances of approximately $66.5 million and $33.5 million, respectively.
The Partnership estimates that the Lena River will generate approximately $86.6 million of incremental contracted revenues over its remaining minimum charter term, assuming full utilization, and approximately $24.8 million of estimated net cash from operations for the first 12 months after the closing of the acquisition.
The Board of Directors of the Partnership and the Conflicts Committee of the Board have approved the Lena River acquisition. The Conflicts Committee retained Cadwalader, Wickersham & Taft LLP as legal counsel in connection with the contemplated transaction and the Partnership has been advised by Seward & Kissel LLP.
Following the completion of the Lena River acquisition, the Partnership's management intends to recommend to the Board an increase in the Partnership's quarterly cash distribution per common and subordinated unit of between 4% to 6%.
The proposed increase would result in a quarterly cash distribution per common and subordinated unit of between $0.4394 to $0.4479 which would become effective for the quarter ending March 31, 2016.
Assuming the distribution increase is recommended by management and approved by the Board, it will result in annualized cash distributions of between $1.76 and $1.79 per common and subordinated unit, which would represent an increase of between 21% to 23% since the Partnership's initial public offering.
Any such increase would be conditioned upon, among other things, the closing of the Lena River 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.
Tony Lauritzen, Chief Executive Officer of the Partnership, commented: "We are pleased to announce the acquisition of our third LNG Carrier from our Sponsor since our initial public offering. In this short period of two years we have doubled the size of our fleet and increased our cash distributions per common and subordinated unit at a cumulative annualized level consistent with the targets we set out to achieve. In addition our contracted cash flows provide sufficient comfort to support our belief that the aforementioned proposed distributions to our unitholders are sustainable."
