Mount Street is mulling more investments in older shipping tonnage after acquiring an 18-year-old product tanker in a sale-and-leaseback transaction.
The London investment manager has purchased the 37,808-dwt MR tanker Banyan Pride (built 2002) from TXZ Tankers. The buyer is owned by oil and gas company International Energy Group (IEG), part of Singapore-listed New Silkroutes Group.
The tanker has been leased back to IEG under a five-year, fixed-rate bareboat charter with extension and purchase options attached, which can be exercised at certain points during the lease.
The commercial details of the deal are confidential, but VesselsValue estimates the China-built tanker's current market value at $7.2m.
Shaun Burch, co-head of global transportation at London-based Mount Street, told TradeWinds that the transaction is "one of many" the firm is underwriting at the moment.
"We have an active pipeline of transactions that we're working on with various capital partners," he said.
The transaction, he said, was a straightforward refinancing by IEG, which has divested its only owned vessel to free up cash.
The deal itself was closed remotely between parties in London, Singapore and New York after much of the world had gone into lockdown to prevent spread of the coronavirus.
Parent group New Silkroutes has said that IEG plans to focus on its ship chartering business to mitigate the effects of volatile oil markets this quarter, according to its financial report for the three months to 31 March.
It was Mount Street's investment management division that undertook the Banyan Pride transaction.
"We target income returns, so the key interest from our side was downside protection — it's older tonnage," Burch said of Mount Street's investment in the 18-year-old Banyan Pride.
"We're comfortable with the age. We're very comfortable with the asset, being within the tanker space. The [IEG] team has got experience in owning, operating and managing similar sized vessels within their fleet, so it was a very good transaction for us to complete."
Mount Street's investment management business has around $15bn of assets under management and the firm aims to grow the business further by deploying capital across the shipping sector, Burch told TradeWinds.
Investment in main shipping sectors
The firm's transportation investments will focus on the main commoditised shipping sectors, comprising tankers, containerships and bulk carriers, as well as LNG and LPG carriers, he said.
"We're looking at good, well-built vessels. We're not particularly worried about the ages so we can look at newbuilds, young, middle-aged and older vessels heading towards the end of their lives," said Burch.
"We can step into the space that's been left by the banks, where the banks can no longer finance."
He said the company is not specifically looking for distressed assets.
"Long-term cash flows with good credit-rated counterparties and good assets are really what we're looking for," Burch explained.
Mount Street also has a separate loan servicing business unit, which specialises in distressed debt investments.
The unit has around $70bn of assets under management and is thought to be the world's largest independent servicer of asset-backed debt.
Deal closed remotely
Mount Street and IEG began negotiating the commercial terms of the deal before much of the world went into lockdown.
The transaction was closed remotely after the restrictions had entered into force.
"The challenge for us was obviously communication and then really just managing the process where everyone was operating remotely. We had two lawyers in London and Singapore and we were actually communicating on a daily basis on all-party conference calls," Burch told TradeWinds.
"It's a real testament to the effort of the whole team and the trust involved, as well to get that process done in between time zones in Singapore and London, closing the money in New York and then confirming the cash the next day," said Burch.
Mount Street was advised in the transaction by a team from law firm Stephenson Harwood, led by ship finance partner Ian Mace and senior associate Roderick McGeachy.
"What really makes this deal standout are the circumstances under which it was completed," said Mace.
"It’s a testament to the innovative approaches, determination and commitment of all involved that this deal completed in a relatively short time frame and under such unusual circumstances."
