Analysts are backing Nordic American Tankers (NAT) over its plan to pay off debt within two years.
Clarksons Securities said the US-listed suezmax shipowner is performing well in the rising tanker market as cash flows continue to grow.
The company intends to revert to the “former glory” of its debt-free status and distribute its entire cash flow in dividends, analysts led by Frode Morkedal said.
They expect bank debt to be fully repaid by the first quarter of 2024 and financial leases to be redeemed the following year.
Clarksons Securities has a “buy” on the company, based on its belief in a multi-year upcycle due to a record-low orderbook.
Fourteen of NAT’s suezmaxes are financed through Beal Bank in a deal carried out in 2019.
The facility includes a cash sweep mechanism that requires 50% of earnings above the breakeven point to be directed towards debt repayment.
The investment bank calculates that the breakeven for these ships is $15,900 per day.
The remaining five vessels in NAT’s fleet are financed through leasebacks with Norway’s Ocean Yield.
“While this financing arrangement will also be repaid in full, we do not expect this to happen until the next purchase options become available in 2025,” the analysts said.
Suezmax rates tipped to rise further
NAT repaid $27m of debt during the fourth quarter.
“The company has demonstrated an ability to make quick debt repayments while still maintaining a respectable dividend yield,” Morkedal and his team said.
The annualised yield based on the final three months is 13%.
Dividends are expected to rise further following the repayment of the 2019 facility, or if the company chooses to refinance it, Clarksons Securities said.
Its analysts are forecasting non-eco suezmax rates of $47,000 per day this year, rising to $55,000 in 2024.
NAT founder and chief executive Herbjorn Hansson said earlier this week: “We now expect very clearly to be a debt-free company in a year or two and being able then to raise dividends significantly.”
He added market conditions are better than he has ever seen.
NAT argues its debts are among the lowest of publicly listed tanker companies, with net debt at $197m.
