Boosted by soaring tanker earnings, Imperial Petroleum has redeemed early the second of its three major bank loans, nearly wiping out its entire debt amid rising interest rates.
The Nasdaq-listed owner of eight tankers and four bulkers announced on Tuesday it has repaid “early and in full” an outstanding $30m from a loan with the National Bank of Greece (NBG).
The company made a similar move on 3 April, for the $23.2m it still owed to DNB Bank under an ongoing loan agreement from 2021.
Imperial Petroleum’s NBG loan was much more recent than the one with DNB. According to Imperial’s latest annual report, the company concluded its five-year loan with the Greek lender in November 2022.
The NBG loan was secured by Imperial's two biggest vessels — the 160,000-dwt suezmaxes Suez Enchanted (built 2007) and Suez Protopia (built 2008).
The repayment of its DNB and NBG loans leaves the company with just $15m of debt. According to earlier stock exchange filings, this is the outstanding amount from of a four-year, $17m loan that Imperial concluded with Greece’s Alpha Bank in September 2022.
“The company elected to voluntarily repay the majority of its outstanding loans so as to utilise its excess cash amidst a positive market environment and shield its cash flow generation going forward against… increasing finance costs,” Imperial said in its statement on Tuesday.
The finance cost increase is evident. Spurred by rising interest rates, the average interest rate on Imperial's loans — including the margin — jumped to 6.28% in 2022 from 2.17% the year before, according to its latest annual report.
Redeeming the bank loans helps limit the company’s interest rate exposure. Following the repayments, Imperial is already net-debt free and 10 of its 12 vessels are unencumbered.
The company’s latest finance moves are underpinned by soaring profitability, as its fleet grows and markets move in its favour.
The Harry Vafias-led firm saw net income climb to $29.5m last year from a net loss of $3.6m in 2021, which was its first year of operations.
Robust tanker markets also help boost Imperial's value. In a market update released on 27 March, the company estimated its net asset value (NAV) at just shy of $340m — more than six times its market capitalisation as of 11 April.
