The transformation of Scorpio Tankers’ balance sheet continues as the New York-listed shipowner buys back six more vessels from expensive lease-financing and repurchases more of its own stock.
Scorpio on Tuesday announced that it would slash a further $147.3m in debt as it purchases the half-dozen tankers, which had been lease-financed at 350 basis points over Libor. The purchases from China’s Bank of Communications Financial Leasing are expected to close in June.
The Monaco- and New York-based shipowner has been on a campaign to cut debt, wiping $1.2bn off the balance sheet through lease buyouts and debt repayments over the course of 2022. This took total debt just below $2bn from a starting point of $3.2bn.
Scorpio on 13 March announced a further debt reduction of $150m as it bought out six product tankers from leases.
The current estimate has Scorpio’s debt down to $1.6bn — or half the level at the start of 2022 — by the end of the current quarter, according to estimates relayed by the company on Tuesday.
Scorpio will have exercised 40 purchase options since the third quarter of last year, but still has 56 tankers under lease financing.
In the new round of purchase options, Scorpio is buying a 2019-built LR2 and five 2019-built MRs.
The LR2 is the 110,000-dwt STI Lobelia, while the MRs include the 50,000-dwt STI Magic, STI Mystery, STI Marvel, STI Mythic and STI Magister.
Valuation platform VesselsValue estimates that the LR2 is worth $66.5m, while the five MRs are assessed at between $43.1m and $43.8m.
In another move aimed at enhancing shareholder value, Scorpio announced that it had repurchased 396,706 shares at $54.41 each, for a total outlay of $21.6m.
At its last quarterly earnings report on 16 February, Scorpio said it had repurchased 5.8m common shares worth $256.5m since July 2022.
The outfit followed this by splashing $69m on 1.27m shares priced at $54.30 each on 4 April.
“Ultimately, the company is putting itself in a position to weather any future storms, which should hopefully prevent what had occurred from the mistimed 2017 acquisition of the Navig8 product tanker fleet which stretched the firm’s balance sheet, requiring all these sale leasebacks in the first place and a very dilutive equity raise,” analyst Ben Nolan of Stifel said in a February client note.
Scorpio shares were up nearly 2% to $56.22 in midday trading on Tuesday on the New York Stock Exchange.
