Avance Gas has turned to the sale and leaseback finance sector due to a lack of regular financing.
The John Fredriksen-controlled company said it had refinanced the 83,000-cbm VLGC Pampero (built 2015) by offloading it for $45m to an unnamed Chinese leasing house.
VesselsValue assesses the unit as worth $60m.
The transaction bears interest below 3.4% over a 10-year charter back to Avance, which said the move will generate net cash proceeds of $10m and lower its cash break-even to $19,500 per day.
The Chinese lessor can cancel the contract after five years, while Avance can buy the ship back after year two.
The deal strengthens its cash position by $30m, as well as cutting the fleet age and improving fuel efficiency, Avance added.
The Oslo-listed company said debt and equity financing remains "scarce" for new VLGC projects, and this is likely to continue, along with market uncertainty due to Covid-19.
It sold its oldest VLGC this month at a price analysts described as "very firm", after failing to sell it last year.
The 82,500-cbm Avance (built 2003) went to an unnamed third party for $35m, giving the shipowner a $6m profit.
Profit cut in weaker markets
In the second quarter, Avance made a net profit of $6.7m, against $9.8m in the same period of 2019, bringing the six-month profit to $21.8m.
Revenue dropped to $50m from $61m.
The average time charter equivalent rate was $28,900 per day, down from nearly $45,000 in the first quarter.
Ebitda of $23m was below consensus, but in line with Fearnley Securities' estimates. The Norwegian investment bank said the achieved TCE rate was "well below observed rates but driven by waiting time, slow steaming and repositioning voyages in the backwash of Covid-19".
Admin costs go down
Daily operating expenses stood at $8,576 per day, while administration expenses were cut to $608 per day, from $1,042.
Time charter coverage is 21% for the rest of the year at $33,500 per day and 14% for 2021 at $32,500 per day.
By the third quarter, seven of its ships will have completed special surveys and five scrubbers will have been installed.
The first three months were strong, but rates crashed in the second quarter due to Covid-19-related reduced demand and an unfavourable LPG trading environment, Avance said.
"With a closed LPG price arbitrage and reduced Asian demand, freight rates started to drop in May/June. During July/August, the demand has started to return to normal trajectories, and the LPG price differential has developed positively," the company added.
Lower fleet capacity due to dry-docking and the slow steaming of the fleet has led to a rebound in freight markets in the third quarter, it said.
Volatility grows
The fall in oil prices has increased volatility in US export volumes, mainly due to an unfavourable price differential between the US and Asia.
The global VLGC fleet totalled 299 ships by the end of July, with an orderbook of 33 ships, or 11% of the fleet.
Three new ships have been confirmed ordered, for delivery in 2022.
Five carriers are due for delivery in the rest of this year, 20 in 2021 and eight in 2022.
"It is expected that the effect of fleet growth will be partly mitigated by [the] large number of special surveys due 2020-2022," Avance said.
It believes the sector's long-term fundamentals remain strong.
