Idan Ofer-backed LNG carrier company Cool Company (CoolCo) has exercised options to acquire two newbuildings from EPS Ventures.
Each LNG carrier is being acquired under the pre-existing purchase option price of $234m, a discount of around 10% to current quoted market value for comparable newbuildings.
CoolCo said the initial exercise price is about $57m per vessel, while around $134m of the remaining $177m is due upon delivery.
The expected closing date and payment of the option exercise is 3 July, the Oslo and New York-listed shipowner confirmed.
The two-stroke LNG carriers are due for delivery from South Korea’s Hyundai Samho Heavy Industries in September and December 2024.
They have a cargo capacity of 174,000 cbm, a GTT Mark III Flex Membrane cargo tank system, reliquification, air lubrication and shaft generators.
EPS Ventures is wholly owned by Quantum Pacific Shipping, a discretionary trust in which Ofer is the beneficiary.
CoolCo said the vessels, which will be named Kool Tiger and Kool Panther, are expected to be funded with a combination of cash on hand and debt financing for which it said it has received a commitment letter from a financing institution.
This debt financing, which is subject to customary approvals, is on a fixed-rate-per-day basis for 10 years with a minimum loan to value of 80% and an implied interest rate of around 6%.
“Their 2024 delivery date makes the vessels especially attractive, with comparable vessels ordered today only being delivered in the 2027/2028 time frame,” CoolCo chief executive Richard Tyrrell said.
“The vessels’ best-in-class design and boil-off rate make them highly attractive to charterers who benefit from the ability to operate efficiently at a range of speeds with reduced emissions.”
Tyrrell said that with the vast majority of the global orderbook already committed to liquefaction projects coming online in the years ahead, few, if any, modern LNG carriers are expected to be available for time charter employment during the late 2024 window when the duo delivers.
“We are currently in discussions to forward fix the vessels on long-term time charters and expect to do so well in advance of delivery at levels that reflect current market strength,” he said.
Fearnley Securities analysts led by Oystein Vaagen said: “We are not surprised to see CoolCo exercise its options, as both ships cost $234m, some 10% below current newbuilding prices, and are delivered three years earlier than what you would get today.
“Moreover, the delivery dates are attractive as limited modern tonnage is available in that delivery window [most newbuildings are contracted].”
As for charters for the pair, the analysts expect to see something in the seven to 10-year range at around $100,000 per day.
Next on the agenda for CoolCo will be its remaining vessel charter openings for 2024 and 2025.
Fearnley Securities said this could be followed by refinancing of debt and further increased dividend capacity.
Separately, CoolCo announced that a syndicate of existing lenders in one of its bank facilities has approved a $70m increase in the debt amount and agreed to reduce the interest rate margin to 225 basis points from 275 basis points.
The shipowner said the additional debt funding will be used to fund the “LNGe” conversion of five vessels, including retrofits with sub-coolers for LNG boil-off reliquefaction under the contract with HD Hyundai Global Service announced this month.
