The GasLog companies' decision to cut incentive distribution rights last week is earning high marks from analysts, while GasLog shares have shot up.
On 24 June, the New York-traded LNG players announced a move to eliminate GasLog's rights in exchange for 2.5 million common shares in GasLog Partners, its master limited partnership spinoff, and another 2.5 million series B preferred shares.
The companies said the decision was based on a desire to simply and differentiate its corporate structure.
Since announcing the cuts, GasLog shares have shot up 7.2% to $14.10 Tuesday afternoon. GasLog Partners shares have not fared as well, dropping slightly 0.6% to $21.06.
"The [incentive distribution rights] structure was a product of a different era for shipping MLPs, and we have had many discussions with investors of both entities that desired a cleaner structure across the GasLog complex," said Evercore analyst Jonathan Chappell, whose firm advised GasLogs's conflicts committee on the move.
"We believe GLOG’s sum-of-the-parts valuation becomes more straightforward under its new ownership structure, while GLOP’s accretion hurdle for further fleet and distribution expansion is reset lower.
Jefferies Randy Giveans said the transaction was immediately accretive to GasLog Partner's distributable cash flow and cash flow neutral.
"[Axing the rights] enhances GasLog Partners’ ability to pursue growth opportunities by reducing its expected cost of capital, and reduces the complexity in GasLog’s structure and simplifies the presentation of financial results," he wrote in a Monday morning note.
Of the 2.5 million class B shares GasLog received, equal increments will be convertible to common shares each 1 July for the next six years.
Those shares will not have voting or distribution rights until all shares are converted.
Prior to the move, GasLog owned more than a quarter of GasLog Partners.
