Private equity-backed shipowner Chembulk Tankers has repurchased bonds worth $21.8m over the last few months, taking its total buy-back to $41.4m, after selling almost half the ships a $200m placement was made to finance in 2018.
Recent purchases have been made at a price range of $0.75-$0.9775 from an initial issue in Oslo of 8% senior secured notes that matures on 2 February 2023.
Reporting the bond purchases, Fearnleys Securities said that “while the buy-backs eat into Chembulk’s funds, the interest portion of cash break-even has come down meaningfully from $4,000 per day to $3,200 per day for the 11 remaining vessels”.
Chembulk, which is backed by equities investors KKR and York Capital Management, now operates a fleet of 19 owned and chartered-in stainless-steel tankers after selling vessels in 2019.
The bond issue was originally structured to finance 20 ships, and was part of a drive to expand the company, which now likely has large liquid reserves and debt compared to the size of its current owned fleet.
The Fearnleys analysts added that assuming the latest buy-backs were evenly distributed in the disclosed price range Chembulk is left with $39.2m free cash net of the 2020 bond buy-backs versus a minimum liquidity covenant of $15m.
In March the company revealed it is moving its fleet to commercial management in tanker pools run by Womar Logistics.
Net proceeds from the bond offering were originally earmarked for refinancing of existing bank debt and general corporate purposes, and there was an option for Chembulk to expand the issue amount at a future date to a maximum of $250m.
The Connecticut-based shipowner's last annual report showed it lost $67.9m for the 2018 year, after a slight decline in revenue and a jump in voyage expense.
