American Shipping Co (AMSC) — the Norwegian owner of a fleet of US-flag tankers — is expanding its horizons.
The Oslo-listed company announced on Thursday that it had bought a troubled offshore construction vessel, the 26,832-gt Normand Maximus (built 2016), from a Solstad Offshore subsidiary for $157m, then leased it back to another Solstad company.
“[The deal] diversifies AMSC’s leasing portfolio and adds additional stable and predictable returns to our shareholders,” chief executive Pal Lothe Magnussen said.
“We have for some time been looking for the right growth opportunity and we are very satisfied with concluding on this transaction.”
Magnussen said the deal is projected to produce an annual return on equity greater than 20% and a strong running dividend yield.
The offshore services market, he said, is in recovery and is experiencing increased activity.
The purchase will be financed 70% with debt and the rest with cash on hand and new equity.
As it stands, AMSC owns 10 MR product tankers.
All are Jones Act qualified, meaning they are among a small fleet able to carry cargo between points in the US, and the company pitches itself as the “Jones Act yield company”.
It has its entire fleet on long-term charter to Florida-based Overseas Shipholding Group (OSG).
But three of those ships, the 46,800-dwt Overseas Los Angeles (built 2007), Overseas New York and Overseas Texas City (both built 2008), will be returning to AMSC at the end of the year as OSG evaluates new, decarbonisation-related trades.
The Norwegian company said it will be looking for new charterers for the trio.
Fearnley Securities called the purchase an “opportunistic offshore diversification”.
“The investment looks accretive for the equity story and adds support to the current dividend payments,” analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said.
“The opportunistic move also supports our confidence in AMSC’s ability to re-charter the three Jones Act tanker vessels rolling off contracts later this year.”
The investment bank considers the deal beneficial for the tanker owner’s $220m, 7.25% 2025 bond, as the new offshore ship will sit outside the US bond-issuer entity.
The Normand Maximus had been on time charter to Saipem until September 2022, when the Italian oilfield services company terminated the fixture.
Solstad had been in jeopardy of having to buy the $122m Normand Maximus from Maximus Ltd if it could not find work for the ship, which tended to be short and medium-term contracts since the Saipem deal was terminated.
According to the company’s annual report, Maximus Ltd and Normand Maximus Ltd, the ship’s bareboat charterer, had held talks throughout 2021 with the vessel’s financiers over its NOK 2.4bn ($247m) lease obligations.
Buyer and seller both said the Normand Maximus will be delivered to AMSC in the fourth quarter of 2022, then go on bareboat charter to a Solstad subsidiary.
The charter will run for five years, with the option to extend, and options for Solstad to buy the ship after five and 10 years.
“We are very pleased that we have been able to secure the continued availability of Normand Maximus to our customers,” Solstad chief executive Lars Peder Solstad said.
“Normand Maximus is one of the most sophisticated vessels within this segment, and a vital part of the Solstad offering to our clients.”