Oslo-listed product tanker owner American Shipping Co (ASMC) is paying out more in dividends after its big refinancing push.
The company said it is increasing the payout by 25% to $0.10 per share for the second quarter, backed by increased free cash flow.
AMSC, which charters its 10 ships to US Jones Act player Overseas Shipholding Group (OSG), closed on $505m of bank and bond debt refinancing in the period.
Chief executive Pal Magnussen said: "Despite the Covid-19 pandemic the company has successfully refinanced the bond and the bank debt at considerably lower cost, which enables us to increase dividends while at the same time strengthen our debt service coverage.
"The new debt terms reflect AMSC’s predictable platform of ten ships with contracted revenues operating in a market with stable long-term outlook."
Debt payments cut
Norwegian investment bank Clarksons Platou Securities said the refinancing of secured debt lowers the tanker owner's debt service by $10m per year, compared to 2019 levels. The bond refinancing is poised lower interest cost by another $5m.
The bank expects annual free cash flow to be $33m.
AMSC said net bareboat revenue was stable at $21.9m in the second quarter.
Net profit rose to $3.5m from $2.5m, partly due to gains on interest swaps.
The charter backlog is $279m, with an average term of 3.2 years.
The company has made increased provisions for dry dockings this year, as ships enter their third and more expensive maintenance cycle.
"We expect dry dock provisions to stay elevated through 2020," AMSC said.
The owner added that demand for transport of petroleum products in the US market was sharply reduced in March and April and "remains lower than normal".
AMSC is insulated from downturns due to its "come hell or high water" bareboat contracts, with five vessels secured until December 2022, four more until December 2023 and a shuttle tanker fixed through to June 2025, the shipowner said.
Market fundamentals in place
"The long term fundamentals in the Jones Act tanker market remain stable," the company added.
Norwegian investment bank Fearnley Securities said Ebitda of $21m was in line with expectations.
The firm added that the implied time-charter equivalent rate from AMSC's main customer, OSG, was was $59,000 per day in the first quarter but has increased to $60,000 per day in the latest period.
"Still, there is no impact on profit split, largely due to OSG claiming higher dry dock provisions ahead of the vessels' third special survey cycle," the bank said.
Its analysts added: "Worth noting is that should these provisions prove too high, the surplus will be due to AMSC through the profit split mechanism."
Fearnley said the dip seen in clean product demand, primarily gasoline, had continued into the second quarter.
"With circa two thirds of all volumes shipping by AMSC being related to the product trade, primarily into Florida, this could postpone the developments seen on the profit split side," the bank added.
Clarksons Platou said that, with most MR tankers under the Jones act on contracts for 2020 and beyond, the utilisation slump mainly impacts oil companies and refiners, rather than shipowners and operators.
"That being said, it is likely to add pressure to rates going forward, impacting owners which have vessels that roll off contracts in the near to medium term," said the firm, an arm of shipbroking giant Clarksons.
