CSSC (Hong Kong) Shipping has agreed to provide more lease financing to Scorpio Tankers via a two-ship deal.
In an exchange filing, Hong Kong-listed CSSC Shipping said it signed a memorandum of agreement to acquire the 101,000-dwt STI Grace and STI Jermyn (both built 2016) from Scorpio for $57.4m.
As part of the deal, the New York-listed product tanker operator will charter them back on bareboat terms for a total hire of $68.4m.
The lease period will last for six years and Scorpio is obliged to buy the LR2s upon the expiry of the charters.
CSSC Shipping, a subsidiary of state-owned conglomerate China State Shipbuilding Corp, said the leasing deal would strengthen its business and is consistent with its overall business development strategies.
“The directors are of the view that the terms ... are fair and reasonable, and are in the interests of the company and its shareholders as a whole,” CSSC Shipping said in the filing.
Scorpio generally does not comment on individual ship financing.
In its last quarterly report published in February, Scorpio said it expected to receive $20.8m from refinancing two ships and a draw-down in a credit facility by the end of March.
The company also said it was in discussions with financial institutions to further increase liquidity by up to $61.2m by refinancing 15 vessels. The prospective financiers were not named.
Company executives said back then that Scorpio could use the extra cash to continue securities repurchases and maintain dividend payout during the market downturn.
Scorpio has secured lease financing from Chinese state lessors in recent years, including CSSC Shipping, AVIC International Leasing and CMB Financial Leasing.
When acquiring Navig8 Product Tankers in 2017, the company took over eight LR2 vessels on bareboat charters from CSSC Shipping.
Those are the 113,000-dwt STI Gallantry, STI Nautilus, STI Guard, STI Guide, STI Goal (all built 2016), and STI Gauntlet, STI Gladiator and STI Gratitude (all built 2017).
Attached with buyback obligations, the leases are to last throughout 2026 and 2027.
In September 2019, Scorpio and CSSC Shipping reached an agreement to increase the borrowing capacity under the leases by up to $12.5m to fund scrubber installations.
The amount has been drawn down.
