Scorpio Tankers has unveiled a package of moves to fatten its balance sheet liquidity to $477.9m, or double its prevailing position over the past two years.
While the headline deal for the New York-listed owner is its sale of 12 LR1 product tankers to Hafnia for $413.8m, Scorpio also has sold two MRs at firm levels and is in refinancing talks with a lender for a further $27m cushion.
The combined measures were called “game changing” by Clarksons Platou Securities analyst Omar Nokta.
“Scorpio has unlocked a significant amount of cash from the sale of its LR1s, at least $170m after taking into account the existing debt on the ships,” Nokta told clients in a note on Thursday.
“Including the sale of the two MRs, total liquidity unlocked equates to $189m from the sale of the 14 ships. It has closed on a debt financing releasing $33m and is in discussions on another refinancing that would unlock $27m.”
Even as the timetable for a rebound for a dire tanker market keeps pushing backward, Scorpio’s latest package of responses appears to fully eliminate concerns of a dilutive equity issue as a solution.
“This is the highest figure for Scorpio over the past several years and provides substantial flexibility in the coming quarters,” Nokta wrote.
TradeWinds broke news of Scorpio's impending sale of its 12 LR1s to Hafnia on 19 January. The two companies confirmed the sale in separate announcements on Thursday.
Details in those filings also confirmed expectations that the sale price would trump current estimates of the tankers’ valuations. The $34.5m average easily exceeded the $30m to $32m range projected by VesselsValue, as well as Clarksons’ estimates of $30.5m.
Nokta described “a price level last seen during the stronger period of 2014/2015”.
“Thus, we view this sale as an attractive opportunity for Scorpio to monetise its LR1s at prices reflective of a strong market, while building a bridge with the unlocked cash to a healthier earnings period,” he said.
Besides the LR1s, Scorpio said it had sold the 50,000-dwt STI Fontvieille (built 2013) for $23.5m and the 47,400-dwt STI Majestic (built 2019) for $34.9m. VesselsValue tabbed the tankers at $24.7m and $32.3m, respectively.
More sales could come in non-core areas such as the handysize fleet and older MRs, allowing Scorpio to focus on strong suits in LR2s and MRs, Nokta projected.
Meanwhile, the company is trading at roughly half of Clarksons Platou's pre-deal net-asset-value estimate of $24.50 per share, which is $0.85 higher after the sales. If the just-achieved premium were applied across the fleet, the NAV number moves closer to $30.
“Scorpio has now put itself in a very strong position with a liquidity level it has not seen in several years,” Nokta wrote.
“In fact, the company's pro forma liquidity is over $200m above where it stood after the record-setting product market of 2Q20.
“With this much runway, we see the shares appreciating closer to NAV, as liquidity concerns are now effectively resolved.”
Scorpio shares were up nearly 5% on the New York Stock Exchange on Thursday morning amid a generally positive start to the broader trading day.
