Teekay Tankers has revealed it is saving $8m on interest costs after a series of vessel buy-backs in recent months.
The US-listed owner has declared options to repurchase six aframaxes and two suezmaxes from leasing companies at a cost of $186m.
Speaking on a conference call with analysts, chief executive Kevin Mackay said the moves will be funded by a mixture of new leasebacks at lower interest rates, and existing bank finance.
"We're actually just finalising those term sheets," Mackay said. "So we've got a pretty good handle on that."
He revealed that $140m will be refinanced through new leasebacks and the rest with cash from a revolver.
"We're probably looking at [a] minimum of $8m [in interest savings] in 2022 from doing that," Mackay said.
Further savings?
And there is scope to bring financial costs down even further.
Chief financial officer Stewart Andrade told analysts that another six tankers remain on higher-rate leasing contracts that were inked a few years ago.
However, the coupon is "quite a bit lower" than those for the eight vessels being refinanced.
"It's more in the 6% range, but the total amount outstanding on those is about $160m — not something that we're focused on immediately," Andrade said.
"But, of course, as the market turns and we start generating more cash flow, we'll look to continue to try and bring down our cost of capital. But, at the moment, we won't be doing anything with those ones in the near term."
As for further fleet plans, Mackay said he believes it still pays to be prudent.
"So we're not rushing to come up with a definitive execution plan for this quarter; I think we'll continue to do what we've been doing, strengthening the balance sheet, look to pay down the expensive debt," he said.
"And, as we sit here today, we've got a 50-ship fleet that's exposed to a market that we anticipate will pick up, certainly as we move to the back end of this year and into next year," Mackay said.
He believes the company is well positioned to reap the benefit of a lot of the "hard work that we've done" over the last 18 months.
"Let's see how the uncertainty over the next few months or possibly quarter plays out, and then we'll take it from there," Mackay said.
So far in the second quarter, the owner has booked 55% of suezmax and 49% of aframax spot revenue days at an average of $10,500 per day, he said.
New orders being deterred
He argued rising newbuilding prices spurred by an increase in steel prices and a very large amount of ordering in the containership sector since the start of the year are acting as a deterrent to new tanker deals at yards.
"We've also seen a modest increase in recycling numbers since the start of the year," Mackay said. "So we would look for a more substantial increase in demolitions if, or more likely when, sanctions on Iran are lifted and the fleet of older ships currently serving sanction trades are phased out."
