Looks like a terrible deal to TC 5 LR1's for 3 years at what looks like arround 14600 USD/day. Everybody is expecting the product tanker market to improve sooner rather than later - but TNP are playing defense. Hope this is not a sign that banks is asking for secured cashflow. Anybody has a guess on how this could be an attractive deal for Tsakos?
It is a terrible deal: TNP shares 50% of 'profits' which really means losing revenue to pay overhead, which means more losses. BTW, TNP pays 100% of the losses. Three years ago, management issued stock to buy more ships, increasing capacity in an industry with overcapacity and diluting earnings (they had some then). Any fool could see they should have cancelled ship building contracts, sold ships, bot stock BUT management has not changed. How is that private placement of shares at $12/sh working for you?
Well - it was nice with a 5% gain but that came a couple of days after the annoncement and TNK rose more than 6% on the same day... Im actually a shareholder of TNP. Im sure TNP can have a great future and it also looks like shares are relative cheap right now. But as far as I can see when looking at future cash flow TNP simply needs more cash soon. Next couple of years's repayments of debt and drydockings are simply much higher than the cash flow generated from the ships. They can fund this in many different ways. Issuing shares, sale and lease back of ships or restructuring into an MLP. But they need to do something and Im not sure that action will not cost shareholders before a recovery can take place...
14,600 is profitable and is more than NNA is getting for 12 month deals. It's not their entire fleet. They need to hold out against losses on the crude side. So yes, maybe defense, but a solid deal. Profitability is the key. Plenty of fleet size to capitalize upon after they weather the storm.
That comparison to NNA misses a key point.....profit sharing. NNA was 50/50 profit sharing on almost all its long term deals, giving their earnings nice upside potential is the market strengthens.
And another point is being overlooked by just making these facile comparisons of rates. The 14,600 rate is less "profitable" for TNP. They carry much higher legacy costs on their product fleet, since they bought those at appreciably higher prices than today's new builds. This has been a strong point for STNG, who is buying their fleet at 30% less than costs just 5 yrs ago, not to mention for eco-type vessels who's operating costs are also much lower.