Capital Product Partners earmarks $3 billion for 11 newbuild vessels as focus shifts to LNG carrier segment

After revealing plans to shift its business focus towards the LNG carrier sector, Capital Product Partners L.P. (CPLP) has now entered into an agreement to acquire eleven newbuild LNG carriers for a total price of $3.1 billion.

On November 13, CPLP said it had entered into an umbrella agreement with Capital Maritime & Trading Corp. and Capital GP providing for the acquisition of eleven newbuild LNG carriers from Capital Maritime.

As per terms of the agreement, the vessels will be purchased through the acquisition of 100% of the equity interests in the applicable vessel-owning company.

The vessels purchased by Capital Product Partners are two-stroke MEGA Mark III Flex 174,000 cubic meter LNG carriers built/under construction at Hyundai Heavy Industries and Hyundai Samho Heavy Industries in South Korea.

One of the vessels is the recently delivered LNG carrier Amore Mio I and CPLP intends to acquire its vessel-owning company on or about the closing date of the umbrella agreement, which is expected to occur by the end of 2023. The acquisition of this vessel was financed through a $196.3 million sale and leaseback transaction between the vessel-owning company and CMB Financial Leasing.

The remaining ten vessels are scheduled to join CPLP’s fleet between January 2024 and March 2027.

In addition, CPLP will receive funding support from Capital Maritime, including a no-fee, fully backstopped rights offering of $500 million and an unsecured non-amortizing seller’s credit of $220 million.

Following the closing of the umbrella agreement, the company plans to explore the disposal of its container vessels and abstain from acquiring additional container vessels.

Additionally, CPLP agreed to change its name to Capital New Energy Carriers L.P. to reflect its focus on LNG carriers and energy transition shipping. The change is expected to become effective by December 31, 2023.

The change of the business focus to concentrate on the LNG carrier market will also include right of first refusal on two ammonia carriers and two liquid CO2 carriers on order by Capital Maritime, as well as on future two-stroke LNG vessels and charters from Capital Maritime.

Jerry Kalogiratos, Chief Executive Officer of the General Partner, commented: “We are very pleased to announce this transformative transaction for the Partnership, which we expect to usher Capital Product Partners L.P. to a new chapter in its life as a public listed entity. Upon completion of the 11 LNG/C fleet acquisition, we expect CPLP to transform, into one of the largest US listed shipping companies in terms of enterprise value and the largest owner of two stroke, latest generation LNG carriers compared to the current fleet of its US listed peers.

“The commitment to change the name of the Partnership to ‘Capital New Energy Carriers L.P.’ and to gradually divest our container vessels, reflects our renewed business focus on LNG and energy transition shipping. We are well positioned to take advantage of the strong fundamentals of the LNG industry with six open LNG/Cs delivering between 2026-2027 and rights of first refusal on a unique fleet of LCO2 and ammonia carriers. We believe that this transaction, together with our stated intention to convert the Partnership into a corporation and to review over time our capital allocation policy, should attract additional investor interest and allow our equity valuation to move closer to our peers.”

CPLP currently owns 22 vessels, including seven LNG carriers, twelve Neo-Panamax container vessels, and three Panamax container vessels.