Capital Product Partners L.P. — FY2018 Form 20-F
Filing identity and period: The supplied filing is Capital Product Partners L.P.’s audited annual report for the fiscal year ended December 31, 2018, filed April 26, 2019—not a quarterly report. This differs from the request metadata naming Capital Clean Energy Carriers Corp. The financial statements include the tanker business later spun off, so FY2018 results are not directly comparable with the company’s post-transaction business.
Business context and material transaction
At year-end 2018, the Partnership operated a 36-vessel fleet across tanker, container and drybulk markets. On March 27, 2019, it completed the DSS transaction: distributed its 25 crude and product tankers to unitholders through Diamond S Shipping, received $319.7 million, redeemed all Class B preferred units for $119.5 million, and repaid $146.5 million of debt plus interest and breakage costs. It also effected a 1-for-7 reverse unit split. Afterward, the Partnership owned ten neo-panamax container vessels and one drybulk vessel.
Financial results
| Metric | FY2018 | FY2017 | Change / context |
|---|---|---|---|
| Total revenue | $279.3 million | $249.1 million | Up 12.1%; more vessel operating days and voyage-charter activity, partly offset by weaker tanker rates |
| Operating income | $26.3 million | $64.3 million | Down 59.1%; operating margin about 9.4%, versus 25.8% |
| Net income (loss) | $(0.1) million | $38.5 million | Common-unit loss per unit was $(0.60), versus earnings of $1.51, on reverse-split-adjusted basis |
| Impairment charge | $28.8 million | $3.3 million | Related to sale of M/T Amore Mio II |
| Cash from operations | $97.9 million | $127.0 million | Down $29.1 million, reflecting lower operating cash generation and adverse working-capital movements |
| Cash used in investing | $4.5 million | $2.0 million | Acquisitions and vessel-sale proceeds substantially offset |
| Cash used in financing | $126.5 million | $168.3 million | Included debt repayments and $52.6 million of distributions paid |
At December 31, 2018, total assets were $1.385 billion, total liabilities $503.9 million and partners’ capital $881.3 million. Gross debt was $445.9 million; reported cash and cash equivalents were $30.2 million, with an additional $18.0 million of restricted cash. The weighted-average borrowing rate rose to 5.35% from 4.29%. All vessels secured the debt, and the Partnership reported compliance with its financial covenants at year-end. The company stated that working capital should meet existing liquidity needs for at least 12 months, subject to market and financing conditions.
Changes, outlook and risks
- Revenue rose, but profitability and operating cash flow fell. Voyage expenses increased to $46.3 million from $15.2 million, largely because more vessels operated on voyage charters; vessel operating expenses rose to $99.1 million from $86.1 million.
- The Partnership declared and paid $2.24 per common unit for FY2018 on a reverse-split-adjusted basis. Following the DSS transaction, it adopted quarterly distribution guidance of $0.315 per common unit; this is guidance, not a guaranteed distribution.
- Management described container charter rates as having recovered in the first half of 2018 before retreating, and drybulk rates as having partially recovered. The remaining fleet was chartered under medium- to long-term contracts, with approximately 5.1 years of revenue-weighted charter duration. The M/V Cape Agamemnon charter was expected to expire in June 2020.
- Charterer concentration and creditworthiness are significant risks. In reported FY2018 results, Petrobras, HMM and CMA CGM accounted for 19%, 16% and 15% of revenue, respectively. The smaller post-spin fleet increases customer and cash-flow concentration risk.
- Environmental compliance requires capital investment. Contracted scrubber expenditure was $19.5 million, expected mainly in 2019–2021; estimated remaining ballast-water treatment expenditure was approximately $1.5 million. Scrubber installation could cause 30–45 off-hire days per vessel.
- Other material risks include floating-rate debt and LIBOR transition, vessel-value declines and covenant headroom, shipping-market cyclicality, limited access to external financing, and the 2018 management buy-out of the fleet manager and 2019 change in general-partner ownership.
- The filing disclosed two 2018 Iran port calls and stated the activity was believed compliant with applicable sanctions. The related revenue was approximately $0.1 million for one call and $1.5 million for the M/T Amore Mio II voyage.
Investor verification priorities
- Confirm the issuer and filing match the intended investment: this document is for Capital Product Partners L.P., not the company named in the request metadata.
- Review the completed DSS transaction’s final cash, debt, preferred-unit redemption and working-capital true-ups; the filing reports transaction amounts but also describes post-closing adjustments.
- Assess post-spin charter exposure, particularly customer concentration, counterparty ability to pay and upcoming charter expirations.
- Verify the basis and sustainability of the $0.315 quarterly distribution guidance and the restrictions imposed by debt covenants and available cash.
- Track scrubber/BWTS installation costs, off-hire, compliance, and any effects on charter rates and liquidity.
- Consider the $28.8 million impairment, vessel valuations and the assumptions used in impairment testing; carrying values exceeded estimated charter-free market values for certain vessels.