Business Context and Reporting Period
This Form 6-K filing by Capital Product Partners L.P. (Registrant) covers the month of July 2022, with the report dated July 21, 2022. The Registrant is a foreign private issuer focused on shipping, specifically container and LNG carriers. The primary purpose of this filing is to announce a new debt offering by its wholly owned subsidiary, CPLP Shipping Holdings PLC.
Key Financial Metrics and Capital Structure
The filing details a new debt issuance rather than reporting standard quarterly financial results (revenue, profit, or cash flow) for the period.
- Debt Offering: Launch of up to €100 million in unsecured bonds, guaranteed by the Registrant.
- Offering Expenses: Estimated at approximately €3.4 million.
- Use of Proceeds: Up to €96.6 million designated for debt repayment and/or acquisition of new vessels; remainder for working capital.
- Financial Covenants:
- Net Debt to Market Value Adjusted Total Assets ratio must be ≤ 0.75.
- EBITDA to Net Interest Expense ratio must be ≥ 2.0.
- Liquidity/Reserves: A Debt Service Reserve Account (DSRA) is required, including a fixed €100,000 and 50% of cash distributions exceeding €20 million (capped at 1/3 of bond par value).
- Insurance Coverage (as of May 31, 2022):
- Hull & Machinery: $2.8 billion.
- Increased Value (Total Loss): $600 million additional.
- War Risks: $3.4 billion.
- Pollution (P&I): Up to $1.0 billion per incident per vessel.
Material Changes and Operational Updates
The filing reports several material operational changes and asset movements:
- Vessel Sales: M/V Archimidis was delivered to a new owner on July 6, 2022. M/V Agamemnon is expected to be delivered by the end of August 2022.
- Charter Extension: On May 26, 2022, the charterer of LNG/C Adamastos (Engie Energy Marketing Singapore Pte Ltd.) exercised an option to extend the firm charter period from 5 to 7 years, with an adjusted time charter rate.
- Share Repurchases: As of June 30, 2022, the Partnership repurchased 567,289 common units at an average cost of $13.07 per unit under a $30.0 million program authorized in January 2021.
- Contracted Revenue: As of May 31, 2022, the average charter duration for the fleet (excluding vessels sold) was 5.6 years with $1.4 billion in total contracted revenue. Assuming all extension options are exercised, this extends to 10.1 years and $2.6 billion.
Outlook, Risks, and Management Commentary
Market Outlook: Management highlights the strategic significance of LNG in the EU energy mix, noting the EU's replacement of Russian gas with LNG. Data provided shows a significant increase in EU LNG imports in 2022 compared to 2021, while Russian natural gas imports declined.
Risk Factors:
- Economic Recession: A potential global recession could negatively impact business activity, cash flow, and solvency due to the strong correlation between world GDP and container transportation demand.
- Market Volatility: Historical data provided illustrates the volatility of containership earnings relative to world GDP and seaborne trade volumes.
- Forward-Looking Statements: The Registrant disclaims any obligation to update forward-looking statements regarding the bond offering, use of proceeds, and LNG carrier performance.
Investor Verification Checklist
- Confirm the closing of the €100 million bond offering on or around July 22, 2022, and the commencement of trading on the ATHEX.
- Verify the final use of proceeds, specifically the split between debt repayment and new vessel acquisitions.
- Monitor the delivery of the M/V Agamemnon, expected by the end of August 2022.
- Review the impact of the extended 7-year charter for LNG/C Adamastos on future cash flow stability.
- Assess the Registrant's ability to maintain the new financial covenants (Net Debt/Assets ≤ 0.75; EBITDA/Interest ≥ 2.0) post-issuance.