Business Context and Reporting Period
This Form 6-K filing by Capital Product Partners L.P. (CPLP) is dated February 25, 2008. The filing discloses a non-binding letter of intent to acquire two additional vessels from its general partner's affiliate, Capital Maritime & Trading Corp., expanding its fleet of modern double-hull tankers.
Key Financial Metrics and Transaction Details
- Acquisition Targets: M/T Amore Mio II (2001-built, 159,982 dwt) and M/T Aristofanis (2005-built, 12,000 dwt).
- Total Purchase Price: $118 million ($95 million for M/T Amore Mio II; $23 million for M/T Aristofanis).
- Financing Structure:
- $57.5 million via drawdown on a $350 million revolving credit facility.
- $2 million from available cash.
- Remaining balance funded by issuing approximately 2.55 million common units to Capital Maritime at $22.94 per unit.
- Charter Terms:
- M/T Amore Mio II: Chartered to BP Shipping Limited. Base gross rate of $36,456/day (net $36,000). Charter expires no earlier than January 2011. Includes 50/50 profit sharing on revenues above base rate. Operating expenses fixed at $8,500/day for five years.
- M/T Aristofanis: Chartered to Shell International Trading & Shipping Company Ltd. Gross rate of $13,250/day (net $12,952). Charter expires no earlier than March 2010. Operating expenses fixed at $5,500/day for five years.
- Expected Contribution: Approximately $0.08 per unit annually to operating surplus, excluding profit sharing.
Material Changes and Strategic Outlook
The transaction represents a strategic "drop-down" acquisition intended to grow the fleet and diversify the customer base by adding Shell International as a client while extending the relationship with BP. Upon completion, CPLP will own 16 vessels, with an agreement to purchase two additional product tankers, totaling 18 vessels under medium to long-term charters.
Management expects to distribute amounts accreted from these acquisitions to unitholders over time. The transaction is subject to definitive agreements, customary closing conditions, a fairness opinion, and Board of Directors approval.
Risks and Contingencies
- Transaction Uncertainty: The deal is based on a non-binding letter of intent and is subject to negotiation of definitive agreements and Board approval.
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks and uncertainties that could cause actual results to differ materially from anticipated outcomes, including financing terms and expected cash flow contributions.
- Related Party Transaction: The acquisition is from an affiliate of the general partner, requiring review by the conflicts committee and a fairness opinion.
Investor Verification Checklist
- Confirm the execution of definitive purchase agreements and receipt of the required fairness opinion.
- Verify the final closing date, currently expected by the end of April 2008.
- Monitor the actual issuance of the 2.55 million common units and the impact on total unit count.
- Track the realization of the projected $0.08 per unit annual contribution to operating surplus.
- Review the status of the two additional product tankers under agreement for future purchase.