Dorian LPG Ltd. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2017. The filing was signed February 7, 2018. Dorian operates a 22-vessel fleet of very large gas carriers (VLGCs) transporting LPG worldwide; 18 vessels were in the Helios Pool at December 31.
Financial performance and position
| Metric | Three months ended Dec. 31, 2017 | Nine months ended Dec. 31, 2017 |
|---|---|---|
| Revenue | $44.5 million | $120.3 million |
| Operating income | $7.0 million; 15.7% of revenue | $3.2 million; 2.6% of revenue |
| Net income/(loss) | $1.7 million; 3.7% of revenue | $(16.9) million; (14.1)% of revenue |
| Adjusted EBITDA | $24.7 million | $56.3 million |
| Operating cash flow | Not provided for the quarter | $40.9 million |
- At December 31, cash and cash equivalents were $55.6 million and restricted cash was $29.1 million. Current assets of $92.4 million were below current liabilities of $142.8 million, a $50.4 million working-capital deficit.
- Total debt obligations were $746.3 million before $18.9 million of deferred financing fees; reported debt net of fees was $727.5 million. The current portion was $126.6 million.
- Fleet utilization was 95.6% for the quarter and 92.3% for the nine-month period. Average TCE rates were $22,833 and $21,199 per day, respectively. Daily vessel operating expense was $7,804 and $8,003, respectively.
Changes versus comparable periods
- Quarterly revenue rose 24.7% year over year, mainly as higher spot-market rates lifted TCE; quarterly operating income improved from a $3.5 million loss to $7.0 million income. Net income declined from $5.0 million to $1.7 million.
- Nine-month revenue was nearly unchanged, up 0.4%. Net loss widened from $3.4 million to $16.9 million, while Adjusted EBITDA was nearly flat, down from $56.8 million to $56.3 million.
- Nine-month interest and finance costs rose 15.0% to $24.8 million, attributed mainly to higher LIBOR and financing-fee amortization, partly offset by lower average debt. General and administrative expenses increased 22.0% to $19.5 million, including $2.3 million of employee cash bonuses.
- Nine-month operating cash flow fell from $49.2 million to $40.9 million, primarily due to timing of working-capital changes related to amounts due from the Helios Pool. Cash increased by $38.6 million, supported by financing and restricted-cash releases.
Outlook, financing, and risks
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern absent refinancing. The $66.9 million remaining 2017 Bridge Loan principal was due December 31, 2018, and refinancing had not been secured at filing. Management believed additional debt or equity financing, cash on hand, and operating cash flow would meet obligations, but gave no assurance financing would be available.
- The bridge loan maturity was extended to December 31, 2018, with interest margins scheduled to rise to LIBOR plus 6.50% from April 2018 and LIBOR plus 8.50% from July 2018. Debt covenants include liquidity, interest coverage, and vessel-value requirements. The 2015 Debt Facility also temporarily restricted dividends and share repurchases.
- After quarter-end, Dorian refinanced the Concorde through a sale-and-bareboat-charterback structure, with a stated $70.0 million transaction price, $56.0 million cash proceeds and a $14.0 million buyer-retained deposit. Proceeds were used in part to repay $35.1 million of 2015 Debt Facility principal. The vessel remains on the balance sheet as the transaction is treated as financing.
- The Corsair was refinanced in November 2017 under a similar structure: $52.0 million cash proceeds and a $13.0 million deposit against a $65.0 million transaction price; $30.1 million repaid the bridge loan. The arrangement has a stated 4.9% fixed rate and a 12-year charterback.
- Management reported indicators of potential vessel impairment but recorded no impairment. Its sensitivity analysis estimated that a 40% reduction in assumed 10-year average spot TCE rates would trigger an approximately $154.5 million impairment; a 30% reduction would not trigger impairment.
- Key operating risks include volatile LPG shipping rates and vessel values, supply-demand shifts, customer and pool performance, financing availability and covenant compliance, interest-rate exposure, and operating, regulatory, and environmental costs. The filing provides no numerical earnings or revenue guidance.
- The company reported no known legal claim requiring disclosure or accrual. It stated disclosure controls were effective and there were no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether Dorian refinanced or otherwise funded the $66.9 million bridge-loan maturity and met all debt covenants.
- Cash availability and restrictions, including the required restricted-cash balance and the company’s ability to meet near-term debt service.
- Helios Pool collections and exposure: Dorian reported $50.7 million due from the pool, including $19.8 million of contributed working capital.
- Post-quarter Concorde refinancing cash proceeds and debt repayment: the filing gives $56.0 million cash proceeds in the note but refers to $54.0 million in the MD&A; confirm the final net cash and use of proceeds.
- Spot TCE rates, utilization, bunker costs, and vessel values underlying operating results and the impairment assessment.
- Effects of rising LIBOR, bridge-loan margin step-ups, and financing-fee amortization on future interest expense and liquidity.