Business Context and Reporting Period
This Form 6-K filing by Capital Product Partners L.P. (CPLP) is dated March 27, 2008. The filing reports the completion of a vessel acquisition and the closing of a new credit facility. CPLP is a Marshall Islands master limited partnership that owns modern double-hull tankers. Following the reported transaction, the partnership owns 15 vessels with agreements to purchase three additional product tankers, totaling 18 vessels under medium to long-term charters.
Key Financial Metrics and Transaction Details
- Acquisition: CPLP acquired the M/T Amore Mio II, a 159,982 dwt crude oil tanker, for $95 million from its general partner's owner, Capital Maritime & Trading Corp.
- Financing Structure: The purchase was funded with $46 million from a new credit facility, $2 million in cash, and the issuance of 2,048,823 common units valued at $22.94 per unit.
- Charter Terms: The vessel is chartered to BP Shipping Limited until at least January 2011. The base gross rate is $36,456 per day (net $36,000), with a 50/50 profit-sharing arrangement on revenues above the base rate. Operating expenses are fixed at $8,500 per day for five years.
- Debt Facility: CPLP closed a new 10-year, $350 million revolving credit facility. It is non-amortizing until March 2013, carries a rate of LIBOR + 110 basis points, and has a commitment fee of 32.5 basis points.
- Interest Rate Hedging: The LIBOR portion of drawn amounts has been swapped to a fixed rate until March 2013.
Material Changes
The primary material change is the expansion of the fleet by one vessel and the establishment of a significant new liquidity source. The partnership increased its debt capacity with the $350 million facility, utilizing $46 million immediately for the M/T Amore Mio II acquisition. The transaction involved a related-party sale, which was approved by the Board of Directors and the conflicts committee following a fairness opinion from Fortis Securities LLC.
Outlook, Management Commentary, and Risks
Management expressed satisfaction with closing the non-amortizing credit facility given current credit market conditions, noting it enhances financial flexibility for future accretive acquisitions. The filing includes standard forward-looking statement disclaimers regarding risks and uncertainties that could cause actual results to differ materially from anticipated results. No specific quantitative guidance for future revenue or earnings was provided in this text.
Investor Verification Checklist
- Verify the exact number of common units issued (2,048,823) and the weighted average price ($22.94) used for the related-party transaction.
- Confirm the terms of the 50/50 profit-sharing arrangement on the M/T Amore Mio II charter and its potential impact on future cash flows.
- Review the full credit agreement for the $350 million facility to understand covenants and the specific mechanics of the interest rate swap.
- Assess the status of the three additional product tankers under agreement for purchase from Capital Maritime & Trading Corp.
- Monitor the utilization of the remaining $304 million in the new credit facility for future acquisitions.