Business Context and Reporting Period
This Form 6-K filing by Dynagas LNG Partners LP (NYSE: DLNG) is dated September 19, 2019. The Partnership is a growth-oriented master limited partnership that owns and operates liquefied natural gas (LNG) carriers on multi-year charters. Its current fleet consists of six LNG carriers with an aggregate carrying capacity of approximately 914,000 cubic meters.
Key Financial Metrics and Capital Structure
The filing details a significant refinancing transaction rather than reporting standard operating metrics like revenue or net income for a specific period.
- New Debt Facility: Entered into a syndicated $675 million senior secured term loan.
- Debt Repayment: Proceeds will repay $470 million in Senior Secured Term Loan B and $250 million in 6.25% Senior Unsecured Notes maturing October 30, 2019.
- Interest Rate: The new facility carries a margin of LIBOR plus 300 basis points.
- Liquidity Covenant: The Partnership must maintain a minimum cash balance of $50 million in a restricted collateral account.
- Amortization: Repayable over five years with a 14-year amortization profile, including a balloon payment in year five.
Material Changes Versus Prior Period
The primary material change is the restructuring of the Partnership's debt profile:
- Debt Consolidation: Replacing existing indebtedness with a single new credit facility secured by first priority mortgages on the fleet.
- Cost of Debt: Management states the new facility provides a reduced cost of debt relative to the existing structure.
- Distribution Policy: The Partnership is restricted from paying distributions to common unit-holders while borrowings under the new facility are outstanding. Distributions to preferred unit-holders (Series A and Series B) remain permitted provided no event of default occurs.
Guidance, Outlook, and Risks
Management Commentary: CEO Tony Lauritzen described the transaction as a "transformative re-financing" that simplifies the debt structure and creates a viable path toward deleveraging through increased amortization. The Partnership expects to close the financing before the end of September 2019.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Key risks identified include fluctuations in charter rates and vessel values, changes in LNG demand, operating expense volatility (bunker prices, drydocking), regulatory changes, and potential disruptions to shipping routes.
Investor Verification Checklist
- Confirm the closing of the $675 million Credit Facility and the full repayment of the $470 million Term Loan B and $250 million Senior Notes.
- Verify the impact of the suspension of common unit distributions on cash flow available to investors.
- Monitor the Partnership's ability to maintain the required $50 million minimum cash balance in the restricted collateral account.
- Review the specific terms of the financial covenants regarding maximum leverage ratios.