Business Context and Reporting Period
This Form 6-K filing by Capital Product Partners L.P. (Registrant) covers the month of October 2021, specifically dated October 12, 2021. The Registrant is a foreign private issuer focused on the ownership and operation of liquefied natural gas carriers (LNG/C). The primary purpose of this filing is to announce a new debt offering by its wholly owned subsidiary, CPLP Shipping Holdings PLC, and to provide updates on fleet acquisitions and unit repurchase activities.
Key Financial Metrics and Capital Structure
The filing details a significant capital raise but does not provide consolidated revenue, profit, or cash flow statements for the period.
- Debt Offering: The Issuer launched an offering of up to €150 million in unsecured bonds, guaranteed by the Registrant. The offering was expected to close on October 22, 2021.
- Use of Proceeds: Approximately €145.2 million is designated to finance the acquisition of three vessel-owning companies (Poseidon Gas Carrier Corp., Kronos Gas Carrier Corp., and Maximus Gas Carrier Corp.). The remainder will fund working capital.
- Offering Expenses: Estimated at approximately €4.8 million.
- Unit Repurchases: As of September 15, 2021, the Registrant repurchased 372,360 common units at an average cost of $11.70 per unit under a $30.0 million program authorized in January 2021.
- Insurance Coverage (as of June 30, 2021):
- Hull & Machinery: $892.0 million
- Increased Value (Total Loss): $243.5 million
- War Risks: $1.14 billion
- Pollution (P&I): Up to $1.0 billion per incident per vessel
Material Changes and Fleet Updates
The Registrant has expanded its fleet and secured long-term revenue streams through recent transactions:
- New Vessel Deliveries: Two vessels, LNG/C Aristos I and LNG/C Aristarchos, were delivered on September 3, 2021. The third vessel, LNG/C Aristidis I, is expected by the end of November 2021.
- Consideration for Acquisitions: In connection with the acquisition of the two delivered vessels, the Registrant issued 1,153,846 common units to CGC Operating Corp.
- Contracted Revenue: The three vessels targeted for acquisition via the bond proceeds (LNG/C Attalos, LNG/C Adamastos, LNG/C Asklipios) have total contracted revenue of approximately $333.1 million (base case) or $621.3 million (if all options are exercised). The average daily rate is approximately $74,478 (base) or $71,639 (with options).
Guidance, Covenants, and Risk Factors
The filing outlines specific financial covenants and risk factors associated with the new bond issuance and the LNG shipping industry.
Financial Covenants
To maintain the bond offering, the Registrant must adhere to the following:
- Net Debt to Market Value Adjusted Total Assets: Must remain ≤ 0.75.
- EBITDA to Net Interest Expense: Must remain ≥ 2.0.
- Debt Service Reserve Account (DSRA): The Issuer must maintain a DSRA including a fixed €100,000 plus 50% of cash disbursements to unitholders exceeding €20 million (capped at 1/3 of bond par value). Additionally, if Market Value Adjusted Net Worth (MVAN) falls below $300 million, the difference must be deposited into the DSRA.
Risk Factors
- Market Volatility: The LNG/C shipping industry is cyclical; oversupply may depress charter rates.
- Asset Valuation: Vessel values may fluctuate substantially, potentially leading to impairment losses.
- Regulatory and Environmental: Risks include CO2 taxes, changes in natural gas demand, and stringent charterer risk assessments regarding regulatory compliance.
- Forward-Looking Statements: The Registrant disclaims any obligation to update forward-looking statements regarding bond performance or vessel operations.
Investor Verification Checklist
- Verify the closing of the €150 million bond offering and the actual trading commencement on the ATHEX.
- Confirm the delivery date and operational status of the LNG/C Aristidis I (expected end of November 2021).
- Monitor the Registrant's compliance with the Net Debt to Market Value Adjusted Total Assets ratio (≤ 0.75) and EBITDA to Net Interest Expense ratio (≥ 2.0) covenants.
- Track the exercise of charter options for the three new vessels to determine if revenue aligns with the $621.3 million upside scenario or the $333.1 million base case.
- Review the impact of the 1,153,846 common units issued to CGC on existing unitholder dilution.