Cool Company Limited (NYSE: CLCO) announced on Wednesday that it has exercised purchase options to acquire two new-build LNG tankers, scheduled for delivery next year.
The company highlighted the attractive delivery schedule and the purchase price of the ships, which is around 10% below the current market value.
The state-of-the-art 2-stroke LNG tankers feature a cargo capacity of 174,000 cubic meters, GTT Mark III Flex Membrane cargo tank system, reliquefaction, air lubrication and shaft generators. They are currently being built at Hyundai Samho Heavy Industries in Korea in September and December 2024.
“We look forward to welcoming these state-of-the-art vessels to the CoolCo fleet at a significant discount from their current market value,” said Richard Tyrrell, CoolCo CEO. “The 2024 delivery date makes the ships particularly attractive as comparable ships ordered today will not be delivered until 2027/28.” The ships’ premium design and boil-off rate make them extremely attractive to charterers who benefit from the ability to work efficiently at different speeds and with reduced emissions.”
The options, which were due to expire at the end of the month, were held at affiliates of majority shareholder EPS Ventures, which owned a 58.2% stake in the company. EPS is part of Singapore based Eastern Pacific Shipping.
Each of the two ships with names Cool tiger And cool panther, will be acquired at the existing call option price of approximately $234 million, representing a discount of approximately 10% compared to the offer values for comparable newbuild vessels. The initial exercise price is approximately $57 million per vessel, while approximately $134 million of the remaining $177 million is due upon delivery of each vessel.
CoolCo plans to fund the ships with cash and debt that has a fixed rate of interest per day for 10 years with a minimum loan-to-value ratio of 80% and an implied interest rate of approximately 6%. No additional equity is expected to be required.
“With the vast majority of the global LNG tanker backlog already destined for liquefaction projects coming online in the coming years, few, if any, modern LNG tankers are expected to arrive in the late 2024 window when the ships deliver will be available for time charter operations.” said Tyrrell. “We are currently in discussions to place the vessels on time charter for the long term and expect to do so well ahead of delivery at a level that reflects current market strength.”
CoolCo owns a fleet of 11 LNG tankers and manages a further 8 LNG tankers and 9 Floating Storage & Regasification Units (FSRUs). The Company’s shares began trading on the NYSE on March 17, 2023 under the ticker symbol “CLCO”.
Separately, the company also announced that a syndicate of existing lenders has agreed to a $70 million increase in debt and a reduction in interest margin on one of its banking facilities. The additional funds will be used to fund the LNGe retrofit of five vessels, including retrofits with subcoolers for LNG boil-off reliquefaction, under a recently announced deal with HD Hyundai Global Service.
“The improved terms of the facility are a testament to our strong financial position, which is a source of real competitive advantage under current credit conditions,” said John Boots, CoolCo’s CFO. “The upgrades that make up the LNGe conversion process place our TFDE vessels firmly in the top bracket of any TFDE on the market, with boil-off rates that make these modernized vessels extremely competitive with 2-stroke vessels and the capacity of Keep improving CoolCo.” Benefit from the strong demand for high-quality, modern LNG tankers.