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Teekay purchases 12 Suezmax tankers

Teekay Tankers Ltd. (ticker: TNK) announced yesterday that the company purchased 12 Suezmax tankers from Principal Maritime for $662 million. The purchase will increase Teekay’s fleet size by 60%, and be immediately accretive to the company’s earnings, according to the press release put out by Teekay.

The purchase will make Teekay one of the largest owners of Suezmax tankers in the world, adding to the ten the company already owns. Suezmax tankers are medium to large-sized ships with a deadweight tonnage (DWT) between 120,000 to 200,000. The name comes from the fact that 200,000 DWT is the maximum tonnage that can pass through the Suez Canal while fully laden.

The 12 ships have an average age of 5.5 years, meaning the new ships will reduce the average age of Teekay’s entire fleet by 1.2 years.


Creole Spirt, Teekay Suezmax Tanker, Source: Teekay

The vessels included in the transaction are scheduled to deliver to Teekay Tankers by the end of October 2015, and are expected to operate in the spot tanker market upon deliver or soon after. “This significant increase in our scale will allow us to further optimize our fleet efficiencies, enhance our service offering to both existing and new customers across more regions, and expand our presence in the evolving global Suezmax trade-routes,” said Teekay Tanker CEO Kevin Mackay.

Financing for the deal was prearranged, with Teekay receiving commitments from four of its key lenders to provide a new debt facility of approximately $400 million to be secured by the acquired vessels. In addition, Teekay Tankers agreed to issue new Class A common shares in the amount of $50 million to Principal Maritime, $30 million to Teekay Corporation and $60 million to a group of institutional investors, at a weighted price of $6.76 per share. The remaining amount will be funded from Teekay Tanker’s existing liquidity.

As of June 30, 2015, Teekay Tankers had liquidity of approximately $230 million, which included $37.3 million of net proceeds received during the second quarter of 2015 from the issuance of common units under the company’s continuous offering program.

“The transaction is expected to further increase our ability to generate significant free cash flow,” said Mackay. “[This] enabled Teekay Tankers to reduce its net debt to book capitalization from 72% at the end of 2013 to approximately 56%,” pro forma the purchase.

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