A US government shutdown has delayed a major merger and stock listing involving Diamond S Shipping, a company backed by key Trump ally and United States Secretary of Commerce Wilbur Ross.
The holdup was confirmed by Jerry Kalogiratos, the chief executive of Capital Product Partners, which is spinning its existing tanker fleet into Diamond S ahead of a float.
Kalogiratos said on Capital’s fourth quarter conference call the reopening of the government and the timely review of filings by the SEC should see the transaction close before the end of the present quarter.
Ross was one of the cornerstone investors in Diamond S, which will realise a long-term ambition to list in the US following the Capital deal.
“We remain positive on the rather creative deal as it will create two companies that will both be more valuable than where they started,” said Stifel analyst Ben Nolan.
'Transformative transaction'
Kalogiratos said on the call the merged company would have a fleet of 68 vessels and a combined net asset value of around $700m based figures from the end of the third quarter of 2018.
Capital unit holders will receive 33% of the floated Diamond S, which the executive placed at $236m on an NAV basis.
“We’re very pleased with our agreements with DSS and we’re looking forward to consummating the transformative transaction in order to unlock and generate long-term value for unitholders,” he said.
Kalogiratos said the transaction was going ahead at a time both the crude and product tanker markets were at an inflection point.
Spot focus
“We expect Diamond S to be predominantly focused on the spot market and able to take better advantage of the dynamic we see in the tanker market for 2019 and 2020,” he said.
On the product tanker market, Kalogiratos explained the recovery was expected to continue through 2019, supported by favorable demand and supply dynamics.
“In addition to preparation and implementation of the IMO 2020 regulation is expected to close a major dislocation for tankers, including shorter term and longer term storage, as heavy fuel oil tanks are emptied moving major quantities on middle distillates and other additives needed for complying fuels, the larger tankers being off hire for scrubber retrofits and potentially slow steaming and/or scrapping of older inefficient vessels, “he said.
Turing to the suezmax market, the executive said demand growth of 2% this year would slightly exceed the 1.9% increase in supply, without taking to account impact of the IMO 2020 regulation.
