Scorpio Tankers has repurchased more leased ships as it whittles away its debt.
The New York-listed product tanker owner said it is exercising options to buy back three LR2s and five MRs that were previously sold and taken back on financial leases. The company also said it intends to repay a credit facility backing a fourth LR2.
The first set of vessels is made up of the 110,000-dwt LR2 tanker STI Alexis (built 2014) and 52,000-dwt MR tankers STI Duchessa, STI San Antonio, STI Mayfair, STI St Charles, and STI Yorkville (all built 2014).
Those ships were refinanced in a sale-and-leaseback deal in July 2018.
Scorpio said purchasing those ships would reduce debt by $85.5m.
The company had an option to repurchase the ships three years into the sale-and-leaseback agreement and a requirement to take back ownership of the vessels at the end of their seven-year bareboat charters.
The other purchases cover the 110,000-dwt LR tankers STI Steadfast and STI Supreme (both built 2016), which Scorpio acquired in 2018 when Scorpio bought Navig8 Product Tankers for $1.1bn.
Those two ships, plus 15 others, were on financing deals Scorpio was able to transfer over after closing the deal.
The company said it would save $55.6m in debt.
Scorpio also intends to pay back a bilateral credit facility for the 110,000-dwt STI Madison (built 2014), which still has $17.5m outstanding.
Scorpio intends to repay the debt in full this month.
According to the company’s second-quarter earnings statement, it had $2.2bn in net debt as of 27 July, less $450m in cash and cash equivalents.
Fearnley Securities said the moves reduce debt by roughly $160m, which the investment bank estimates could further cut the cash break-even by around $300 per day on interest alone.
This comes on top of a $1.22bn reduction announced over the summer.
“Scorpio Tankers has taken several debt reduction and shareholder distribution actions since the summer on the back of the fundamentally sound product tanker market, where LR2s are currently earning $36,000 per day and MRs in the Atlantic see rates of $39,000 per day,” analysts Oystein Vaagen and Ulrik Mannhart said.
They believe the company will post strong numbers for the third and fourth quarters.
The fleet has booked in earnings of $43,200 per day for the third period, up from $36,000 in the record-breaking second quarter.
The deals follow several other agreements to repurchase ships, including two deals last month to tack back control of three LR2s, four MRs and two handymax tankers. Those moves slashed debt by more than $160m.
That followed agreements to buy back six MRs in August, cutting debt by $95m.
Scorpio’s shares slipped nearly $1 or just over 2% on Thursday to close at $48.05, but regained $0.15 in early after-hours trading, hitting $48.20.
