Narrative
Full Description
Project narrative
In July 2018, Scorpio Tankers Inc. executed an agreement to sell and leaseback three MR product tankers (STI Ville, STI Fontvieille and STI Brooklyn) and two LR2 product tankers (STI Rose and STI Rambla) to AVIC International Leasing Co., Ltd. The borrowing amounts under the arrangement were $24.0 million per MR and $36.5 million per LR2 ($145.0 million in aggregate). These transactions closed in August and September 2018. Each vessel was subject to an eight-year bareboat charter, bearing interest at LIBOR plus a margin of 3.70% per annum, with options to purchase the vessels beginning at the end of the second year of each agreement. Each agreement also had a purchase obligation at the end of the eighth year, which was equal to the outstanding principal balance at that date. In February 2020, Scorpio Tankers Inc. executed an agreement to upsize this arrangement to partially finance the purchase and installation of scrubbers on these vessels. In December 2020, Scorpio Tankers Inc. executed the agreements on three of the vessels (STI Brooklyn, STI Rose and STI Rambla) and drew down $4.6 million under the upsized portion of this arrangement. The upsized portion of the lease financing had a final maturity of three years after the first drawdown, bearing interest at LIBOR plus a margin of 4.20% per annum. In February 2022, Scorpio Tankers Inc. repaid $17.2 million in connection with the sale of STI Fontvieille, thus terminating the lease. In September 2022, Scorpio Tankers Inc. gave notice to exercise the purchase option on the remaining four vessels. The carrying value of the lease obligations related to these vessels was classified as current on the consolidated balance sheet of Scorpio Tankers Inc. as of December 31, 2022. The purchases closed in January 2023 and Scorpio Tankers Inc. repaid the aggregate outstanding lease obligation of $77.8 million and paid purchase option fees of $1.2 million as part of these transactions, thus terminating the leases.
Staff comments
1. AVIC International Leasing Co., Ltd. (AVICIL) is a non-bank financial institution in China that leases aircraft, aircraft engines, and other aviation products. It is a division of the Aviation Industry Corporation of China (AVIC), a state-owned Chinese aerospace and defense company. AVICIL is the only leasing company in China with a background in aircraft manufacturing, and it primarily leases Chinese-made aircraft to Chinese carriers. 2. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products. 3. A bareboat charter is when the owner of the vessel (in this case, AVIC International Leasing Co., Ltd. ) leases (or "charters") the vessel to a lessee ("charterer") without any crew or supplies. The charterer assumes full responsibility for the operation of the vessel. 4. Scorpio Tankers Inc. is a company incorporated under the laws of the Republic of the Marshall Islands on July 1, 2019. Its principal executive offices are located at 99 Boulevard du Jardin Exotique Monaco 98000 and its telephone number at that address is +377-9798-5716. It provides seaborne transportation of crude oil and refined petroleum products worldwide. It began its operations in October 2009 with three vessels. In April 2010, it completed its initial public offering, and its common stock commenced trading on the New York Stock Exchange, or NYSE, under the symbol “STNG.” Scorpio Tankers Inc. has since expanded, and as of March 21, 2024, its fleet consisted of 110 wholly owned or leased financed tankers (39 LR2, 57 MR and 14 Handymax) with a weighted average age of approximately 8.1 years. 5. AidData has estimated the all-in interest rate by adding 3.7% to average 6-month LIBOR in July 2018 (2.51953%).