Narrative
Full Description
Project narrative
In May and June 2022, under a lease financing agreement, Scorpio Tankers Inc. closed on the sale and leaseback of two MR product tankers (STI Gramercy and STI Queens) and two LR2 product tankers (STI Selatar and STI Oxford) with AVIC International Leasing Co., Ltd. for aggregate proceeds of $118.4 million. Scorpio Tankers Inc. repaid the outstanding indebtedness of $90.2 million related to these vessels on the $116.0 million lease financing as part of these transactions. Each vessel is subject to a nine-year bareboat charter. The lease financings bear interest at the prevailing benchmark rate (LIBOR and SOFR plus a CSA) plus a margin of 3.50% per annum. The lease financings are scheduled to be repaid in equal aggregate quarterly repayments of approximately $2.3 million. Each agreement contains purchase options to re-acquire each of the subject vessels beginning on the second anniversary date from the delivery date of the respective vessel, with a purchase obligation upon the expiration of each agreement. Additionally, Scorpio Tankers Inc. was required to deposit with the lessor 1% of the borrowing amount, or $1.2 million in aggregate. The carrying value of the amounts due under the arrangement (net of the deposits of $1.2 million) were $103.5 million and $112.6 million as of December 31, 2023 and 2022, respectively, and Scorpio Tankers Inc. was in compliance with the financial covenants as of those dates.
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 3.55% to average 6-month LIBOR in May 2022 (2.02077%).