Narrative
Full Description
Project narrative
Scorpio Tankers Inc. assumed the obligations under a lease financing arrangement with CSSC (Hong Kong) Shipping Company Limited (CSSC) for eight LR2 tankers (STI Gallantry, STI Nautilus, STI Guard, STI Guide, STI Goal, STI Gauntlet, STI Gladiator and STI Gratitude) as part of the September 2017 acquisition of Navig8 Product Tankers Inc. (NPTI). Under the arrangement, each vessel is subject to a 10-year bareboat charter which expire throughout 2026 and 2027 (depending on the vessel). Charterhire under the arrangement is comprised of a fixed repayment amount of $0.2 million per month per vessel plus a variable component calculated at LIBOR plus 4.60% per annum. Scorpio Tankers Inc. had purchase options to re-acquire each of the subject vessels during the bareboat charter period, with the first of such options exercisable at the end of the fourth year from the delivery date of the respective vessel. There was also a purchase obligation for each vessel upon the expiration of the agreement. Additionally, in September 2019, Scorpio Tankers Inc. executed an agreement with CSSC to increase the borrowing capacity by up to $12.5 million to partially finance the purchase and installation of scrubbers on the eight LR2s. In December 2019, $11.0 million was borrowed under this arrangement to partially finance the purchase and installation of seven scrubbers, and in August 2020, we drew down $1.6 million to partially finance the purchase and installation of a scrubber on one vessel. The upsized portion of the lease financing bears interest at LIBOR plus a margin of 3.80% per annum, matures two years from the date of the drawdown and is being repaid in monthly installment payments of approximately $0.3 million in aggregate. In October and November 2020, Scorpio Tankers Inc. repaid $81.7 million and paid a $1.6 million prepayment fee when it refinanced the existing debt on STI Nautilus, STI Guard, and STI Gallantry. In September 2021, Scorpio Tankers Inc. amended and restated the terms of the CSSC lease financing and CSSC scrubber lease financing arrangements for the remaining five LR2 vessels (STI Gratitude, STI Gladiator, STI Gauntlet, STI Guide and STI Goal). Under the terms of the amended and restated agreement, the borrowing amount increased to $140.7 million from $128.9 million at the time of the transaction (which is inclusive of scrubber financing), resulting in a net additional borrowing of $11.8 million. Then, in October 2023, Scorpio Tankers Inc. exercised the purchase options on all of the remaining vessels under this arrangement, repaid the outstanding indebtedness of $110.4 million, and paid purchase option fees of $1.7 million as part of these transactions. These leases were terminated as a result of these transactions.
Staff comments
1. Bank of Communications Financial Leasing Co., Ltd. (BoCom Leasing) is a financial leasing company that was founded in December 2007 and is a subsidiary of Bank of Communications (BoComm). BoCom Leasing is registered in Shanghai, China and provides financial leasing services to industries such as aviation, shipping, manufacturing, utilities, and energy equipment. 2. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). AidData codes capital leases as loans. 3. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products. 4. A bareboat charter is when the owner of the vessel (in this case, CSSC) 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. 5. 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. 6. AidData has estimated the all-in interest rate by adding 4.6% to average 6-month LIBOR in September 2021 (0.15171%).