In QuotedData’s morning briefing 20 September 2022:
- Tufton Oceanic Assets (SHIP) is buying two product tankers – Courteous and Mindful – for $73.0m, less than their depreciated replacement cost. This takes the fund’s fleet to 23 vessels. Both tankers have fixed rate time charters for three to five years to a major commodity trading and logistics company. The deals are being financed primarily by a new $60m loan, secured on the two new tankers and the two tankers acquired earlier this year, Marvelous and Exceptional. Marvelous, which is operating in the spot market, will also enter a fixed rate time charter for three to five years to the same major commodity trading and logistics company from November. The loan will be repaid over three to five years depending on the charter coverage of the four vessels at the relevant time. Exceptional will be available for a new charter by April 2024. These four tankers are in the top quartile of fuel efficiency in their market segment but will nonetheless be evaluated for further improvement, including the retrofit of energy saving devices. After the acquisitions, which are expected to close in mid November, and the new charter for Marvelous, the average portfolio charter length will be 1.4 years. Pro forma debt will be about 15% of the portfolio’s charter-free value.
- Fair Oaks Income (FAIR) is cutting the quarterly dividend on its shares from 2.5 cents to 2 cents and using the cash it saves to help fund additional buybacks as it seeks to address its 23%+ discount. The yield drops from about 21.7% to about 17%. $20m will be spent buying back about 47m shares (based on the current share price). The board and the investment adviser believe that recent movements in the market price of the 2021 shares are not being driven by fundamentals and intend through these measures to demonstrate the company’s capital discipline and confidence in the company’s cashflows and NAV. [This idea makes sense to us. The buybacks will enhance NAV and revenue per share.]