ATHENS - Performance Shipping Inc. (NASDAQ: PSHG), a global shipping company specializing in tanker vessels, has finalized a sale and leaseback deal for a newbuild LR2 Aframax tanker. The agreement with an unnamed third party involves a bareboat charter for a ten-year period post-delivery, with a financing amount of approximately $45.39 million, reflecting 70% of the vessel's construction cost.
The vessel, part of a duo announced on December 20, 2023, is LNG-ready and fitted with a scrubber, boasting around 114,000 dwt and scheduled for delivery in the first quarter of 2026. The charter includes 120 monthly payments set at a fixed rate of $211,500, plus a variable rate tied to SOFR plus 2.1% annually. A final balloon payment of around $20 million will also be due for the vessel's repurchase.
Performance Shipping has already secured a five-year charter for the vessel with Clearlake Shipping Pte Ltd., at a daily rate of $31,000, with options to extend for two more years.
CEO Andreas Michalopoulos highlighted the deal's reflection of the company's ability to secure attractive funding and its conservative financing strategy. The terms offer a competitive edge, with an estimated daily cashflow breakeven of approximately $24,390, comfortably covered by the fixed charter rate for the initial five years.
The company's relationship with international lenders and strategic partnerships with charterers are central to its growth-focused business strategy, emphasized by selective acquisitions and prudent financial policies.
While the press release includes forward-looking statements, these are based on assumptions subject to significant uncertainties and contingencies beyond the company's control. Performance Shipping's future actions and market conditions may differ from current projections.
This news is based on a press release statement from Performance Shipping Inc. and reflects the company's latest business developments in securing financing and charter arrangements for its expanding fleet.
InvestingPro Insights
Performance Shipping Inc.'s recent sale and leaseback deal for its newbuild LR2 Aframax tanker aligns well with the company's financial position and market performance. According to InvestingPro data, PSHG has a market capitalization of $25.36 million USD, which puts into perspective the significance of the $45.39 million financing deal for the new vessel.
InvestingPro Tips reveal that Performance Shipping "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations." These factors likely contributed to the company's ability to secure attractive funding terms for the new tanker, as mentioned by CEO Andreas Michalopoulos.
The company's impressive gross profit margin of 72.6% for the last twelve months as of Q2 2024 suggests efficient operations, which could be further enhanced by the addition of this modern, LNG-ready vessel to its fleet. This efficiency is also reflected in the "impressive gross profit margins" highlighted in the InvestingPro Tips.
While the company has experienced a revenue decline, with a -18.08% growth rate over the last twelve months, the secured five-year charter at $31,000 per day for the new vessel could help stabilize future revenue streams. This strategic move may address the InvestingPro Tip that "analysts anticipate sales decline in the current year."
It's worth noting that Performance Shipping is currently "trading at a low Price / Book multiple" of 0.1, which could indicate that the stock is undervalued relative to its assets. This metric, combined with the company's recent positive performance—a "significant return over the last week" of 9.04%—suggests that investors might be starting to recognize the potential in PSHG's strategic decisions.
For investors interested in a deeper analysis, InvestingPro offers 11 additional tips for Performance Shipping Inc., providing a more comprehensive view of the company's financial health and market position.
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