Scorpio funds fleet refresh with US$325m CB
Already flush with cash, Scorpio Tankers took the unusual step of raising an upsized US$325m from the sale of five-year convertible bonds to fund the ongoing modernisation of its fleet.
Morgan Stanley wall-crossed investors with details of the financing before launching marketing overnight on Tuesday at fixed price talk of a 1.75% coupon and 35% conversion premium, with a concurrent share repurchase used to facilitate delta hedging. The bank finalised pricing at those terms, while upsizing to US$325m from US$300m at pricing.
Funding came on the eve of threatened US strikes on Iran to reopen the Strait of Hormuz and the Trump administration agreed with Iran to a two-week cease fire late on Tuesday as the pricing was being finalised.
Scorpio has benefited from rising day rates to charter its fleet of vessels used to transport refined petroleum products. Amid capacity constraints from stopped shipments through the Strait of Hormuz, its shares had surged by 46.2% YTD to close Tuesday’s session at US$74.36, near their US$81.85 annual high shortly after the onset of hostilities with Iran in late February.
The new CBs are is convertible at US$100.39, a level Scorpio last traded at in 2015.
Scorpio late last month updated investors with details on first quarter results that saw it charter 97% of its large LR2 tankers at US$51,000 per day, 97% of its MR tankers at US$32,000 per day, and 95% of its Handymax tankers at US$34,000 per day. It had chartered 16%/16%/10% of those ships in Q2 at day rates of US$101,000/US$36,500/US$32,000.
Separately, Scorpio late last month agreed to sell two 2015-built MR ships for US$35m and signed a deal to acquire six new ships. Expected to close in Q2, those sales boosted total liquidity to US$1.8bn, including more than US$500m of cash and availability on a revolving credit facility.