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ATHENS - Performance Shipping Inc. (NASDAQ: PSHG), a global shipping company specializing in the ownership of tanker vessels, has finalized a sale and leaseback agreement for a newbuild LR2 Aframax tanker vessel. According to InvestingPro data, the company maintains strong financial health with more cash than debt on its balance sheet and an impressive gross profit margin of 72.5%. This agreement, with an undisclosed third party, marks the completion of financing for three new LNG-ready, scrubber-fitted tankers, with deliveries scheduled for August and September 2025, and January 2026.
The financing arrangement amounts to $45 million for the vessel, which will be sold to the third party and then chartered back to Performance Shipping for eight years starting from delivery. The bareboat charter rate is fixed at $6,850 per day, with an additional variable rate based on the SOFR plus 2.05% per annum. At the end of the charter, a balloon payment of approximately $25 million will be due. With a conservative debt-to-equity ratio of 0.17 and trading at just 0.07 times book value, the company appears undervalued based on InvestingPro analysis.
Performance Shipping has also secured the option to repurchase the vessel at predetermined rates after the second year of the charter. This move is part of the company’s strategy for fleet renewal, aiming to reduce the average age of its fleet from 14 to 10 years by January 2026.
The company has previously entered into a five-year charter agreement with Clearlake Shipping Pte Ltd. for all three newbuild tankers at a rate of $31,000 per day, with an option to extend for two additional years. This charter rate exceeds the estimated daily breakeven rate of $25,000 per vessel, including lease payments. The company’s operational efficiency is reflected in its last twelve months EBITDA of $56 million, significantly higher than its current market capitalization of $18.65 million.
Andreas Michalopoulos, CEO of Performance Shipping, commented on the financial strategy, highlighting the attractive terms secured well in advance of the vessels’ delivery dates. The total bareboat financing of $134.6 million represents roughly 70% of the total shipbuilding contract cost, covering almost all of the $138.4 million remaining payments to the shipyard.
Performance Shipping operates its fleet on spot voyages, pool arrangements, and time charters. The company’s recent financial maneuvers are based on a press release statement and are part of its ongoing efforts to maintain a modern and efficient fleet to serve the global demand for tanker transportation.
In other recent news, Performance Shipping has announced a new time charter contract with American Eagle Tankers for its Aframax tanker vessel, the M/T Blue Moon. The contract, starting in early January, is set at a daily rate of $28,000 and spans twenty-one months, with an option for a 15-day extension. This agreement is projected to generate approximately $17.4 million in gross revenue for the minimum charter period. As a result, Performance Shipping’s secured revenue backlog has increased to about $59.4 million for its operating vessels and $169.8 million when including three new buildings. CEO Andreas Michalopoulos highlighted this collaboration as a testament to the trust charterers have in the company. The charter aims to enhance Performance Shipping’s ability to manage market volatility and focus on long-term value creation. The company continues to operate its fleet across various market segments, including spot voyages, pool arrangements, and time charters. Performance Shipping has noted that certain statements in their press release may be forward-looking and subject to assumptions and uncertainties.
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