KNOT Offshore Partners LP announced the following:
Agreement to Acquire the Ingrid Knutsen
The Partnershipâ€™s wholly owned subsidiary, KNOT Shuttle Tankers AS, has entered into a share purchase agreement to acquire Knutsen NYK Shuttle Tankers 16 AS, the company that owns the shuttle tanker, Ingrid Knutsen, from Knutsen NYK Offshore Tankers AS (the â€œAcquisitionâ€). The Partnership expects the Acquisition to close within approximately 30 days, subject to customary closing conditions.
The purchase price of the Acquisition is $115.0 million, net of $104.5 million of outstanding indebtedness related to the Ingrid Knutsen. On the closing of the Acquisition, the Partnership will repay $27.0 million, of this indebtedness, leaving an aggregate of $77.5 million of secured debt related to the vessel, composed of two tranches.
Tranche one is a commercial bank loan of $22.4 million, repayable in semi-annual installments with a final balloon payment due at maturity in December 2018. Tranche one bears interest at LIBOR, plus a margin of 2.25%. Tranche two is an export credit loan of $55.1 million, repayable in semi-annual installments with a final balloon payment due at maturity in November 2025. Tranche two bears interest at an annual rate of 3.85%, composed of a 2.5% bank facility margin plus a commission of 1.35% to the export credit guarantor.
The Ingrid Knutsen was delivered in December 2013 and is operating in the North Sea under a ten-year time charter with Standard Marine TÃ¸nsberg AS (a Norwegian subsidiary of ExxonMobil), which will expire in the first quarter of 2024. The charterer has options to extend the charter for one three-year period and one two-year period.
The Partnershipâ€™s board of directors (the â€œBoardâ€) and the conflicts committee of the Board (the â€œConflicts Committeeâ€) have approved the purchase price of the Acquisition. The Conflicts Committee retained an outside financial advisor to assist with its evaluation of the Acquisition.
The Partnership estimates that the Acquisition will generate approximately $3.9 million of net income and approximately $11.5 million of EBITDA1 in 2016. However, the Partnership may not realize this level of estimated net income or EBITDA from the Acquisition in 2016.
The Partnershipâ€™s management believes the Acquisition will be accretive and is currently evaluating whether to recommend an increase in the Partnershipâ€™s quarterly cash distribution to the Board as a result of the Acquisition. Any such increase would be conditioned upon, among other things, the closing of the Acquisition, the approval of such increase by the Board and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.
The Board is pleased that the Partnership has entered into this share purchase agreement in connection with its sixth acquisition since the Partnershipâ€™s initial public offering in April 2013.
Extension of the Carmen Knutsen time charter
In September 2015, the Partnership entered into amended time charter with Repsol Sinopec Brasil B.V. (â€œRepsolâ€) for the Carmen Knutsen, extending the duration of the time charter for five years, while maintaining Repsolâ€™s three one-year extension options. The amended time charter is effective until February 2023, during which period the average charter rate will be reduced by 6.2%.
John Costain, Chief Executive Officer and Chief Financial Officer of the Partnership commented, â€œThe acquisition of Ingrid Knutsen, together with the extension of the Carmen Knutsen time charter, are very positive developments for the Partnership, increasing the average fixed employment of the fleet from 5 years to 5.8 years and growing the Partnershipâ€™s fleet to ten vessels.â€
â€œThe benign US Dollar interest rate environment while adversely affecting the Carmen Knutsenâ€™s extension rate continues to limit the Partnershipâ€™s financial expenses. Offsetting the time charter rate reduction are significant operating cost savings arising on our time-chartered fleet, because of the strong US Dollar exchange rate against the Norwegian Kronerâ€.
â€œWe have now grown the IPO fleet of four vessels by six additional vessels on long-term charters with major oil companies. The growth of the Partnershipâ€™s fleet to ten vessels has occurred in less than ten quarters and has led to a growth in the common unitholdersâ€™ distribution of 36%.
â€œThe Partnership still has the option to acquire the Raquel Knutsen from Knutsen NYK Offshore (â€œKNOTâ€)â€ and will have the option to acquire four additional shuttle tankers from KNOT currently under construction following acceptance by the respective charterer of each such vessel.
The Partnership owns, operates and acquires shuttle tankers under long-term charters in the offshore oil production regions of the North Sea and Brazil. The Partnership is structured as a master limited partnership. The Partnershipâ€™s common units trade on the New York Stock Exchange under the symbol â€œKNOP.â€