NYSE-listed Dynagas LNG Partners has priced an offering of perpetual preferred equity to fund a vessel acquisition from its private sponsor.
The George Prokopiou-led partnership priced the USD75 million share sale at a dividend rate of 9%. If the underwriter option is fully exercised, gross proceeds would rise to USD86.25 million.
The sale of perpetual preferred equity allows public shipping companies to raise growth funding without diluting common shareholders. Perpetual preferred equity is a hybrid security that has debt-like attributes – such as a fixed dividend payment akin to the interest or ‘coupon’ rate on a high-yield bond – but is not considered debt for accounting purposes. Perpetual preferred shares are listed and traded separately from common shares.
Including the Dynagas deal, shipping perpetual preferred offerings have grossed USD500 million through mid-July, with 2015 on track to be a record year. The industry raised USD701 million in full-year 2014, USD468 million in 2013, USD78 million in 2012, and USD359 million in 2011, according to data compiled by IHS Maritime.
The dividend to be paid by Dynagas is the most expensive of this year’s offerings. In comparison, Teekay Offshore is paying a fixed divided rate of 8.5% and Costamare, Tsakos Energy Navigation, and GasLog are paying 8.75%.
Dynagas LNG Partners plans to use the proceeds to partially fund the acquisition of one of five vessels from Prokopiou’s private company, Dynagas Holding. Potential acquisitions include the 155,000 cbm Lena River, on charter to Gazprom; the 162,000 cbm Clean Ocean, on charter to Cheniere; the 162,000 cbm Clean Planet, currently employed in the short-term market; or either of two 162,000 cbm newbuildings being delivered in 2H15.