CPLP Got Little Respect for Long-Term Profitable Leases on Its Vessels


  • CPLP’s management is an expert at the art of the deal.
  • The announced Capital Maritime Partners / Diamond S Shipping deal has the potential to be a win-win-win.
  • Capital Maritime gets to restart its drop-downs, win.
  • Diamond S gets a fungible public listing for its PE investor base, and an attractive tanker fleet near what may be the bottom of the cycle, win.
  • CPLP shareholders get the reasonable potential for significant multiple expansion/value recognition, as well as the ability to go with growth (DSSI), or income (CPLP), depending on their particular needs and wants.

Capital Product Partners (CPLP), a diversified ship leasing company, announced a rather creative deal in an attempt to help the market realize the value of its assets. It is expected to work, but only after significant turmoil, says Seeking Alpha.

The Rodney Dangerfield of Shipping.

CPLP’s income investor base is initially likely to feel “cheated” by the lower combined distribution. Over the intermediate term, however, this investor base should rotate and lead to a higher overall valuation. CPLP has been one of the Rodney Dangerfields of shipping.

It gets no respect for its significant dividend covered by relatively stable cash flows. Cash flows which were stabilized by a mix of staggered lease expirations periods, and diversified ship types, but never really seemed to be fully appreciated by investors.

The company also got little respect for the long-term profitable leases on its containerships and bulk carrier, nor for the significant optionality, the staggered lease MR and crude fleet represented. Indeed its biggest shipping sector, MR product tankers, is currently seeing improving rates.

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Source: Seeking Alpha



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