By GMM News | 2024-08-30 | International Shipping News |

Avance Gas Holding Ltd., a leading global operator in the transportation of liquefied petroleum gas (LPG), has agreed to sell its fleet of Very Large Gas Carriers (VLGC) to BW LPG Ltd for $1.05 billion.

The Avance Gas VLGC fleet currently consists of eight eco VLGCs built in 2015 and four dual-fueled VLGCs built in 2022 and 2023. The transaction is regulated by 10 individual Memorandum of Agreements (MoA) for the 10 owned VLGCs, while the remaining two VLGCs on sale-leaseback agreements (SLB) will have their existing debt obligations novated.

The delivery of the ships to BW LPG is scheduled between September 15 and December 31, 2024, allowing Avance Gas to trade the ships for a further period during the winter market.

The VLGC fleet’s estimated book value at delivery is $730-$740 million, with an expected profit from the sale of $310-$320 million. Avance Gas sold four VLGCs in the first half of 2024, profiting $121 million, leading to a total expected profit of approximately $435 million for the full year 2024.

The sale will be settled with $585 million in cash, $132 million in debt novation, and 19.282 million shares in BW LPG valued at $333 million, making Avance Gas the second-largest shareholder of BW LPG with a 12.77% shareholding and a 40-day lock-up on the shares. Net cash proceeds are expected to be approximately $217 million, contributing to a pro forma cash balance of $257 million. The company generated positive cash flow in the second quarter with an average TCE rate of $48,000 per day and will terminate $10 million in interest rate derivatives before ship delivery.

After the transaction closes, Avance Gas will own four medium-sized gas carriers (MGC) capable of carrying full ammonia cargoes, a 12.77% shareholding in BW LPG, and a substantial cash holding.

“The fleet of Avance Gas is currently somewhat sub-scale, and we have found it more beneficial for our shareholders to capitalize on the relatively high second-hand prices and sell the VLGC fleet to BW LPG,” said Øystein Kalleklev, Chief Executive Officer of Avance Gas. “The sale will generate approximately $315 million in profit while allowing us to potentially make a trading profit until delivery of these ships to the buyer.”

Kalleklev assured that the profits from the sale will enable significant dividends for shareholders “We will provide more details in our second quarter results presentation on August 28, but shareholders can rest assured that the profits generated belong to them and will be distributed in a timely manner once the transaction concludes,” he said.

The transaction is subject to the approval of novation of SLB for the leased VLGCs, the charterer’s approval of novation of Time Charter for the three VLGCs on Time Charter, and customary closing procedures under the MoAs.