When Diamond S shares begin trading later this month, it will mark the largest shipping debut on Wall Street since Gener8 Maritime’s IPO in June 2015. It will also put the spotlight back on the Chinese business ties of US commerce secretary Wilbur Ross.
NASDAQ-listed Capital Product Partners (CPLP) is in the process of spinning off its tankers and merging them with Connecticut’s Diamond S Shipping LP (DSS LP). According to an SEC filing late Monday, CPLP owners should receive units in the combined entity, Diamond S Shipping Inc, on March 27. The merged company’s stock should begin regular trading on NYSE the following day under the ticker symbol ‘DSSI’.
WL Ross & Co will be the largest shareholder, with 24.3%; First Reserve will own 20.5%; CarVal Investors, 6.5%; Chengdong Investment Corp – controlled by the state-owned China Investments Corp (CIC) – 6.5%; and CPLP CEO Evangelos Marinakis, 6%.
The Ross-CIC connection has been reported on for years, but the DSSI listing will bring about the striking juxtaposition of a sitting US commerce secretary negotiating a trade deal with China at the very time he’s an equity partner with a Chinese government-controlled fund in a major new public entrant.
DSSI will boast a fleet of 68 tankers totaling 5m dwt: 52 MR product tankers, 15 suezmax crude tankers, and one aframax tanker. It believes it will be the third largest publicly traded product-tanker company in the world, and the fifth largest public tanker company overall.
The post-merger Diamond S will be led by the current Diamond S management team: CEO Craig Stevenson, CFO Florence Ioannou, commercial SVP Michael Fogarty, and COO Sanjay Sukhrani.
It will have $2.19bn in total assets, including $76.2m in cash, and $980.3m in liabilities, including $947.8m in debt. It hopes its modest debt ratio, large scale, and known leadership team will allow shares to “trade at levels closer to net asset value”. Growth plans include “acquisition of secondhand vessels, newbuild resales, as well as orders from shipyards”.
The filing discloses that Diamond S and the CPLP tanker unit posted a combined $527.7m in revenues in 2018 and a combined net loss of $83.2m, driven by losses at DSS LP.
The document also reveals that CPLP began exploring strategic alternatives in November 2017 and signed a confidentiality agreement with DSS LP in January 2018. Proposals ensued in April, leading to negotiations culminating in November’s final agreement.