Arlington Tankers to Acquire Two Modern Product Tankers from the Stena Group for $92 Milliontitle
Company Expects Cash Dividend to Increase an Estimated $0.25 Per Share in 2006
HAMILTON, Bermuda, Nov. 17 /PRNewswire-FirstCall/ -- Arlington Tankers
Ltd. (Arlington; NYSE: ATB) today announced that the Company has entered into
an agreement to acquire two modern 47,000 deadweight tonne double-hulled
Product tankers from the Stena Group for an aggregate purchase price of $92
million in cash. The new vessels, Stena Contest and Stena Concept, were built
in 2005. Arlington expects to take delivery of the vessels in January 2006.
In conjunction with the purchase, Arlington will enter into fixed rate
charter hire agreements with Stena Bulk AB for both vessels. The charters will
be for an initial period of three years, at a rate commencing at $19,765 per
day for the first year, $20,043 per day for the second year, and $20,335 per
day for the third year. There is no additional hire provision during the
initial three year period. At the end of the three year period both Arlington
and Stena Bulk will have the option to extend the charters for an additional
30 months.
Arlington will also enter into vessel management agreements for both
vessels with Northern Marine Management Ltd. for the term of the charters, at
fixed rates commencing at $5,565 per day and increasing at 5% per year.
Northern Marine Management Ltd. is a wholly-owned subsidiary of Stena Group.
These management agreements will be on substantially similar terms as the
management agreements that Arlington now has in place for its existing six
vessels.
As of February 10, 2005 Stena Group and related parties owned
approximately 14.4% of Arlingtons outstanding shares of common stock.
The completion of the acquisition of the vessels is subject to a number of
customary conditions, including the condition that Arlington receives
necessary financing to pay the cash purchase price. The Company plans to
finance the purchase of the vessels through a new $230 million five-year non-
amortizing term loan facility with The Royal Bank of Scotland. The term loan
facility will be a floating rate facility and will be hedged with a five-year
interest rate swap. The fixed rate of the swap will be set at the closing of
the term loan facility, which Arlington expects will occur by December 15,
2005. The Company expects that the fixed interest rate on the new debt
facility will be higher than the fixed interest rate of 4.76% on the Companys
existing debt facility. As part of the new term loan facility, the Company
will pay off this existing five year $135 million debt facility with Fortis
Bank, HSBC Bank, and Svenska Handelsbanken and terminate a corresponding
interest rate swap with Fortis Bank and HSBC Bank.
The Company expects to incur approximately $3 million in costs to complete
the purchase of the vessels and to establish the new debt facility.
In conjunction with the acquisition of the new Product tankers, the
Company also announced certain amendments to its six existing vessel charter
hire agreements with Stena Bulk and vessel management agreements with Northern
Marine. The existing vessel management agreements will be amended to provide
for more frequent maintenance dry-dockings to be funded by Northern Marine .
This provision will also apply to the two new Product tankers. Further, the
existing charter agreements will be amended to include certain favorable
adjustments to fuel consumption metrics used in the calculation of additional
hire revenue for the existing Product and Panamax tankers.
As a result of the purchase of the two Product tankers and the amendments
to the existing charter hire and vessel management agreements, the Company now
expects to generate a cash dividend in 2006 of approximately $2.19 per share.
This compares favorably to the estimated 2006 cash dividend of $1.94 per share
described in the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005. This estimate assumes that Arlington will earn no
additional hire revenues on any of its Product or Panamax tankers in 2006.
The acquisition and its related commercial terms, together with the new
term debt facility with The Royal Bank of Scotland, represent important
developments for Arlington. Consistent with Arlingtons long-term strategy,
the Company has succeeded in adding two high quality vessels with fixed long-
term charters and vessel management arrangements that the Company anticipates
will produce both revenue and cash dividend growth. The acquisition grows
Arlingtons Product tanker fleet to four sister vessels, and provides a
natural complement to the Companys modern fleet. Further, Arlington expects
this transaction to generate an increased cash dividend for the Companys
shareholders in 2006 and beyond, thereby creating improved value for
investors.
Dividend Policy
We intend to pay quarterly cash dividends denominated in U.S. dollars to
the holders of our common shares in amounts substantially equal to the
charterhire received by us under the charters, less cash expenses and any cash
reserves established by our board of directors. We intend to declare those
dividends in January, April, July and October of each year and pay those
dividends in the subsequent month. Distributions to shareholders are applied
first to retained earnings. When retained earnings are not sufficient,
distributions are applied to additional paid-in capital.
Under Bermuda law a company may not declare or pay dividends if there are
reasonable grounds for believing either that the company is, or would after
the payment be, unable to pay its liabilities as they become due, or that the
realizable value of its assets would thereby be less than the sum of its
liabilities and its issued share capital (par value) and share premium
accounts (share premium being the amount of consideration paid for the
subscription of shares in excess of the par value of those shares). The
declaration and payment of any dividends must be approved by our board of
directors. Under the terms of our existing credit facility, we may not declare
or pay any dividends if we are in default under the credit facility.
About Arlington Tankers
Arlington Tankers Ltd. is an international seaborne transporter of crude
oil and petroleum products. Arlingtons fleet consists exclusively of six
modern double-hulled vessels and is one of the youngest tanker fleets in the
world, with an average vessel age of approximately 2.0 years. The fleet
consists of two V-MAX tankers, which are specially designed very large crude
carriers, two Panamax tankers and two Product tankers. All of the Companys
vessels are employed on long-term time charters. The Company was incorporated
in Bermuda in September 2004. The Company completed its initial public
offering on the New York Stock Exchange on November 10, 2004.
Safe Harbor Statement
This press release contains certain forward-looking statements and
information relating to the Company that are based on beliefs of the Companys
management as well as assumptions made by the Company and information
currently available to the Company. In particular, the statements in this
press release regarding the Companys expectations as to the completion of the
purchase of the new vessels, the amendments to the existing charter hire and
ship management agreements and the new debt facility, and the statements
regarding the Companys estimate of the amount of 2006 dividends are forward-
looking statements. When used in this press release, words such as "believe,"
"intend," "anticipate," "estimate," "project," "forecast," "plan,"
"potential," "will," "may," "should," and "expect" and similar expressions are
intended to identify forward-looking statements but are not the exclusive
means of identifying such statements. All statements in this document that are
not statements of historical fact are forward-looking statements.
The forward-looking statements contained in this press release reflect the
Companys current views with respect to future events and are subject to
certain risks, uncertainties and assumptions. Many factors could cause the
Companys actual results, performance or achievements to be materially
different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements, including, among
others: the possibility that the Company may not pay dividends, the highly
cyclical nature of the tanker industry, global demand for oil and oil
products, the number of newbuilding deliveries and the scrapping rate of older
vessels, terrorist attacks and international hostilities, and compliance costs
with environmental laws and regulations. These and other risks are described
in greater detail in the "Risk Factors" section of the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005, filed with the
United States Securities and Exchange Commission.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described in the forward-looking statements included in this press
release. The Company does not intend, and does not assume any obligation, to
update these forward- looking statements.
