IPO Report: Dynagas LNG Partners LP (DLNG)

Francis Gaskins |

Dynagas LNG Partners LP ($DLNG) is a growth-oriented limited partnership focused on owning and operating LNG (liquid natural gas) carriers. DLNG’s vessels are employed on multi-year time charters, which DLNG defines as charters of two years or more

Nine other  operating companies are scheduled  to IPO this week. The full IPO calendar can be found at IPOpremium.

DLNG  scheduled a $250 million IPO on the Nasdaq with a market capitalization of $600 million at a price range midpoint of $20 for Wednesday, November, 13, 2013.

The F-1 with price ranges was  filed November 5, 2013.  Manager, Joint managers: Credit Suisse, BofA Merrill Lynch, Morgan Stanley, Barclays, Deutsche Bank.  Co-Managers: ABN AMRO, Credit Agricole CIB

Overview

The ships were order new  by the private equity sponsor in 2004.  The LNG carriers that comprise DLNG  Initial Fleet have an average age of 6.3 years and are under time charters with an average remaining term of 3.5 years

Valuation

Valuation Ratios

Mrkt

Price /

Price /

Price /

Div

% offered

Annualizing June 6 mos

Cap (mm)

Sls

Erngs

BkVlue

Yield

in IPO

Dynagas LNG Partners LP (DLNG)

$600

7.1

13.2

2.4

7.3%

42%

 

 

 

 

 

 

 

Golar LNG Partners LP (GMLP)

$1,630

5.3

14.1

5.0

6.7%

 

Teekay LNG Partners L.P. (TGP)

$2,900

7.5

11.7

2.4

6.5%

 

 

 

 

 

 

 

 

 

Glossary

Conclusion

  • DLNG is a spin-off of ships with a average age of 6.3 years as of October 28, 2013, compared to the world LNG carrier fleet average age of approximately 11 years.
  • As of December 21, 2012, TGP’s  LNG carriers had an average age of 6.6 years, compared to the world LNG carrier fleet average age of approximately 11 years.
  • As of March 31, 2013, GMLP’s  LNG carriers had an average age of 9 years, compared to the world LNG carrier fleet average age of approximately 11 years.

The rating on DLNG is neutral to slightly positive because the expected dividend is higher than GMLP and TGP, and DLNG’s ships are somewhat newer.

Business

DLNG is a growth-oriented limited partnership focused on owning and operating LNG carriers. DLNG’s vessels are employed on multi-year time charters, which DLNG defines as charters of two years or more, with international energy companies, such as BG Group and Gazprom, providing DLNG with the benefits of stable cash flows and high utilization rates.

DLNG intends to leverage the reputation, expertise, and relationships of its Sponsor and Dynagas Ltd., its Manager, in maintaining cost-efficient operations and providing reliable seaborne transportation services to its customers.

In addition, DLNG intends to make further vessel acquisitions from its Sponsor and from third parties. There is no guarantee that DLNG will grow the size of its fleet or the per unit distributions that DLNG intends to pay or that DLNG will be able to make further vessel acquisitions from its Sponsor or third parties.

DLNG’s Sponsor entered the LNG sector in 2004 by ordering the construction of three LNG carriers, the Clean Energy, the Ob River, and the Clean Force, from Hyundai Heavy Industries Co. Ltd. or HHI, one of the world’s leading shipbuilders of LNG carriers.

On October 29, 2013, DLNG acquired from its Sponsor these vessels, which DLNG refers to as its Initial Fleet, in exchange for 6,735,000 of its common units and all of its subordinated units.

The LNG carriers that comprise its Initial Fleet have an average age of 6.3 years and are under time charters with an average remaining term of 3.5 years, as of October 28, 2013.

Competition

DLNG expects substantial competition for providing marine transportation services for potential LNG projects from a number of experienced companies, including state-sponsored entities and major energy companies.

DLNG anticipates that an increasing number of marine transportation companies, including many with strong reputations and extensive resources and experience, will enter the LNG transportation market.

This increased competition may cause greater price competition for time charters. As a result of these factors, DLNG may be unable to expand its relationships with existing customers or obtain new customers on a profitable basis

Dividends

At the price range mid-point of $20, DLNG expects to pay 7.3% annually, or $1.46 per unit.

5% stockholders
Dynagas Holding Ltd.(the sponsor parent) is beneficially owned by the Prokopiou family, including George Prokopiou and his daughters Elisavet Prokopiou, Johanna Prokopiou, Marina Kalliope Prokopiou, and Maria Eleni Prokopiou, which collectively have a business address at 97 Poseidonos Avenue & 2 Foivis Street Glyfada, 16674, Greece.

Use of proceeds

DLNG expects to net $152.9 million from its IPO. Proceeds are allocated as follows:

$137.96 million to repay in full all of the outstanding indebtedness under its $193 million Ob River Credit Facility, which bears interest at LIBOR plus a margin and matures in July 2017

$3.5 million to repay in part the outstanding indebtedness under its $128 Clean Force Credit Facility, which bears interest at LIBOR plus a margin and matures in April 2020; and

$11.39 million for general partnership purposes, including working capital.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
DLNG Dynagas LNG Partners LP 15.53 0.46 3.05 161,755
TGP Teekay LNG Partners L.P. 15.55 0.35 2.30 401,085
GMLP Golar LNG Partners LP 21.96 0.21 0.97 185,128
RGSJF Regus Plc (St Helier) 2.91 0.00 0.00 0

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