Stena to bail out tanker subsidiary Concordia

Swedish tanker owner Concordia Maritime is struggling with liquidity issues and its parent company Stena has agreed to help the firm by taking 10 Panamax tankers on time charter agreements.

The five-year time charters — amounting to $15,500/day per tanker — agreed by Stena's other subsidiary Stena Bulk will ensure Concordia a stable income. The move, together with up to $20mn in prepayment and guarantees to be paid by Stena and Concordia to the lending banks, is aimed at keeping the struggling firm afloat.

An extraordinary general meeting will be held on 12 August to approve the plan, and Concordia and its banks will likely sign the new financing agreement the same month.

Concordia renegotiated the financing terms on eight of its Panamax ships with some of its banks. Concordia is required to enter into time charter agreements for the eight tankers, with the income to be used solely to cover operational and maintenance costs and to cover interest and amortisation.

The time-charter agreements, which will likely begin in the third quarter of this year, include a profit-sharing mechanism by which Stena Bulk and Concordia will "share equally any possible surplus of income exceeding the base hire that the tankers generate on average during pre-determined periods of six months of the time charter period."

Concordia said that the weak tanker market in the past six years, especially in the latter half of 2020 and the first half of this year, was the main driver behind the deal. The firm has struggled to secure profitable long-term charter agreements for its product tanker fleet.

Clean tanker rates have recently reached some of their lowest levels in several years. Freight rates for 60,000t Long Range 1 products tankers on the Mediterranean to Japan route have averaged $27.29/t so far this year, compared with $34.83/t in 2020 and $29.68/t in 2019. Similarly, on the UK Continent to west Africa route, LR1 rates have fallen to an average of just $14.42/t this year from an average of $22.29/t last year. The Covid-19 pandemic and ongoing lockdowns across the world have weighed on oil demand and tanker markets.

By Saleem Rizvi