Chevron Continues to Pursue Old Offering for Suezmax Refinancing

Chevron’s yet-to-be completed deal to sell and charter back four Suezmax oil tankers resembles Shell’s sale and leaseback for product carriers with First International Group of Companies completed a little over a year ago. Both deals include two tranches of debt finance tied to bareboat charters. But Chevron’s arrangement includes a few refinements, as well as peculiarities in favor of the oil major.

The investment bank of both deals is Donaldson, Lufkin & Jenrette (DLJ) of New York. But the Chevron deal has a slightly new dynamic, in what DLJ touted as perfecting its structure with the Securities and Exchange Commission (SEC). Chevron will keep the vessels on balance sheet through a financing lease which includes a $1 option to purchase the vessels at the end of the initial charters. This is unlike Shell’s arrangement, in which the vessels were off balance sheet and First International retained residual value of the vessels, banking on the product carrier supply situation for future success (see Marine Money Vol. 10, No. 3).

Chevron built termination payments into the charter which will provide liquidity for the debt issues. Shell, on the other hand, made its charters subsequent to having permanent finance in place, wanted the vessels off balance sheet, and made the issues when interest rates were lower.

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