Avance Gas Holding Ltd: Sells its VLGC fleet for $1,050 million to BW LPG Ltd with expected gain on sale of approximately $315 million
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Hamilton, Bermuda August 15, 2024
Avance Gas Holding Ltd. (?Avance Gas? or ?Company?) (OSE: AGAS) has on August 15, 2024, entered into an agreement with BW LPG Ltd (“BW LPG” or “the Buyer”) to sell its fleet of Very Large Gas Carriers (VLGC) for a consideration of $1,050 million. The Avance Gas VLGC fleet today consist of eight 2015 built eco VLGCs and four dual fuelled VLGCs built 2022 and 2023. The transaction is regulated by 10 individual Memorandum of Agreement (MoA) for the 10 owned VLGCs while the remaining two VLGCs on sale-leaseback agreement (SLB) is agreed to be novated with the existing debt obligation.
The transactions and delivery of ships to the Buyer is scheduled to take place in the window September 15 to December 31, 2024, which enables a smooth handover while allowing Avance Gas to trade the ships for some further period in the winter market. Estimated book value of the VLGC fleet at delivery is between $730 to $740 million which thus is expected to generate a gain on sale to be between $310-320 million. In the first half of 2024, Avance Gas sold four VLGCs to other buyers with a gain of $121 million. As a result, gain on sale of the VLGC fleet is expected to be approximately $435 million for the full year 2024.
The sale of the ships is agreed to be settled with approximately $585 million of cash, novation of approximately $132 million of debt obligations under the SLB with the remainder being settled as with 19.282 million shares in BW LPG at a price of $17.25 per share representing a value of $333 million. The share consideration price of $17.25 reflect the fair value of the share on a Net Asset Value basis assessed by Avance Gas as part of the agreement. As a result of the transaction, Avance Gas will thus become the second largest shareholder of BW LPG with a shareholding of approximately 12.77%. Under the agreement, Avance Gas has agreed a 40 days lock-up on the consideration shares for each settlement under the MoAs.
The net cash proceed from the transaction is expected to be approximately $217 million. The cash proceeds are in addition to the pro forma cash balance of $257 million reported on May 15, 2024, in relation to the first quarter reporting 2024. The pro-forma cash comprised of the cash balance of $360m as of March 31, 2024, cash from the sale of “Avance Pollux” on May 10, 2024 less $165 million dividend paid to shareholders on May 31, 2024.
The Company also generate positive cashflow during the second quarter as we guided that 83 per cent of the second quarter was booked at an average Time Charter Equivalent (TCE) rate of approximately $48,000 per day, significantly higher than our cash break-even in the low $20,000 per day. Interest rate derivatives linked to Avance Gas existing loans will also be terminated prior delivery of the ships to the buyer and these derivatives had a positive market value of $10 million as of March 31, 2024.