Wednesday, October 20, 2010

TeeKay in share buy-back

TeeKay's shares recently soared on announcement of a share buyback plan. TeeKay is one of the shipping sector's major success stories. Despite being mainly a tanker operator its share price is at record pre-2008 levels. Since early 2009, it has been making a steady recovery. The company operates a diversified fleet of Aframax, Suezmax, VLCC's and product tankers. It also has a presence in LNG and LPG vessels as well as the FSO/ FSPO market. It is a major operator of shuttle tankers.
Teekay plans to resume buying back its shares under an existing $200m share repurchase authorization. They feel that their shares are currently trading at a 40% discount. They moving into a period of excess cash flow and they see this as a compelling investment opportunity.

Teekay has a number of spin off companies in tanker and gas vessels. Its down stream company, TeeKay Gas Partners, has outperformed peer shipping shares, recovering all its pre-2008 value. It was a tremendous value play in 2009.  Just recently Teekay LNG Partners announced plans to acquire a 50% interest in two Exmar LNG carriers for an equity purchase price of about US$ 70 mio. Exmar will retain a 50% ownership stake and continue to operate the two ships.

The ships are the 138,000-cbm Excalibur (built 2002) and the Excelsior (built 2005), a specialized gas carrier which can both transport and regasify LNG onboard. The two ships are expected to generate distributable cash flow of about $10m per year for Teekay LNG Partners over the firm period of the charter contracts.

TeeKay made news earlier this year with its loan to Nobu Su's TMT for two VLCC's for which they used a pre-2008 credit facility taking advantage of the sizeable loan spreads.

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