He told delegates at the Marine Money Asia conference that the deal made sense thanks to the charter back deals that came with the product tankers.
Last year Ross took a large stake last year in Diamond S Shipping, the Connecticut-based owner-led by former OMI Corp chief executive Craig H Stevenson Jr.
He led a group of private-equity investors who collectively pumped about $1bn into the Diamond S fleet, which included 30 products tankers acquired from Asian owner Cido Shipping, along with its own newbuilding fleet of eight suezmax tankers and two LR2 products tankers.
The billionaire US investor said the ships purchased from Cido “happily had above market rate charters which carried over to us and had about four years and a couple of months to run.”
“Those will throw off enough cash flow to service the debt that we are incurring both on the product side and the suezmax side,” he said.
“The suezmaxes are trading in the spot market as part of the Gemini Pool and we calculate that even if we get no net revenues from them we can service our debt for a couple of years in any event.”
“So we view this particular structure as a way to get us through however long the valley of death is and yet give us upside if, as and when it turns around.”
“We would never have just brought suezmax tankers straight up with nothing else. And for the most part I don’t think there are a lot of banks in the audience that would be crazy about financing them right now anyhow.”
“The other thing is we have a fairly low debt to equity ratio on the whole fleet. It’s somewhat under 60% of the purchase price,” he said.
“And the investors in it, ourselves, CIC and First Reserve, have more funds if they should ever be required for either defensive or more happily for offensive purposes.”
Ross, who is an influential distressed investor who has been dubbed “the king of bankruptcy”, also, has a major stake in LPG player Navigator Gas Holdings.
