International Seaways says it has become the first New York-listed shipowner to link its financing to sustainability.
The US tanker owner has closed a series of secured credit facilities worth $390m in green financing.
This is split into a $300m five-year core term loan and a five-year $40m core revolver, of which $20m has been drawn, and a two-and-a-half-year $50m transition credit facility.
The two core facilities include a sustainability-linked pricing mechanism.
This has been certified by an independent firm specialising in environmental and corporate governance research, it said.
Pricing will be linked to the carbon efficiency of the fleet to ensure it aligns with the IMO's 50% industry reduction target in greenhouse gas emissions by 2050.
Sticking to its Poseidon Principles
It is also consistent with the "de-carbonisation trajectory" outlined in shipping lenders' Poseidon Principles, the global framework by which financial institutions can assess the green credentials of their vessel finance portfolios.
“International Seaways has always been committed to environmental initiatives and minimising risk of all forms of pollution and waste streams,” said CEO Lois Zabrocky.
"Through this sustainability-linked pricing mechanism, we have created an innovative partnership with our banks that further advances our commitment to sustainability initiatives."
She added: "We intend to continue to focus on our ESG [environmental, social and governance] footprint where appropriate and align our sustainability goals with those of our various stakeholders.”
Debt to be repaid
Proceeds from the loans are refinancing $385m of existing "high-cost" debt, including repaying a 2017 loan and its senior secured credit agreement with ABN AMRO, and repurchasing outstanding 10.75% subordinated notes.
The core loans carry interest at Libor plus 2.6%, while the transition facility is priced at Libor plus 3.5%.
The margin on the core facilities can be adjusted by 0.2%, based on whether the owner meets certain leverage ratios.
It currently anticipates the interest will reduced to 2.4% by the third quarter of 2020.
Fearnley Securities said: "In effect, the refinancing will lower the average interest rates on the refinanced portion of the debt by 350 basis points [bps] and overall debt by 200bps,"
"In nominal values, INSW [International Seaways] looks to reduce annual interest cost by circa $15m."
The tanker owner's chief financial officer, Jeffrey Pribor, said the deals reflected its "strong execution over the past three years and the continued support of an expanded top-tier banking group".
Zabrocky added that the new facilities eliminate some restrictions on debt.
They also "eliminate certain restrictions in our debt and position us to advance our disciplined capital allocation strategy following success both renewing our fleet near the bottom of the cycle and significantly paying down debt."
Fearnley Securities said covenants will be "substantially lighter", effectively removing the 50% cash sweep which triggered nearly $250m of additional debt repayments through to 2021.
"In our view this opens up for sizeable dividends," it added.
Earlier this month International Seaways said it would not go above $380m in the financing. Nordea, ABN AMRO, Credit Agricole, DNB and SEB are the lenders involved.
The finance is secured by an unspecified number of tankers.
The company owns and operates a fleet of 42 ships, including 13 VLCCs and two suezmaxes.