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LNG Shipper Dynagas LNG Partners LP Sells a Tasty Preferred

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Dynagas LNG Partners (a MLP), 1 of 2 public shippers, devoted to owning LNG ships has issued a nice cumulative perpetual preferred stock.

All the details of the issue are here.  The issue trades OTC grey market beginning tomorrow (Wednesday). For guidance on trading on the OTC grey market we outline the process here.

DLNG is a small carrier as ocean shippers go with just 5 ships, but they have options on 5 additional LNG ships from their sponsor. No doubt they will purchase some of these ships in the near future.

A key takeaway for investors is that LNG shipping companies, at this point in time, bear little resemblance to other ocean shippers such as the dry bulk carriers, which have been relatively unsuccessful in recent years. LNG carriers have locked into very nice longterm contracts.  In the case of DLNG they have their ships contracted 100% through the balance of 2015 and 2016.  2 ships have contracts that expire in 2017, 2 in 2018 and 1 in 2028. This is a contracted backlog of around $600 million!!  Currently DLNG is paying a 42.25 cents/share quaterly common unit distribution (a current yield of 11.28%). Even with stellar performance the common units have performed marginally. The company is a Greek company (which explains the performance).

 

The new preferred shares are cumulative, qualified tax wise and have a 9% coupon. The fleet is booked through 2016 and has some of the best margins in the industry.  We note that the shares are perpetual which we have avoided, but we are tempted to take a small postition in this issue.  We will await OTC trading and see how it trades before making a final determination.

All the details of the issue are here.

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