As filed with the Securities and Exchange Commission on August 14, 2014
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F
ORM
F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GasLog Partners LP
(Exact name of Registrant as specified in its charter)
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Republic of the Marshall Islands
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4400
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98-1160877
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Gildo Pastor Center, 7 Rue du Gabian, MC 98000, Monaco, + 377 97 97 51 15
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
CT Corporation System
111 Eighth Avenue
New York, New York 10011
(212) 590-9338
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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William P. Rogers, Jr.
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Sean T. Wheeler
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. £
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £
CALCULATION OF REGISTRATION FEE
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Title of Each Class of
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Proposed
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Amount of
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Common units representing limited partner interests |
$125,000,000 |
$16,100 |
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(1) |
Includes common units issuable upon exercise of the underwriters option to purchase additional common units. |
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(2) |
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 14, 2014
PRELIMINARY PROSPECTUS
Common Units
Representing Limited Partner Interests
$
per common unit
We are selling of our common units. We have granted the underwriters an option to purchase up to additional common units.
Our common units are traded on the New York Stock Exchange under the symbol GLOP. The last reported sales price of our common units on August 13, 2014 was $32.39.
Although we are organized as a partnership, we have elected to be treated as a corporation solely for U.S. federal income tax purposes.
We are an emerging growth company, and we are eligible for reduced reporting requirements. See SummaryImplications of Being an Emerging Growth Company.
Investing in our common units involves risks. See Risk Factors beginning on page 24.
These risks include the following:
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We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units and subordinated units. |
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We will be required to make substantial capital expenditures to maintain and expand our fleet, which will reduce cash available for distribution. |
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The Pending Vessel Acquisition and the New Credit Facility may not close as anticipated or they may close with adjusted terms. |
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Our ability to acquire additional LNG carriers from GasLog or third parties will depend upon our ability to raise additional equity and debt financing to fund all or a portion of the acquisition costs of these vessels and may be dependent on the consent of existing lenders to GasLog. |
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Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to unitholders. |
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We depend on GasLog Ltd. and certain of its subsidiaries to assist us in operating and expanding our business and competing in our markets. |
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Our future performance depends on continued growth in LNG production and an increase in demand for LNG and LNG shipping; LNG trade declined by 1.6% in 2012 and improved marginally by only 0.5% in 2013, and we cannot guarantee that LNG trade will not decline in the future. |
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Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of unitholders owning more than 4.9% of our common units. |
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Upon completion of this offering, GasLog and our general partner will own a % interest in us and will have conflicts of interest and limited fiduciary and contractual duties to us and our common unitholders, which may permit them to favor their own interests to your detriment. |
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Even if public unitholders are dissatisfied, they cannot initially remove our general partner without GasLog Ltd.s consent. |
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We currently derive all of our revenues from a single customer. |
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Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price. |
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U.S. tax authorities could treat us as a passive foreign investment company under certain circumstances, which would have adverse U.S. federal income tax consequences to U.S. unitholders. |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Common
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Total |
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Public Offering Price |
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$ |
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$ |
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Underwriting Discount (1) |
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$ |
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Proceeds, before expenses, to GasLog Partners LP (1)(2) |
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$ |
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(1) |
We will also pay up to $25,000 of reasonable fees and expenses of counsel related to the review by the Financial Industry Regulatory Authority, Inc. of the terms of sale of the common units offered hereby. See Underwriting (Conflicts of Interest). |
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(2) |
Excludes offering expenses payable by us as described in Expenses Related to This Offering. |
The underwriters expect to deliver the common units to purchasers on or about , 2014 through the book-entry facilities of The Depository Trust Company.
Citigroup
, 2014
We are responsible for the information contained in this prospectus and in any free writing prospectus we prepare or authorize. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and
the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date of this prospectus.
TABLE OF CONTENTS
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OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
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F-1 |
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[This Page Intentionally Left Blank]
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the historical financial statements of GasLog Partners LP and the notes to those financial statements. The information presented in this prospectus assumes, unless
otherwise noted, that the underwriters do not exercise their option to purchase additional common units. You should read Risk Factors for more information about important risks that you should consider carefully before buying our common units.
References in this prospectus to GasLog Partners, we, our, us and the Partnership or similar terms when used for periods prior to the completion of the initial public offering of GasLog Partners LP on May 12, 2014, or IPO, refer to GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd., which
were contributed by GasLog Ltd. to the Partnership at the IPO. When used for periods after the completion of the IPO, those terms refer to GasLog Partners LP or any one or more of its subsidiaries, or to all such entities unless the context otherwise indicates. Please read Summary Financial and Operating
Data beginning on page 20 for an overview of our operating results and financial position.
References in this prospectus to our general partner refer to GasLog Partners GP LLC, the general partner of GasLog Partners. References in this prospectus to GasLog LNG Services refer to GasLog LNG Services Ltd., a wholly owned subsidiary of GasLog Ltd. References in this prospectus to
GasLog refer, depending on the context, to GasLog Ltd. and to any one or more of its direct and indirect subsidiaries, other than us. References in this prospectus to GasLog Carriers refer to GasLog Carriers Ltd. References in this prospectus to Ceres Shipping refer to Ceres Shipping Ltd. References in
this prospectus to BG Group refer to BG Group plc; references to Samsung refer to Samsung Heavy Industries Co. Ltd.; references to Hyundai refer to Hyundai Heavy Industries Co., Ltd.; and references to Shell refer to Royal Dutch Shell plc, or, in each case, any one or more of their subsidiaries or
to such entities collectively.
Unless otherwise indicated, all references to dollars and $ in this prospectus refer to, and amounts are presented in, U.S. dollars. References to cbm refer to cubic meters. References to TFDE refer to tri-fuel diesel electric propulsion technology.
GasLog Partners LP
We are a growth-oriented limited partnership focused on owning, operating and acquiring liquefied natural gas, or LNG, carriers engaged in LNG transportation under long-term charters, which we define as charters of five full years or more. Our initial fleet of three LNG carriers, which have
charter terms expiring in 2018 and 2019, were contributed to us by GasLog, which controls us through its ownership of our general partner.
Our initial fleet consists of three LNG carriers, built in 2013, with modern tri-fuel diesel electric propulsion technology that operate under long-term charters with subsidiaries of BG Group. We also have options and other rights under which we may acquire additional LNG carriers from GasLog, as
described below. We believe that such options and rights provide us with significant built-in growth opportunities. We may also acquire vessels from shipyards or other owners. We intend to operate our vessels under long-term charters with predictable cash flows and to grow our position in the LNG
market through further acquisitions of LNG carriers from GasLog and third parties. We believe we can grow our distributions per unit organically by providing reliable customer service to our charterers and leveraging GasLogs relationships, expertise and reputation. We intend to make further
acquisitions of LNG carriers from GasLog, including the Pending Vessel Acquisition, and third parties to grow our fleet. However, we cannot assure you that we will make any particular acquisition or that as a consequence we will successfully grow our per unit distributions. Among other things, our
ability to acquire additional LNG carriers will be dependent upon our ability to raise additional equity and debt financing.
GasLog is, we believe, a leading independent international owner, operator and manager of LNG carriers and provides support to international energy companies as part of their LNG logistics
chain. GasLog was founded and is effectively controlled by its chairman, Peter G. Livanos, whose familys shipping activities commenced more than 100 years ago. On April 4, 2012, GasLog completed its initial public offering, and its common shares began trading on the New York Stock Exchange on
March 30, 2012, under the symbol GLOG. At the time of its initial public offering, GasLogs owned fleet consisted of ten LNG carriers, including eight newbuildings on order. Since its initial public offering, GasLog has increased by approximately 126% the total carrying capacity of vessels in its fleet,
which includes vessels on the water and newbuildings on order. This increase includes: two LNG newbuilding orders announced in February 2013, two LNG newbuilding orders announced in August 2013, two LNG newbuilding orders and two exercised options for newbuilding orders announced in June
2014, all of which are expected to be delivered through the second half of 2017; the acquisition of one 2010 built LNG carrier announced in September 2013; and six secondhand steam-powered ships that were acquired from BG Group in April and June 2014. Each of the four newbuildings announced in
2013 is under a long-term charter, which will commence upon delivery. Since January 1, 2013, GasLog has taken delivery of five LNG carriers. As of August 1, 2014, GasLog has a fully owned 22 ship fleet, including 12 ships on the water and 10 LNG carriers on order from Samsung and Hyundai, as well
as a 51.8% ownership in the Partnership.
Initial Fleet
Our initial fleet consists of:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
GasLog Shanghai
2013
155,000
BG Group
January 2018
2021-2026
GasLog Santiago
2013
155,000
BG Group
March 2018
2021-2026
GasLog Sydney
2013
155,000
BG Group
May 2019
2022-2027
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
The charters may be extended for up to two extension periods of three or four years, and each charter requires that the charterer provide us with 90 days notice before the charter expiration of its exercise of any extension option. The period shown reflects the expiration of the minimum optional
period and the maximum optional period.
Pending Vessel Acquisition
On August 14, 2014, we entered into a Share Purchase Agreement to purchase from GasLog Carriers, a direct subsidiary of GasLog, 100% of the ownership interests in GAS-sixteen Ltd. and GAS-seventeen Ltd., the entities that own the
Methane Rita Andrea
and the
Methane Jane Elizabeth
,
respectively, for an aggregate purchase price of $328.0 million, which will be funded with a combination of new or existing debt (as discussed below) and proceeds raised in this offering. GasLog purchased the
Methane Rita Andrea
and the
Methane Jane Elizabeth
from BG Group in April 2014. In
connection with the transaction, the Partnership will acquire GAS-sixteen Ltd. and GAS-seventeen Ltd. with $2.0 million of positive net working capital existing at the time of closing. GasLog supervised the construction of each ship and has provided technical management for the ships since delivery. We
refer to this transaction as the Pending Vessel Acquisition.
The entities being purchased pursuant to the Pending Vessel Acquisition currently have $217.0 million of outstanding indebtedness in respect of the two vessels to be acquired. In connection with the Pending Vessel Acquisition, such indebtedness is expected to be partially prepaid with a portion of
the proceeds of this offering. In addition, at or shortly following the closing of the Pending Vessel Acquisition, we expect to refinance all our outstanding indebtedness and the indebtedness of the entities being acquired pursuant to the Pending Vessel Acquisition with borrowing under the New Credit
Facility
(as defined below). See Recent Developments.
2
Capacity
(cbm)
Expiration
Period
(2)
The following table provides information about the ships to be purchased under the Pending Vessel Acquisition:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
Methane Rita Andrea
2006
145,000
BG Group
April 2020
2021-2026
Methane Jane Elizabeth
2006
145,000
BG Group
October 2019
2021-2026
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
Charterer may extend either or both of these charters for one extension period of three or five years, and each charter requires that the charterer provide us with advance notice of its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the
maximum optional period.
The Pending Vessel Acquisition and the purchase price were approved by our board of directors and the conflicts committee of our board of directors, or the conflicts committee. The conflicts committee retained an independent financial advisor to assist it in evaluating the Pending Vessel
Acquisition. In determining that the Pending Vessel Acquisition is fair and reasonable to us, the conflicts committee obtained the views of its financial advisor as to the fairness of the purchase price.
We have agreed to the Pending Vessel Acquisition for the following reasons:
the long-term, fixed-rate charters with BG Group fits our objective of generating stable cash flows;
the Pending Vessel Acquisition will increase the scale and diversity of our operations;
the Pending Vessel Acquisition is expected to increase our financial strength and flexibility by increasing our cash flow; and
the Pending Vessel Acquisition is expected to increase our cash available for distribution to our unitholders.
We estimate that the vessels being acquired will generate $47.7 million of incremental contracted revenue over their initial charter terms and add over $34.5 million per annum to our EBITDA
(1)
. However, we may not realize that level of revenue or EBITDA from the acquisition of these vessels.
If the Pending Vessel Acquisition is consummated, our management intends to recommend to our board of directors an increase in our quarterly cash distribution of between $0.05625 and $0.06250 (between $0.225 and $0.250 per unit on an annualized basis), which would become effective for our
distribution with respect to the quarter ending
, 2014. Combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase to between $0.43125 to $0.43750 per quarter would result in the quarterly distribution exceeding the first incentive distribution right threshold of
$0.43125. Any such increase would be conditioned upon, among other things, the closing of the Pending Vessel Acquisition, the approval of such increase by our board of directors and the absence of any material adverse developments or potentially attractive opportunities that would make such an
increase inadvisable.
(1)
Non-GAAP Financial Measures
EBITDA.
We define EBITDA as earnings before interest income and expense, gain/loss on interest rate swaps, depreciation and amortization and taxes. EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as our lenders, to assess our
operating performance and ability to generate cash for debt service and capital expenditures, as well as our compliance with the financial covenants and restrictions contained in our financing agreements. We believe that EBITDA assists our management and investors by increasing the comparability of
our performance from period to period. This increased
3
Capacity
(cbm)
Expiration
Period
(2)
comparability is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on interest rate swaps, depreciation and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which
items may significantly affect results of operations between periods. We believe that including EBITDA as an operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing operational strength and cash generating ability
in assessing whether to continue to hold common units.
EBITDA has limitations as an analytical tool (see Summary Financial and Operating Data) and should not be considered an alternative to profit/(loss), profit/(loss) from operations, cash flow (used in)/from operating activities or any other measure of operating performance or liquidity presented in
accordance with IFRS. EBITDA excludes some, but not all, items that affect profit/(loss) and net cash from operating activities, and these measures may vary among other companies. Therefore, EBITDA may not be comparable to similarly titled measures of other companies.
Estimated EBITDA for the two LNG carriers we are purchasing for the first twelve months of operation is based on the following assumptions:
closing of the Pending Vessel Acquisition in the third quarter of 2014 and timely receipt of charter hire specified in the charter contracts;
utilization of 363 days per year and no drydocking;
vessel operating and supervision costs and charter commissions per current internal estimates; and
general and administrative expenses based on managements current internal estimates.
We consider the above assumptions to be reasonable as of the date of this prospectus, but if these assumptions prove to be incorrect, actual EBITDA for the vessels could differ materially from our estimates. The prospective financial information was not prepared with a view toward public disclosure
or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants. Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial
information contained above, nor have they expressed any opinion or any other form of assurance on such information or its achievability and assume no responsibility for, and disclaim any association with, such prospective financial information.
We intend to use the proceeds of this offering, and the related capital contribution to us by our general partner, to partially fund the purchase price for the Pending Vessel Acquisition and to prepay or refinance related indebtedness.
We expect the Pending Vessel Acquisition to close following the closing of this offering, subject to the Partnership obtaining the funds necessary to pay the purchase price and the satisfaction of certain other closing conditions. The Pending Vessel Acquisition may not close as anticipated or it may
close with adjusted terms. See Risk FactorsRisks Inherent in Our BusinessThe Pending Vessel Acquisition may not close as anticipated or it may close with adjusted terms. This offering is not conditioned on the closing of the Pending Vessel Acquisition. If the Pending Vessel Acquisition does not close,
we will use the net proceeds from this offering and the related capital contribution to us by our general partner for general partnership purposes.
The Pending Vessel Acquisition will be accounted for as a reorganization of companies under common control. Beginning with the first quarter following the completion of the Pending Vessel Acquisition, the Partnerships historical results will be retroactively restated to reflect the historical results of
the
Methane Rita Andrea
and
Methane Jane Elizabeth
during the periods they were owned by GasLog.
4
Recent Developments
GasLog Partners LP
On August 1, 2014, we announced a partial cash distribution for the second quarter of 2014 of $4.13 million, or $0.20604 per unit, pro-rated from the IPO closing date through June 30, 2014, payable on August 14, 2014 to all unitholders of record as of August 11, 2014. This distribution corresponds to
a quarterly distribution of $0.375 per unit, or $1.50 per unit per year.
On August 5, 2014, we entered into a commitment letter and a coordination letter with Citibank for a credit facility for up to $450 million, or the New Credit Facility, to refinance the existing debt facilities for our initial fleet, as well as the debt facilities for the vessels to be acquired pursuant to
the Pending Vessel Acquisition. The refinanced debt is expected to have a tenor of five years and an amortization profile of 20 years, which we believe will increase our financial flexibility. The New Credit Facility will be secured by a first priority mortgage on each of our existing vessels and, when
delivered, the vessels to be acquired pursuant to the Pending Vessel Acquisition, a specific assignment of each of the existing charters and a first assignment of earnings and insurances in relation to the vessels. The New Credit Facility will bear interest at LIBOR plus a margin and will be payable in 20
equal quarterly payments of $5.625 million each and a balloon payment of $337.5 million together with the final quarterly payment. We expect that the New Credit Facility will have financial and restrictive covenants that are consistent with our existing debt. The closing of the New Credit Facility is
subject to conditions precedent, including the negotiation and execution of final documentation and final lender approvals. We expect the New Credit Facility to be entered into and funded at or shortly following the closing of the Pending Vessel Acquisition. In addition, at the closing of the Pending
Vessel Acquisition, we expect to use a portion of the proceeds from this offering to prepay amounts related to the
Methane Rita Andrea
and
Methane Jane Elizabeth
currently outstanding under the Facility Agreement between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. as borrowers,
Citibank, N.A., London Branch, or Citibank, as mandated lead arranger, the financial institutions listed in Schedule 1 thereto as lenders, Citibank as bookrunner, Citibank International Plc as agent of the other finance parties and Citibank as security agent and trustee, or the Citibank Facility, which
such borrowers entered into to finance the purchase of the
Methane Rita Andrea
and the
Methane Jane Elizabeth
(as well as the
Methane Lydon Volney
, which is not being acquired in the Pending Vessel Acquisition). See Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources.
If the New Credit Facility described above is not entered into and funded at or prior to the closing of the Pending Vessel Acquisition, (1) the Citibank Facility will remain in place and (2) as required by the Citibank Facility, we and GasLog Partners Holdings LLC, our wholly owned subsidiary, will
enter into a guarantee agreement with Citibank pursuant to which we and GasLog Partners Holdings LLC will guarantee the obligations of the borrowers under the Citibank Facility (including GAS-eighteen Ltd., an entity that will not be acquired from GasLog under the Pending Vessel Acquisition), or
the Guarantee. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources. The funding of the New Credit Facility is not a condition to the completion of this offering or the Pending Vessel Acquisition.
GasLog Ltd.
In May 2014, subsidiaries of GasLog entered into shipbuilding contracts with Samsung for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the first and second half of 2017, respectively.
In June 2014, subsidiaries of GasLog entered into shipbuilding contracts with Hyundai for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the second half of 2017.
5
On June 30, 2014, GasLog took delivery of the
Solaris
, a 155,000 cbm LNG carrier constructed by Samsung that commenced her seven year charter party agreement with Shell.
Option Vessels
We have the option to purchase the following 12 LNG carriers from GasLog, including the two vessels to be acquired pursuant to the Pending Vessel Acquisition, within 36 months after each such vessels acceptance by its charterer (or, in the case of the
GasLog Seattle
and the six vessels recently
acquired from BG Group, including the two vessels subject to the Pending Vessel Acquisition, 36 months after the closing of the IPO), in each case at fair market value as determined pursuant to the omnibus agreement.
Our ability to purchase these optional vessels, should we exercise our right to purchase such vessels, is dependent on our ability to obtain financing to fund all or a portion of the acquisition costs of these vessels and may be dependent on the consent of existing lenders to GasLog with respect to
these optional vessels. See Risk FactorsRisks Inherent in Our BusinessWe may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or financing agreement. As of the date of this prospectus, we have not secured any financing in connection with the 12 optional
vessels (other than those to be acquired pursuant to the Pending Vessel Acquisition). In connection with the Pending Vessel Acquisition, we will enter into the New Credit Facility or the Guarantee. See Recent Developments.
LNG Carrier
Year Built
(1)
Cargo
Charterer
(2)
Charter
GasLog Seattle
2013
155,000
Shell
December 2020
Solaris
2014
155,000
Shell
June 2021
Hull No. 2072
Q1 2016
174,000
BG Group
2026
Hull No. 2073
Q2 2016
174,000
BG Group
2026
Hull No. 2102
Q3 2016
174,000
BG Group
2023
Hull No. 2103
Q4 2016
174,000
BG Group
2023
Methane Rita Andrea
(4)
2006
145,000
BG Group
April 2020
Methane Jane Elizabeth
(4)
2006
145,000
BG Group
October 2019
Methane Lydon Volney
2006
145,000
BG Group
October 2020
Methane Shirley Elisabeth
2007
145,000
BG Group
December 2019
Methane Heather Sally
2007
145,000
BG Group
December 2020
Methane Alison Victoria
2007
145,000
BG Group
June 2020
(1)
For newbuildings, expected delivery quarters are presented.
(2)
Vessels are chartered to a subsidiary of BG Group or a subsidiary of Shell, as applicable.
(3)
Indicates the expiration of the initial term. The charterer of the
Methane Rita Andrea
, the
Methane Jane Elizabeth
and the
Methane Lydon Volney
has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. In addition, the
charterer of the
Methane Shirley Elisabeth
, the
Methane Heather Sally
and the
Methane Alison Victoria
has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. For the other vessels in the above table, the charterers have
unilateral options to extend the term of the time charters for periods ranging from 5 to 10 years, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter.
(4)
Vessels to be acquired pursuant to the Pending Vessel Acquisition. See Pending Vessel Acquisition.
GasLog also has the following 10 additional carriers in its fleet, which it will be required to offer to us for purchase at fair market value as determined pursuant to the omnibus agreement if charters are secured with committed terms of five full years or more:
6
Capacity
(cbm)
Expiration
(3)
LNG Carrier
Year Built
(1)
Cargo
Charterer
(2)
Charter
GasLog Savannah
2010
155,000
BG Group
September 2015
(3)
GasLog Singapore
2010
155,000
BG Group
September 2016
(3)
GasLog Skagen
2013
155,000
BG Group
April 2021
(4)
GasLog Chelsea
2010
153,600
Spot Market
N/A
Hull No. 2043
Q4 2014
155,000
N/A
N/A
Hull No. 2044
Q1 2015
155,000
N/A
N/A
Hull No. 2130
Q2 2017
174,000
N/A
N/A
Hull No. 2131
Q3 2018
174,000
N/A
N/A
Hull No. 2800
Q3 2017
174,000
N/A
N/A
Hull No. 2801
Q4 2017
174,000
N/A
N/A
Capacity
(cbm)
Expiration
|
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(1) |
For newbuildings, expected delivery quarters are presented. |
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|
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(2) |
Vessels are chartered to a subsidiary of BG Group or a spot market counterparty, as indicated. |
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|
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(3) |
Indicates the expiration of the initial term. The charterers have unilateral options to extend the term of the time charters for periods ranging from 30 to 90 months, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter. |
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|
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(4) |
Time charter provides for full employment for three years and a subsequent five year seasonal charter under which the ship is employed for seven months and available to accept other charters for five months. |
In addition to the LNG carriers described in the preceding paragraphs, we intend to leverage our relationship with GasLog to make accretive acquisitions of LNG carriers with long-term charters from GasLog and third parties to increase our distributions per unit. Pursuant to the omnibus agreement, GasLog will be required to offer to us for purchase any other LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or acquires if charters are secured with committed terms of five full years or more. Except as discussed elsewhere in this prospectus, this right will continue throughout the entire term of the omnibus agreement. In addition to GasLogs committed order book, GasLog currently holds fixed price options from Samsung on two additional 174,000 cbm newbuildings with delivery dates in 2017 and early 2018. If GasLog exercises these options, Samsung has agreed to grant GasLog two additional options. GasLog also holds fixed price options from Hyundai on four additional 174,000 cbm newbuildings with delivery dates in late 2017 and during 2018. In addition, we will have a right of first offer with regard to any proposed sale, transfer or other disposition of any LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation under a charter of five full years or more that GasLog owns, as discussed elsewhere in this prospectus. Our ability to acquire additional LNG carriers from GasLog is subject to obtaining any applicable consents of governmental authorities and other non-affiliated third parties, including the relevant lenders and charterers. Under the omnibus agreement, GasLog will be obligated to use reasonable efforts to obtain any such consents. Our ability to exercise any right to acquire additional LNG carriers will also be subject to our ability to obtain additional equity and debt financing. We cannot assure you that in any particular case the necessary consent will be obtained. See Certain Relationships and Related Party TransactionsOmnibus Agreement.
Our Relationship with GasLog Ltd.
We believe that one of our principal strengths is our relationship with GasLog. We believe our relationship with GasLog gives us access to GasLogs relationships with leading energy companies, shipbuilders, financing sources and suppliers and to its technical, commercial and managerial expertise, which we believe will allow us to compete more effectively when seeking additional
7
customers. As of August 1, 2014, GasLog has a fully owned 22 ship fleet, including 12 ships on the water and 10 LNG carriers on order from Samsung and Hyundai, as well as a 51.8% ownership in the Partnership. Since its initial public offering in April 2012, GasLog has increased by approximately
126% the total carrying capacity of vessels in its fleet, which includes vessels on the water and newbuildings on order. In addition, GasLog, through its wholly owned subsidiary GasLog LNG Services, provides ship management services to the LNG carriers in our initial fleet and, subject to any alternative
arrangements with the applicable charterer, additional ships we may acquire from GasLog. GasLog will also provide certain administrative and commercial management services to the Partnership.
GasLog was incorporated in 2003 and is effectively controlled by its chairman, Peter G. Livanos, who beneficially owns approximately 39.0% of GasLogs common shares. Mr. Livanos familys shipping activities commenced more than 100 years ago. On April 4, 2012, GasLog completed its initial
public offering and its common shares began trading on the New York Stock Exchange on March 30, 2012, under the symbol GLOG. GasLog completed a $199 million follow-on public offering and concurrent private placement on January 22, 2014, to fund a portion of the cost of the acquisition of the
three vessels recently purchased from BG Group, and on April 16, 2014, GasLog completed a $110 million follow-on public offering to fund a portion of the cost of the acquisition of the three vessels under contract to be purchased from BG Group.
Upon completion of this offering, GasLog will own our 2.0% general partner interest, all of our incentive distribution rights and a
% limited partner interest in us, which consists of 162,358 common units and all of our subordinated units. Our general partner, by virtue of its general partner
interest, controls the appointment of three of our five directors (subject to its right to transfer the power to elect one director to the common unitholders so that they will thereafter elect a majority of our directors). GasLog intends to utilize us as its primary growth vehicle to pursue the acquisition of
LNG carriers that are expected to generate long-term, stable cash flows.
Business Opportunities
With the global demand for natural gas increasing and LNGs share of the international natural gas trade expanding within the sector, we believe that this is a favorable time to continue to grow the Partnership through the addition of modern vessels. While LNG trade is cyclical and there is no
guarantee that we will be able to take advantage of opportunities to grow, we believe the following attributes of the LNG industry create an attractive environment in which to expand our business:
Natural gas and LNG are strong and growing components of global energy supply.
Natural gas accounted for 24% of the worlds energy consumption in 2013. Over the last two decades, natural gas has been one of the worlds fastest increasing energy sources, growing at approximately twice the
rate of oil consumption over the same period. We believe LNG, which accounted for 31% of overall cross-border trade of natural gas in 2013, will continue to increase its share at least over the next several years. Because of the cost and environmental advantages of natural gas relative to other
energy sources, together with the increased availability of natural gas supply, we believe that demand for natural gas and LNG in particular will continue to grow in the future.
The demand for LNG shipping is expected to grow.
Disparities in the pricing of natural gas between producing regions with natural gas reserves and consuming regions, such as the Far East, have created arbitrage opportunities for LNG producers and traders. These arbitrage opportunities, the
growing distance between the producing regions and end buyers and the cost advantages of LNG shipping as compared to transporting natural gas by pipeline led to the seaborne trade of natural gas in the form of LNG increasing by 21.3% in 2010 and 11.3% in 2011. Although the seaborne trade
in LNG declined by 1.6% in 2012 and improved marginally by only 0.5% in 2013, we believe that planned capacity increases in liquefaction and regasification terminals will support increasing LNG trade in the future. Including all liquefaction projects that are currently under construction and at
Final Investment Decisions, or FID, or Front End Engineering and Design, or FEED, stages, Clarkson Research
8
Services Limited, or Clarkson Research, estimates that liquefaction capacity will increase by approximately 32% by the end of 2016. For more details about these liquefaction projects and the current global order book and other factors affecting demand for LNG shipping, see The LNG Shipping
Industry.
High barriers to entry should restrict the supply of new LNG carriers.
According to Clarkson Research, the existing order book of LNG carriers represents only 33% of current LNG carrier fleet carrying capacity. Fleet growth was limited in 2012 and 2013 but is expected to accelerate in 2014 and
2015. We believe that significant barriers to entry exist in the LNG shipping sector due to the large capital requirements, the limited availability of financing, the limited availability of qualified ship personnel and the need for a high degree of technical management capabilities. The industry also
serves a demanding customer base that requires the highest quality operating standards. Finally, we believe the limited construction capacity at high-quality shipyards and the long lead-time required for the construction of LNG carriers should also restrict the supply of new LNG carriers in the near-
term.
Stringent customer certification standards favor experienced, high-quality operators.
Energy companies have established increasingly high operational, safety and financial standards that independent owners of LNG carriers generally must meet in order to qualify for employment in their programs.
Through our relationship with GasLog, which has managed LNG carriers for BG Group for over 12 years and had its technical management operations vetted by other major energy companies, we believe that these rigorous and comprehensive certification standards will enhance our ability to
compete for new customers and charters relative to less qualified and less experienced ship operators.
Increasing ownership of the global LNG carrier fleet by independent owners.
According to Clarkson Research, independent owners have increased their share of the global LNG carrier fleet from approximately 24% at the start of July 2004 to approximately 39% at the start of July 2014. Orders by
independent owners represent 60% of the vessels in the current global order book. We believe private and state-owned energy companies will continue to seek high-quality independent owners for their growing LNG shipping requirements in the future, driven in part by large capital requirements
and a recognition of the fact that owning and operating LNG ships are outside of their core areas of expertise.
Competitive Strengths
We believe that our future business prospects are well supported by the following factors:
Significant built-in growth opportunities.
In addition to the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we have the option to purchase from GasLog the 10 additional LNG carriers delivered or expected to be delivered to GasLog between 2013 and 2016 that are or will
be subject to long-term charters. GasLog will also be required to offer to us for purchase at fair market value (as determined pursuant to the omnibus agreement) any other LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or
acquires if they are placed under charters of five full years or more, including the four existing LNG carriers currently on short-term or seasonal contracts and six newbuildings on order that have not yet been chartered. We believe these acquisition opportunities, as well as other future acquisition
opportunities from GasLog or third parties, will facilitate the growth of our distributions per unit.
Enhanced growth opportunities through our relationship with GasLog, an established owner, operator and manager of LNG carriers.
We believe our relationship with GasLog will provide us with many benefits that we believe will drive growth in our distributions per unit. We believe charterers
award new business to established participants in the LNG carriers market because of their demonstrated technical, commercial and managerial expertise. GasLog is an experienced operator with an in-house technical manager, GasLog LNG Services, which provides a highly competent technical and
operational platform to GasLogs owned and
9
managed vessels. We believe that GasLog LNG Services 12-year history of providing management services to BG Group has enabled GasLog to develop a track record and reputation for providing highly competent, safe and reliable operations. We believe this track record and reputation will
continue to enable GasLog to attract additional long-term charters for LNG carriers. Further, we believe GasLogs strong relationships with customers, shipyards and established financing providers, and its large pool of experienced and qualified global seafarers, enhance its operational and financial
efficiency.
Predictable cash flow profile through charter contracts with leading energy companies.
Our initial fleet operates under charters with initial terms that expire in 2018 or 2019, the two vessels to be acquired pursuant to the Pending Vessel Acquisition operate under charters with initial terms that
expire in 2019 and 2020, and the other 10 LNG carriers for which we have options to purchase from GasLog have charter durations ranging from 5.5 to 10 years with BG Group and Shell. The charters on the three vessels in our initial fleet contain hire rate provisions that provide for an automatic
periodic adjustment, which is designed to reflect the actual costs of operating the ship and related expenses, although existing charters on certain of the vessels subject to the purchase options, including the vessels to be acquired pursuant to the Pending Vessel Acquisition, do not have similar
provisions. We believe that such provisions can reduce our potential exposure to foreign exchange rates and operating costs and expenses. By contracting with companies that we consider to be financially strong, such as BG Group and Shell, we believe that we have minimized our counterparty risk.
Our current charters do not provide the charterers with options to purchase our ships during or upon expiration of the charter term.
Newly constructed and high specification LNG carriers.
Following the completion of the Pending Vessel Acquisition, our fleet will continue to be among the youngest of any LNG shipping operator. The 155,000 cbm size of each of our initial fleet vessels and the 145,000 cbm vessels to be acquired
pursuant to the Pending Vessel Acquisition are compatible with most of the existing LNG terminals around the globe. Our initial fleet and six of the 10 additional vessels that we will have the option to purchase from GasLog are, or when delivered will be, high-specification LNG carriers equipped
with modern tri-fuel diesel electric propulsion technology.
Demonstrated access to financing.
On May 12, 2014, we raised $186.0 million of net proceeds through our IPO, of which $35.0 million was retained by the Partnership. In connection with the closing of our IPO, GasLog provided us with a $30.0 million revolving credit facility which we may at any
time utilize for general partnership purposes, including working capital. In addition, we have obtained a commitment from Citibank for the New Credit Facility to refinance the debt facilities related to our fleet, including the vessels to be acquired pursuant to the Pending Vessel Acquisition. We
believe that borrowings available under our existing credit facilities as well as other bank financing facilities and the debt capital markets, and our ability to issue additional partnership units will provide us with financial flexibility to pursue expansion opportunities.
We can provide no assurance, however, that we will be able to utilize our strengths described above. For further discussion of the risks that we face, see Risk Factors.
Business Strategies
Our primary business objective is to grow our business profitably and increase quarterly distributions per unit over time by executing the following strategies:
Pursue strategic and accretive acquisitions of LNG carriers on long-term, fixed-rate charters.
We will seek to leverage our relationship with GasLog to make strategic acquisitions that are accretive to our distributions per unit. Under the omnibus agreement, in addition to the vessels to be acquired
pursuant to the Pending Vessel Acquisition, we have the option to purchase 10 additional LNG carriers, delivered or expected to be delivered to GasLog between 2013 and 2016, each of which has been or will be under long-term charter upon its
10
delivery. Additionally, during the term of the omnibus agreement, we will have the right to purchase from GasLog any newbuilding LNG carrier or existing LNG carrier in the GasLog fleet, in either case with a cargo capacity greater than 75,000 cbm engaged in oceangoing LNG transportation that
enters into a long-term charter agreement of five full years or more.
Capitalize on growing global demand for LNG shipping.
Natural gas is one of the fastest growing primary energy sources globally. Moreover, between 1990 and 2013, the volume of LNG traded increased at a rate 36% higher than natural gas pipeline trade and almost three times the increase in
the rate of consumption of natural gas. Although LNG trade declined in 2012 and only improved marginally in 2013, we believe the global demand for LNG shipping will continue to increase, due to currently planned construction projects that, if they proceed on schedule, are expected to increase
LNG supply. As we acquire additional LNG carriers from GasLog over the next few years, our expanded fleet will help position us financially to meet the growing demand for LNG shipping. We believe our relationship with GasLog and its industry reputation and relationships position us well to
further expand our owned fleet to the extent that such additional capacity is accretive to returns.
Manage our fleet and deepen our customer relationships to provide a stable base of cash flows and superior operating performance.
Through our relationship with GasLog, we intend to maintain and grow our cash flows by focusing on strong customer relationships and actively seeking the extension
and renewal of existing charters in addition to new opportunities to serve our customers. GasLog charters its current fleet to BG Group and Shell. GasLog does not, however, have exclusive agreements in place with either BG Group or Shell that require BG Group or Shell to charter additional
current or future unchartered vessels from GasLog. We believe that GasLog will be able to maintain and develop customer relationships beyond its current customer base in order to support its growth programs and capitalize on attractive opportunities. We believe the close relationships that
GasLog has with these companies will provide attractive opportunities to participate in the expected long-term growth of the LNG trade. We will continue to incorporate safety, health, security and environmental stewardship into all aspects of vessel design and operation in order to satisfy our
customers and comply with national and international rules and regulations.
We can provide no assurance, however, that we will be able to implement our business strategies described above. For further discussion of the risks that we face, see Risk Factors.
Risk Factors
An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. Please read carefully the risks described under Risk Factors beginning on page 24 of this prospectus.
These risks include, among others, the following:
We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units and subordinated units.
We will be required to make substantial capital expenditures to maintain and expand our fleet, which will reduce cash available for distribution.
The Pending Vessel Acquisition and the New Credit Facility may not close as anticipated or they may close with adjusted terms.
Our ability to acquire additional LNG carriers from GasLog or third parties will depend upon our ability to raise additional equity and debt financing to fund all or a portion of the acquisition costs of these vessels and may be dependent on the consent of existing lenders to GasLog.
Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to unitholders.
11
We depend on GasLog Ltd. and certain of its subsidiaries to assist us in operating and expanding our business and competing in our markets.
We will initially derive all of our revenues from a single customer.
Our future performance depends on continued growth in LNG production and an increase in demand for LNG and LNG shipping. According to Clarkson Research, LNG trade declined by 1.6% in 2012 and improved marginally by only 0.5% in 2013. We cannot guarantee that LNG trade will not
decline in the future.
Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of unitholders owning more than 4.9% of our common units.
GasLog and our general partner will own a
% interest in us and will have conflicts of interest and limited fiduciary and contractual duties to us and our common unitholders, which may permit them to favor their own interests to your detriment.
Even if public unitholders are dissatisfied, they cannot initially remove our general partner without GasLogs consent.
Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.
U.S. tax authorities could treat us as a passive foreign investment company under certain circumstances, which would have adverse U.S. federal income tax consequences to U.S. unitholders.
This is not a comprehensive list of risks to which we are subject, and you should carefully consider all the information in this prospectus prior to investing in our common units.
Implications of Being an Emerging Growth Company
We had less than $1.0 billion in revenue during our last fiscal year, we have not issued more than $1.0 billion in non-convertible debt and we are not a large accelerated filer, which means that we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, or the
JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
the ability to present only two years of audited financial statements and only two years of related Managements Discussion and Analysis of Financial Condition and Results of Operations in the registration statement of its initial public offering;
exemption from the auditor attestation requirement in the assessment of the emerging growth companys internal control over financial reporting; and
exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditors report in which the auditor would be required to provide additional information about
the audit and financial statements.
We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company as of the earliest to occur of: (i) the last day of the fiscal
year during which we had $1 billion or more in annual gross revenues; (ii) the date of our issuance, in a three-year period, of more than $1 billion in non-convertible debt; or (iii) the date on which we are deemed to be a large accelerated filer as defined for purposes of the Securities Exchange Act of
1934, or the Exchange Act, which will occur if the market value of our common units held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter. We may choose to take advantage of some, but not all, of these reduced burdens. For as long as we take advantage of
the reduced reporting obligations, the information that we provide unitholders may be different than information provided by other public companies.
12
Organizational and Ownership Structure
At the closing of this offering, we will receive $
from our general partner for
general partner units to allow it to maintain its 2.0% general partner interest in us (or $
for
general partner units if the underwriters exercise in full their option to purchase additional common
units). The sale of general partner units is not part of this offering. The following table and diagram depict our simplified organizational and ownership structure after giving effect to the offering, the sale of general partner units and the Pending Vessel Acquisition, assuming no exercise of the
underwriters option to purchase additional common units:
Number of
Percentage
Public Common Units
(1)
GasLog Ltd. Common Units
(1)
162,358
GasLog Ltd. Subordinated Units
9,822,358
General Partner Units
2.00%
(1)
If the underwriters option is exercised in full, then GasLog would own common units representing a
% ownership interest in us and the public would own common units representing a
% ownership interest in us.
13
Units
Ownership
14
Our Management
In accordance with our partnership agreement, our general partner has delegated to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis. Certain of our directors and officers also currently serve as directors and officers of GasLog or
its affiliates. For more information about these individuals, see ManagementDirectors and Executive Officers.
Pursuant to the administrative services agreement, we will pay a fixed fee to GasLog for the reasonable costs and expenses incurred in connection with providing administrative services to us. For the three vessels in our initial fleet, we expect that we will pay approximately $1.8 million under the
administrative services agreement for the twelve months ending September 30, 2015. For the vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect that we will pay approximately $1.2 million under the administrative services agreement for the twelve months ending September 30,
2015. For a more detailed description of this arrangement, see Certain Relationships and Related Party TransactionsAdministrative Services Agreement.
Our operating subsidiaries are party to commercial management agreements, which were amended in connection with the IPO, pursuant to which we will reimburse GasLog for the reasonable costs and expenses incurred in connection with providing commercial management services to us. For the
three vessels in our initial fleet, we expect that we will pay approximately $1.1 million in total under the amended commercial management agreements for the twelve months ending September 30, 2015. For a more detailed description of this arrangement, see Certain Relationships and Related Party
TransactionsCommercial Management Agreements. The entities being acquired in connection with the Pending Vessel Acquisition are also party to similar commercial management agreements which are being amended in connection with this offering, and we expect that we will pay GasLog
approximately $0.7 million in total under the amended commercial management agreements for the twelve months ending September 30, 2015.
In addition, our operating subsidiaries are party to ship management agreements with GasLog LNG Services, which were amended in connection with the IPO, that govern the crew and technical management of the vessels in our fleet. For the three vessels in our initial fleet, we expect that our
operating subsidiaries will pay GasLog LNG Services approximately $1.7 million in total under the amended ship management agreements for the twelve months ending September 30, 2015. For a more detailed description of this arrangement, see Certain Relationships and Related Party TransactionsShip
Management Agreements. The entities being acquired in connection with the Pending Vessel Acquisition are also party to similar ship management agreements which are being amended in connection with this offering, and we expect that our operating subsidiaries will pay GasLog LNG Services
approximately $1.1 million in total under the amended ship management agreements for the twelve months ending September 30, 2015.
Principal Executive Offices and Internet Address; SEC Filing Requirements
Our registered and principal executive offices are located at Gildo Pastor Center, 7 Rue du Gabian, MC 98000, Monaco, and our phone number is + 377 97 97 51 15. We expect to make our periodic reports and other information filed with or furnished to the United States Securities and Exchange
Commission, or the SEC, available, free of charge, through our website at www.gaslogmlp.com as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. See Where You Can Find More Information for an explanation of our
reporting requirements as a foreign private issuer.
Summary of Conflicts of Interest and Fiduciary Duties
Our general partner and our directors have a legal duty to manage us in a manner beneficial to our unitholders, subject to the limitations described under Conflicts of Interest and Fiduciary Duties. This legal duty is commonly referred to as a fiduciary duty. Our directors also have fiduciary
duties to manage us in a manner beneficial to us, our general partner and our limited
15
partners. Our executive officers are employed by GasLog or its applicable affiliate and have fiduciary duties to that entity and not to us. As a result of these relationships, conflicts of interest may arise between us and our unaffiliated limited partners on the one hand, and GasLog and its affiliates,
including our general partner, on the other hand. The resolution of these conflicts may not be in the best interest of us or our unitholders. In particular:
certain of our directors and officers also serve as directors and officers of GasLog or its affiliates and as such have fiduciary duties to GasLog or its affiliates that may cause them to pursue business strategies that disproportionately benefit GasLog or its affiliates or which otherwise are not in the
best interests of us or our unitholders;
our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, which entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligations to give
any consideration to any interest of or factors affecting us, our affiliates or any unitholder; when acting in its individual capacity, our general partner may act without any fiduciary obligation to us or our unitholders whatsoever;
GasLog and its affiliates may compete with us, subject to the restrictions contained in the omnibus agreement, and could own and operate LNG carriers under charters of five full years or more that may compete with our vessels if the Partnership does not exercise its rights to acquire such vessels;
any agreement between us, on the one hand, and our general partner and its affiliates, on the other, will not grant to our unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in our favor;
borrowings by us and our affiliates do not constitute a breach of any duty owed by our general partner or our directors to our unitholders, including borrowings that have the purpose or effect of: (i) enabling our general partner or its affiliates to receive distributions on any subordinated units held
by them or our incentive distribution rights or (ii) hastening the expiration of the subordination period;
GasLog, as the holder of our incentive distribution rights, has the right to reset the minimum quarterly distribution and the cash target distribution levels upon which the incentive distributions payable to GasLog are based without the approval of our unitholders or the conflicts committee of our
board of directors at any time when there are not subordinated units outstanding and we have made cash distributions to the holders of our incentive distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters; in connection with such resetting
and the corresponding relinquishment by GasLog of incentive distribution payments based on the cash target distribution levels prior to the reset, GasLog will be entitled to receive a number of newly issued common units and general partner units based on a predetermined formula described under
Our Cash Distribution Policy and Restrictions on DistributionsGasLogs Right to Reset Incentive Distribution Levels; and
we have entered into agreements, and may enter into additional agreements, with GasLog and certain of its subsidiaries, relating to the purchase of additional vessels, the provision of certain services to us by GasLog, GasLog LNG Services and their affiliates and other matters. In the performance
of their obligations under these agreements, GasLog and its subsidiaries, other than our general partner, are not held to a fiduciary duty standard of care to us, our general partner or our limited partners, but rather to the standard of care specified in these agreements.
For a more detailed description of our management structure, see ManagementDirectors and Executive Officers and Certain Relationships and Related Party Transactions.
Our general partner, which is wholly owned by GasLog, has the right to appoint three of five, or a majority of our directors. Our board of directors has a conflicts committee composed of directors who meet both New York Stock Exchange, or NYSE, and SEC independence
16
requirements and are not any of the following: (a) officers or employees of our general partner, (b) officers, directors or employees of any affiliate of our general partner (other than the Partnership and its subsidiaries) or (c) holders of any ownership interest in the general partner, its affiliates or the
Partnership and its subsidiaries (other than (x) common units or (y) awards granted pursuant to any long-term incentive plan, equity compensation plan or similar plan of the Partnership or its subsidiaries). Our board of directors may, but is not obligated to, seek approval of the conflicts committee for
resolutions of conflicts of interest that may arise as a result of the relationships between GasLog and its affiliates, on the one hand, and us and our unaffiliated limited partners, on the other. There can be no assurance that a conflict of interest will be resolved in favor of the Partnership.
Our partnership agreement contains provisions that reduce the standards to which our general partner and our directors would otherwise be held under Marshall Islands law. For example, our partnership agreement limits the liability and reduces the fiduciary duties of our general partner and our
directors to our unitholders. Our partnership agreement also restricts the remedies available to our unitholders. By purchasing a common unit, you are treated as having agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner, its affiliates or our
directors, all as set forth in our partnership agreement. See Conflicts of Interest and Fiduciary Duties for a description of the fiduciary duties that would otherwise be imposed on our general partner, its affiliates and our directors under Marshall Islands law, the material modifications of those duties
contained in our partnership agreement and certain legal rights and remedies available to our unitholders under Marshall Islands law.
For a more detailed description of the conflicts of interest and fiduciary duties of our general partner and its affiliates, see Conflicts of Interest and Fiduciary Duties. For a description of our other relationships with our affiliates, see Certain Relationships and Related Party Transactions.
17
The Offering
Common units offered to the
public
common units if the underwriters exercise in full their option to purchase additional common units.
Common units and subordinated
units outstanding after this
offering
common units and 9,822,358 subordinated units, representing a
% and
% interest in us, respectively, if the underwriters exercise in full their option to purchase additional common units.
General partner units
At the closing of this offering, we will receive $
from our general partner for
general partner units to allow it to maintain its 2.0% general partner interest in us (or $
for
general partner units if the underwriters exercise in full their option
to purchase additional common units). The sale of general partner units is not part of this offering.
Use of proceeds
We intend to use the net proceeds from this offering and the sale of general partner units (approximately $
million, or $
if the underwriters exercise in full their option to purchase additional common units, in each case after deducting underwriting
discounts and commissions and estimated offering expenses payable by us) to partially finance the Pending Vessel Acquisition and to prepay or refinance related indebtedness. In the event that the Pending Vessel Acquisition is not consummated, the net proceeds from
this offering will be used for general partnership purposes.
U.S. federal income tax
considerations
18
common units.
common units and 9,822,358 subordinated units, representing a
% and
% interest in us, respectively.
Although we are organized as a partnership, we have elected to be treated as a corporation solely for U.S. federal income tax purposes. Consequently, all or a portion of the distributions you receive from us will constitute dividends for such purposes. The remaining
portion of such distributions will be treated first as a non-taxable return of capital to the extent of your tax basis in your common units and, thereafter, as capital gain. We estimate that if you hold the common units that you purchase in this offering through the
period ending December 31, 2017, the distributions you receive, on a cumulative basis, will constitute dividends for U.S. federal income tax purposes will be approximately 60% of the total cash distributions you receive during that period. Please see Material U.S.
Federal Income Tax ConsiderationsU.S. Federal Income Taxation of U.S. HoldersRatio of Dividend Income to Distributions for the basis of this estimate. Please also see Risk FactorsTax Risks for a discussion relating to the taxation of dividends. For a discussion
of other material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, see Material U.S. Federal Income Tax Considerations.
Non-U.S. tax considerations
We have been organized under the laws of the Republic of the Marshall Islands. Our vessel-owning subsidiaries have been organized under the laws of Bermuda and we, GasLog LNG Services and our general partner are expected to be treated as managed and
controlled in Monaco. For a discussion of material Marshall Islands income tax considerations that may be relevant to prospective unitholders and for a discussion of the risk that unitholders may assume and for the activities we undertake in various jurisdictions for
taxation purposes, see Non-United States Tax Considerations and Risk FactorsTax Risks.
Exchange listing
Our common units are listed on the New York Stock Exchange under the symbol GLOP.
Conflicts of Interest
An affiliate of Citigroup Global Markets Inc. is a lender under the Citibank Facility and, accordingly, will receive a portion of the net proceeds of this offering. Because an affiliate of Citigroup Global Markets Inc. will receive more than 5% of the net proceeds in this
offering, it will be deemed to have a conflict of interest under Rule 5121(f)(5) of the Financial Industry Regulatory Authority, Inc., or FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Rule 5121 requires that
a qualified independent underwriter, or QIU, participate in the preparation of this prospectus and exercise the usual standards of due diligence with respect thereto.
has agreed to act as qualified independent underwriter for this offering and to undertake the
legal responsibilities and liabilities of an underwriter under the Securities Act of 1933, as amended, or the Securities Act, specifically including those inherent in Section 11 of the Securities Act.
will not receive any additional fees for serving as qualified
independent underwriter in connection with this offering. We have agreed, subject to certain terms and conditions, to indemnify
against certain liabilities incurred in connection with it acting as QIU in this offering, including liabilities under the Securities Act.
See Use of Proceeds and Underwriting (Conflicts of Interest).
19
Summary Financial and Operating Data
The following table presents, in each case for the periods and as of the dates indicated, summary historical financial and operating data. Our historical combined and consolidated financial statements were prepared on the basis that the acquisition of our initial fleet constituted a reorganization of
companies under common control. The summary historical financial data as of and for the years ended December 31, 2012 and 2013 has been derived from the audited combined and consolidated financial statements of GasLog Partners LP, and the summary historical financial data as of June 30, 2014 and
for the six month periods ended June 30, 2013 and 2014 has been derived from the interim unaudited condensed combined and consolidated financial statements of GasLog Partners LP. The financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS,
as issued by the International Accounting Standards Board, or the IASB, which are included elsewhere in this prospectus.
The Pending Vessel Acquisition will be accounted for as a reorganization of companies under common control. Beginning with the first quarter following the completion of the Pending Vessel Acquisition, the Partnerships historical results will be retroactively restated to reflect the historical results of
the
Methane Rita Andrea
and
Methane Jane Elizabeth
during the periods they were owned by GasLog.
The following financial data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, the historical combined and consolidated financial statements of GasLog Partners LP, the interim unaudited condensed combined and
consolidated financial statements, and the notes thereto included elsewhere in this prospectus.
The results of operations reflect operations of the
GasLog Shanghai,
the
GasLog Santiago
and the
GasLog Sydne
y, which commenced operations under their respective charters from January 2013, March 2013 and May 2013, respectively.
Our results of operations, cash flows and financial conditions could differ from those that would have resulted if we operated autonomously or as an entity independent of GasLog in the periods prior to our IPO for which historical financial data is presented below, and such data may not be
indicative of our future operating results or financial performance.
20
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Statement of Profit or Loss:
Revenues
$
$
64,143
$
21,735
$
41,717
Vessel operating costs
(13,097
)
(4,983
)
(7,946
)
Depreciation
(12,238
)
(4,129
)
(7,967
)
General and administrative expenses
(30
)
(1,525
)
(661
)
(1,707
)
(Loss)/profit from operations
(30
)
37,283
11,962
24,097
Financial costs
(1
)
(12,133
)
(4,117
)
(10,229
)
Financial income
110
32
16
9
(Loss)/gain on interest rate swaps
(940
)
1,036
2,747
(3,616
)
Total other expense
(831
)
(11,065
)
(1,354
)
(13,836
)
(Loss)/profit for the year/period
$
(861
)
$
26,218
$
10,608
$
10,261
Earnings per unit for the period May 12, 2014 to June 30, 2014, Basic and Diluted:
(1)
Common unit
0.21
Subordinated unit
0.18
General partner unit
0.19
As of December 31,
As of June 30,
2012
2013
2014
(dollars in thousands)
Statement of Financial Position Data:
Cash and cash equivalents
$
2
$
14,404
$
52,570
Vessels
(2)
562,531
554,732
Vessels under construction
118,482
Total assets
128,765
581,770
613,762
Loanscurrent portion
22,075
17,697
Loansnon-current portion
363,917
278,917
Total equity
106,629
156,169
288,336
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Cash Flow Data:
Net cash (used in)/from operating activities
$
(110
)
$
32,159
$
15,545
$
12,779
Net cash from/(used in) investing activities
110
(454,263
)
(452,780
)
(1,491
)
Net cash from financing activities
436,506
448,754
26,878
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
Fleet Data:
Number of LNG carriers at end of period
3
3
3
Average number of LNG carriers during period
2.3
1.6
3
Average age of LNG carriers (years)
0.76
0.26
1.26
Total calendar days for fleet
833
282
543
Total operating days for fleet
(3)
833
282
543
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Other Financial Data:
EBITDA
(4)
$
(30
)
$
49,521
$
16,091
$
32,064
Adjusted EBITDA
(4)
(42
)
49,559
16,105
32,133
Capital expenditures:
Payment for vessels under construction
452,792
452,792
21
(1)
As disclosed in Note 1 to our audited combined and consolidated financial statements, the general partner interest, the common units and the subordinated units were issued to GasLog in exchange for the shares in GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd., which owned the three LNG
vessels in our initial fleet, and to the other common unitholders in connection with the IPO on May 12, 2014. Earnings per unit is presented for the period in which the units were outstanding.
(2)
Represents vessels in our initial fleet less accumulated depreciation. See Note 3 to our audited combined and consolidated financial statements and Note 4 to our interim unaudited condensed combined and consolidated financial statements included elsewhere in this prospectus.
(3)
The operating days for our fleet is the total number of days in a given period that the vessels were in our possession less the total number of days off-hire. We define days off-hire as days lost to, among other things, operational deficiencies, drydocking for repairs, maintenance or inspection, equipment
breakdowns, special surveys and vessel upgrades, delays due to accidents, crew strikes, certain vessel detentions or similar problems, our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, or periods of commercial waiting time
during which we do not earn charter hire.
(4)
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA.
We define EBITDA as earnings before interest income and expense, gain/loss on interest rate swaps, depreciation and amortization and taxes. Adjusted EBITDA is defined as EBITDA before foreign exchange gains/(losses). EBITDA is used as a supplemental
financial measure by management and external users of financial statements, such as our lenders, to assess our operating performance and ability to generate cash for debt service and capital expenditures, as well as our compliance with the financial covenants and restrictions contained in our financing
agreements. Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our operating performance and ability to generate cash for debt service and capital expenditures. We believe that adjusted EBITDA assists
our management and investors by increasing the comparability of our performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on interest rate swaps, foreign exchange gains/(losses), depreciation and
amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods. We believe that including adjusted EBITDA as an operating measure benefits
investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing operational strength and cash generating ability in assessing whether to continue to hold common units.
EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered alternatives to profit/(loss), profit/(loss) from operations, cash flow (used in)/from operating activities or any other measure of operating performance or liquidity presented in accordance with IFRS. Some
of these limitations include the fact that they do not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, (ii) changes in, or cash requirements for our working capital needs and (iii) the significant interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such
replacements. They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows and other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure.
EBITDA and adjusted EBITDA exclude some, but not all, items that affect profit/(loss) and net cash from operating activities, and these measures may vary among other companies. Therefore,
22
EBITDA and adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies. The following tables reconcile EBITDA and adjusted EBITDA to profit/(loss) and net cash from operating activities, the most directly comparable IFRS financial measures, for
the periods presented:
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Reconciliation to profit/(loss):
(Loss)/profit
$
(861
)
$
26,218
$
10,608
$
10,261
Financial income
(110
)
(32
)
(15
)
(9
)
Financial costs
1
12,133
4,116
10,229
Loss/(gain) on interest rate swaps
940
(1,036
)
(2,747
)
3,616
Depreciation
12,238
4,129
7,967
EBITDA
$
(30
)
$
49,521
$
16,091
$
32,064
Foreign exchange (gains)/losses
(12
)
38
14
69
Adjusted EBITDA
$
(42
)
49,559
$
16,105
$
32,133
Year Ended December 31,
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Reconciliation to net cash from operating activities:
Net cash (used in)/from operating activities
$
(110
)
$
32,159
$
15,545
$
14,793
Net increase in operating assets
960
1,543
1,780
791
Net increase in operating liabilities
(408
)
(8,324
)
(1,953
)
(1,444
)
Net change in related parties
(472
)
13,646
(1,852
)
10,280
Interest paid
9,223
2,237
6,418
Non-cash contributed services
(627
)
(421
)
Realized loss on interest rate swaps
1,901
755
1,226
EBITDA
$
(30
)
$
49,521
$
16,091
$
32,064
Foreign exchange (gains)/losses
(12
)
38
14
69
Adjusted EBITDA
$
(42
)
$
49,559
$
16,105
$
32,133
23
Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors together
with all of the other information included in this prospectus in evaluating an investment in our common units.
If any of the following risks were actually to occur, our business, financial condition, results of operations and ability to make cash distributions to our unitholders could be materially adversely affected. In that case, we might not be able to make distributions on our common units, the trading price of our
common units could decline and you could lose all or part of your investment.
Risks Inherent in Our Business
We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay the minimum quarterly distribution on our common units, subordinated units and general partner units.
We may not have sufficient cash from operations to pay the minimum quarterly distribution of $0.375 per unit on our common units, subordinated units and general partner units. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our
operations, which may fluctuate from quarter to quarter based on the risks described in this section, including, among other things:
the rates we obtain from our charters;
the continued availability of natural gas production, liquefaction and regasification facilities;
the price and demand for natural gas;
the level of our operating costs, such as the cost of crews, vessel maintenance and insurance;
the number of off-hire days for our fleet and the timing of, and number of days required for, drydocking of vessels;
the supply of LNG carriers;
prevailing global and regional economic and political conditions;
changes in local income tax rates;
currency exchange rate fluctuations; and
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business.
In addition, the actual amount of cash available for distribution will depend on other factors, including:
the level of capital expenditures we make, including for maintaining or replacing vessels and complying with regulations;
our debt service requirements, including fluctuations in interest rates, and restrictions on distributions contained in our debt instruments;
the level of debt we will incur to fund future acquisitions, including if we exercise our options to purchase any additional vessels from GasLog;
fluctuations in our working capital needs;
our ability to make, and the level of, working capital borrowings; and
the amount of any cash reserves, including reserves for future maintenance and replacement capital expenditures, working capital and other matters, established by our board of directors, which cash reserves are not subject to any specified maximum dollar amount.
The amount of cash we generate from our operations may differ materially from our profit or loss for a specified period, which will be affected by non-cash items. As a result of this and the
24
other factors mentioned above, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.
Our ability to grow and to meet our financial needs may be adversely affected by our cash distribution policy.
Our cash distribution policy, which is consistent with our partnership agreement, requires us to distribute all of our available cash (as defined in our partnership agreement) each quarter. Accordingly, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing
operations.
In determining the amount of cash available for distribution, our board of directors approves the amount of cash reserves to set aside, including reserves for future maintenance and replacement capital expenditures, working capital and other matters. We also rely upon external financing sources,
including commercial borrowings, to fund our capital expenditures. Accordingly, to the extent we do not have sufficient cash reserves or are unable to obtain financing, our cash distribution policy may significantly impair our ability to meet our financial needs or to grow.
We must make substantial capital expenditures to maintain and expand our fleet, which will reduce cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash
available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
We must make substantial capital expenditures to maintain and replace, over the long-term, the operating capacity of our fleet. We estimate that maintenance and replacement capital expenditures will average approximately $23.37 million per year, including potential costs related to replacing current
vessels and the vessels to be acquired pursuant to the Pending Vessel Acquisition, at the end of their useful lives. Maintenance and replacement capital expenditures include capital expenditures associated with (i) the removal of a vessel from the water for inspection, maintenance and/or repair of
submerged parts (or drydocking) and (ii) modifying an existing vessel or acquiring a new vessel, to the extent these expenditures are incurred to maintain or replace the operating capacity of our fleet. These expenditures could vary significantly from quarter to quarter and could increase as a result of
changes in:
the cost of labor and materials;
customer requirements;
the size of our fleet;
the cost of replacement vessels;
length of charters;
governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment;
competitive standards; and
the age of our ships.
Our partnership agreement requires our board of directors to deduct estimated, rather than actual, maintenance and replacement capital expenditures from operating surplus each quarter in an effort to reduce fluctuations in operating surplus (as defined in our partnership agreement). The amount of
estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by our conflicts committee at least once a year. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and replacement
capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted from operating surplus. If our board of directors underestimates the appropriate level of estimated maintenance and replacement
capital expenditures, we may have less cash available for distribution in future periods when actual capital expenditures exceed our previous estimates.
25
If capital expenditures are financed through cash from operations or by issuing debt or equity securities, our ability to make cash distributions may be diminished, our financial leverage could increase or our unitholders may be diluted.
Use of cash from operations to expand or maintain our fleet will reduce cash available for distribution to unitholders. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering, as
well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for future capital expenditures could have a material adverse effect on our business, financial condition,
results of operations and ability to make cash distributions to our unitholders. Even if we are successful in obtaining necessary funds, the terms of such financings could limit our ability to pay cash distributions to unitholders. In addition, incurring additional debt may significantly increase our interest
expense and financial leverage, and issuing additional equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain our current level of quarterly distributions to unitholders, both of which could have a material adverse effect on our
ability to make cash distributions.
Any limitation in the availability or operation of our ships could have a material adverse effect on our business, financial condition, results of operations and cash flows, which effect would be amplified by the small size of our initial fleet.
Our initial fleet consists of three LNG carriers that are in operation. If any of our ships is unable to generate revenues for any significant period of time for any reason, including unexpected periods of off-hire or early charter termination (which could result from damage to our ships), our business,
financial condition, results of operations and cash flows, including cash available for distribution to unitholders, could be materially and adversely affected. The impact of any limitation in the operation of our ships or any early charter termination would be amplified during the period prior to acquisition
of additional vessels from GasLog, as a substantial portion of our cash flows and income are dependent on the revenues earned by the chartering of our three LNG carriers in operation. In addition, the costs of ship repairs are unpredictable and can be substantial. In the event of repair costs that are not
covered by our insurance policies, we may have to pay for such repair costs, which would decrease our earnings and cash flows.
Any charter termination could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our charterers have the right to terminate a ships time charter in certain circumstances, such as:
loss of the ship or damage to it beyond repair;
if the ship is off-hire for any reason other than scheduled drydocking for a period exceeding 90 consecutive days, or for more than 90 days in any one-year period;
defaults by us in our obligations under the charter; or
the outbreak of war or hostilities involving two or more major nations, such as the United States or the Peoples Republic of China, that would materially and adversely affect the trading of the ship for a period of at least 30 days.
A termination right under one ships time charter would not automatically give the charterer the right to terminate its other charter contracts with us. However, a charter termination could materially affect our relationship with the customer and our reputation in the LNG shipping industry, and in
some circumstances the event giving rise to the termination right could potentially impact multiple charters. Accordingly, the existence of any right of termination could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for
distribution to unitholders.
26
If we lose a charter, we may be unable to obtain a new time charter on terms as favorable to us or with a charterer of comparable standing, particularly if we are seeking new time charters at a time when charter rates in the LNG industry are depressed. Consequently, we may have an increased
exposure to the volatile spot market, which is highly competitive and subject to significant price fluctuations. In the event that we are unable to re-deploy a ship for which a charter has been terminated, we will not receive any revenues from that ship, and we may be required to pay expenses necessary to
maintain the ship in proper operating condition.
Due to our lack of diversification, adverse developments in the LNG transportation industry could adversely affect our business, particularly if such developments occur at a time when we are seeking a new charter.
Due to our lack of diversification, an adverse development in the LNG transportation industry could have a significantly greater impact on our business, particularly if such developments occur at a time when our ships are not under charter or nearing the end of their charters, than if we maintained
more diverse assets or lines of businesses.
We will initially derive all of our revenues from a single customer and will depend on two customers for nearly all of our revenues after our expected acquisition of additional vessels from GasLog. The loss of either of these customers would result in a significant loss of revenues and could have a
material adverse effect on our business, financial condition, results of operations and cash flows.
We currently derive all of our revenues from one customer, BG Group. Following the completion of the Pending Vessel Acquisition and the expected acquisition of additional vessels from GasLog, BG Group will continue to be a key customer, as at least ten of the vessels which we have options to
acquire from GasLog will be chartered to a subsidiary of BG Group. In addition, two of the vessels that we will have options to acquire from GasLog have been or will be chartered to a subsidiary of Shell. We could lose a customer or the benefits of our time charter arrangements for many different
reasons including if the customer is unable or unwilling to make charter hire or other payments to us because of a deterioration in its financial condition, disagreements with us or otherwise. If any of these customers terminates its charters, chooses not to re-charter our ships after the initial charter terms
or is unable to perform under its charters and we are not able to find replacement charters, we will suffer a loss of revenues that could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
Our future performance depends on continued growth in LNG production and demand for LNG and LNG shipping.
Our future performance, including our ability to profitably expand our fleet will depend on continued growth in LNG production and the demand for LNG and LNG shipping. A complete LNG project includes production, liquefaction, storage, regasification and distribution facilities, in addition to the
marine transportation of LNG. Increased infrastructure investment has led to an expansion of LNG production capacity in recent years, but material delays in the construction of new liquefaction facilities could constrain the amount of LNG available for shipping, reducing ship utilization. The rate of
growth of the LNG industry has fluctuated due to several factors, including the global economic crisis and continued economic uncertainty, fluctuations in the price of natural gas and other sources of energy, the continued acceleration in natural gas production from unconventional sources in regions such
as North America and the highly complex and capital intensive nature of new or expanded LNG projects, including liquefaction projects. Continued growth in LNG production and demand for LNG and LNG shipping could be negatively affected by a number of factors, including:
27
increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;
increases in the cost of natural gas derived from LNG relative to the cost of natural gas generally;
increases in the production levels of low-cost natural gas in domestic natural gas consuming markets, which could further depress prices for natural gas in those markets and make LNG uneconomical;
increases in the production of natural gas in areas linked by pipelines to consuming areas, the extension of existing, or the development of new pipeline systems in markets we may serve, or the conversion of existing non-natural gas pipelines to natural gas pipelines in those markets;
decreases in the consumption of natural gas due to increases in its price, decreases in the price of alternative energy sources or other factors making consumption of natural gas less attractive;
any significant explosion, spill or other incident involving an LNG facility or carrier;
infrastructure constraints such as delays in the construction of liquefaction facilities, the inability of project owners or operators to obtain governmental approvals to construct or operate LNG facilities, as well as community or political action group resistance to new LNG infrastructure due to
concerns about the environment, safety and terrorism;
labor or political unrest or military conflicts affecting existing or proposed areas of LNG production or regasification;
decreases in the price of LNG, which might decrease the expected returns relating to investments in LNG projects;
new taxes or regulations affecting LNG production or liquefaction that make LNG production less attractive; or
negative global or regional economic or political conditions, particularly in LNG consuming regions, which could reduce energy consumption or its growth.
Reduced demand for LNG or LNG shipping, or any reduction or limitation in LNG production capacity, could have a material adverse effect on our ability to secure future time charters upon expiration or early termination of our current charter arrangements, for any ships for which we have not yet
secured charters, or for any new ships we acquire beyond our contracted newbuildings, which could harm our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
Demand for LNG shipping could be significantly affected by volatile natural gas prices and the overall demand for natural gas.
Natural gas prices are volatile and are affected by numerous factors beyond our control, including but not limited to the following:
worldwide demand for natural gas;
the cost of exploration, development, production, transportation and distribution of natural gas;
expectations regarding future energy prices for both natural gas and other sources of energy;
the level of worldwide LNG production and exports;
government laws and regulations, including but not limited to environmental protection laws and regulations;
local and international political, economic and weather conditions;
political and military conflicts; and
the availability and cost of alternative energy sources, including alternate sources of natural gas in gas importing and consuming countries.
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Natural gas prices have historically varied substantially between regions. This price disparity between producing and consuming regions supports demand for LNG shipping and any convergence of natural gas prices would adversely affect demand for LNG shipping.
Fluctuations in overall LNG demand growth could adversely affect our ability to secure future time charters.
Over the past three years, global LNG demand has continued to rise, but at a slower pace than previously predicted. Clarkson Research estimates that LNG trade decreased by 1.6% in 2012 primarily due to lower production as a result of planned and unplanned outages at various liquefaction sites
and the weakness in the world economy. According to Clarkson Research, LNG trade improved marginally by only 0.5% in 2013. Continued economic uncertainty and the continued acceleration of unconventional natural gas production could have an adverse effect on our ability to secure future term
charters.
The Pending Vessel Acquisition and the New Credit Facility may not close as anticipated or they may close with adjusted terms.
We plan to use the net proceeds of this offering to fund a portion of the purchase price of the Pending Vessel Acquisition. This offering is not conditioned on the closing of the Pending Vessel Acquisition. We cannot assure you that the Pending Vessel Acquisition will close on our expected
timeframe, or at all, or close without adjustment of material terms. If we cannot complete the purchase of any of the ships for any reason, we will have the discretion to apply the proceeds of this offering for general corporate purposes, including the acquisition of other ships. We will not escrow the net
proceeds from this offering and will not return the net proceeds of this offering if we do not complete the Pending Vessel Acquisition. Any delay in the expected timeframe, adjustment of the material terms or alternative use of proceeds may not generate as much cash flow as currently expected to be
derived from the Pending Vessel Acquisition.
On August 5, 2014, we entered into a commitment letter and a coordination letter with Citibank for the New Credit Facility to refinance the existing debt facilities for our initial fleet, as well as the debt facilities for the vessels to be acquired pursuant to the Pending Vessel Acquisition. We expect
that the New Credit Facility will have financial and restrictive covenants that are consistent with our existing debt. The closing of the New Credit Facility is subject to conditions precedent, including the negotiation and execution of final documentation and final lender approvals. We expect the New
Credit Facility to be entered into and funded at or shortly following the closing of the Pending Vessel Acquisition. The Pending Vessel Acquisition is not conditioned on the closing of the New Credit Facility. We cannot assure you that the New Credit Facility will close on our expected timeframe, or at
all, or close without adjustment of material terms. If we cannot close the New Credit Facility, our existing credit facilities and the Citibank Facility will remain in place.
We may have difficulty further expanding our fleet in the future.
We may expand our fleet beyond the vessels we may acquire from GasLog by ordering additional newbuildings or by making selective acquisitions of high-quality secondhand ships to the extent that they are available. Our future growth will depend on numerous factors, some of which are beyond
our control, including our ability to:
obtain consents from lenders and charterers with respect to the vessels that we may acquire from GasLog;
identify attractive ship acquisition opportunities and consummate such acquisitions;
obtain newbuilding contracts at acceptable prices;
obtain required equity and debt financing on acceptable terms;
secure charter arrangements on terms acceptable to our lenders;
expand our relationships with existing customers and establish new customer relationships;
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recruit and retain additional suitably qualified and experienced seafarers and shore-based employees through GasLog pursuant to the services agreements we will enter into with GasLog;
continue to meet technical and safety performance standards;
manage joint ventures; and
manage the expansion of our operations to integrate the new ships into our fleet.
During periods in which charter rates are high, ship values are generally high as well, and it may be difficult to consummate ship acquisitions or enter into shipbuilding contracts at favorable prices. In addition, any ship acquisition we complete may not be profitable at or after the time of acquisition
and may not generate cash flows sufficient to justify the investment. We may not be successful in executing any future growth plans, and we cannot give any assurances that we will not incur significant expenses and losses in connection with such growth efforts.
We may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or a financing agreement.
Under the omnibus agreement, we will have certain options and other rights to acquire vessels with existing charters from GasLog. The omnibus agreement provides that our ability to consummate the acquisition of any such vessels from GasLog will be subject to obtaining any consents of
governmental authorities and other non-affiliated third parties and to all agreements existing with respect to such vessel. In particular, with respect to GasLogs existing vessels, we would need the consent of the existing charterers and lenders. While GasLog will be obligated to use reasonable efforts to
obtain any such consents, we cannot assure you that in any particular case the necessary consent will be obtained from the governmental entity, charterer, lender or other entity.
Our future growth depends on our ability to expand relationships with existing customers, establish relationships with new customers and obtain new time charter contracts, for which we will face substantial competition from established companies with significant resources and potential new entrants.
One of our principal objectives is to enter into additional long-term, fixed-rate charters. The process of obtaining charters for LNG carriers is highly competitive and generally involves an intensive screening procedure and competitive bids, which often extends for several months. We believe LNG
carrier time charters are awarded based upon a variety of factors relating to the ship and the ship operator, including:
size, age, technical specifications and condition of the ship;
efficiency of ship operation;
LNG shipping experience and quality of ship operations;
shipping industry relationships and reputation for customer service;
technical ability and reputation for operation of highly specialized ships;
quality and experience of officers and crew;
safety record;
the ability to finance ships at competitive rates and financial stability generally;
relationships with shipyards and the ability to get suitable berths;
construction management experience, including the ability to obtain on-time delivery of new ships according to customer specifications; and
competitiveness of the bid in terms of overall price.
We expect substantial competition for providing marine transportation services for potential LNG projects from a number of experienced companies, including other independent ship owners as well as state-sponsored entities and major energy companies that own and operate LNG carriers and
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may compete with independent owners by using their fleets to carry LNG for third parties. Some of these competitors have significantly greater financial resources and larger fleets than do we or GasLog. A number of marine transportation companiesincluding companies with strong reputations and
extensive resources and experiencehave entered the LNG transportation market in recent years, and there are other ship owners and managers who may also attempt to participate in the LNG market in the future. This increased competition may cause greater price competition for time charters. As a
result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for
distribution to unitholders.
Hire rates for LNG carriers may fluctuate substantially. If rates are lower when we are seeking a new charter, our revenues and cash flows may decline.
Our ability from time to time to charter or re-charter any ship at attractive rates will depend on, among other things, the prevailing economic conditions in the LNG industry. Hire rates for LNG carriers may fluctuate over time as a result of changes in the supply-demand balance relating to current
and future ship capacity. This supply-demand relationship largely depends on a number of factors outside our control. The LNG charter market is connected to world natural gas prices and energy markets, which we cannot predict. A substantial or extended decline in demand for natural gas or LNG
could adversely affect our ability to charter or re-charter our ships at acceptable rates or to acquire and profitably operate new ships. Hire rates for newbuildings are correlated with the price of newbuildings. Hire rates at a time when we may be seeking new charters may be lower than the hire rates at
which our ships are currently chartered. If hire rates are lower when we are seeking a new charter, our revenues and cash flows, including cash available for distribution to unitholders, may decline, as we may only be able to enter into new charters at reduced or unprofitable rates or may not be able to
re-charter our ship, or we may have to secure a charter in the spot market, where hire rates are more volatile. Prolonged periods of low charter hire rates or low ship utilization could also have a material adverse effect on the value of our assets.
Ship values may fluctuate substantially, which could impact our compliance with the covenants in our loan agreements and, if the values are lower at a time when we are attempting to dispose of ships, could cause us to incur a loss.
Values for ships can fluctuate substantially over time due to a number of different factors, including:
prevailing economic conditions in the natural gas and energy markets;
a substantial or extended decline in demand for LNG;
the level of worldwide LNG production and exports;
changes in the supply-demand balance of the global LNG carrier fleet;
changes in prevailing charter hire rates;
the physical condition of the ship;
the size, age and technical specifications of the ship;
demand for LNG carriers; and
the cost of retrofitting or modifying existing ships, as a result of technological advances in ship design or equipment, changes in applicable environmental or other regulations or standards, customer requirements or otherwise.
If the market value of our ships declines, we may breach some of the covenants contained in our credit facilities. If we do breach such covenants and we are unable to remedy the relevant breach, our lenders could accelerate our indebtedness and seek to foreclose on the ships in our fleet securing
those credit facilities. In addition, if a charter contract expires or is terminated by the customer, we may be unable to re-deploy the affected ships at attractive rates and, rather than
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continue to incur costs to maintain and finance them, we may seek to dispose of them. Any foreclosure on our ships, or any disposal by us of a ship at a time when ship prices have fallen, could result in a loss and could materially and adversely affect our business, financial condition, results of operations
and cash flows, including cash available for distribution to unitholders.
Our ability to obtain additional debt financing for future acquisitions of ships or to refinance our existing debt may depend on the creditworthiness of our charterers and the terms of our future charters.
Our ability to borrow against the ships in our existing fleet and any ships we may acquire in the future largely depends on the value of the ships, which in turn depends in part on charter hire rates and the ability of our charterers to comply with the terms of their charters. The actual or perceived
credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional ships and to refinance our existing debt as balloon payments come due, or may significantly increase our costs of obtaining such
capital. Our inability to obtain additional financing or committing to financing on unattractive terms could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distributions to our unitholders.
Our future capital needs are uncertain and we may need to raise additional funds in the future.
We believe that our existing cash and cash equivalents, including the funds raised in this offering, will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, we may need to raise additional capital to maintain, replace and expand the operating capacity of
our fleet and fund our operations. Among other things, we hold options to acquire 12 LNG carriers from GasLog (including the vessels to be acquired pursuant to the Pending Vessel Acquisition) and we do not currently have financing sources in place to fund the acquisition of vessels other than those to
be acquired pursuant to the Pending Vessel Acquisition. Our future funding requirements will depend on many factors, including the cost and timing of vessel acquisitions, and the cost of retrofitting or modifying existing ships as a result of technological advances in ship design or equipment, changes in
applicable environmental or other regulations or standards, customer requirements or otherwise.
We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our unitholders may experience dilution or reduced distributions per unit. Debt financing, if available, may involve covenants
restricting our operations or our ability to incur additional debt or pay distributions. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our unitholders. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or
delay, reduce the scope of or eliminate some or all of our fleet expansion plans. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distributions to our unitholders.
Fluctuations in exchange rates and interest rates could result in financial losses for us.
Fluctuations in currency exchange rates and interest rates may have a material impact on our financial performance. We receive virtually all of our revenues in dollars, while some of our operating expenses, including employee costs and certain crew costs, are denominated in euros. As a result, we
are exposed to foreign exchange risk. Although we monitor exchange rate fluctuations on a continuous basis, we do not currently hedge movements in currency exchange rates. As a result, there is a risk that currency fluctuations will have a negative effect on our cash flows and results of operations.
In addition, we may be exposed to a market risk relating to fluctuations in interest rates to the extent our credit facilities bear interest costs at a floating rate based on a prevailing market interest rate. Significant increases in the interest rates could adversely affect our cash flows, results of operations
and ability to service our debt. Although we use interest rate swaps from time to time to
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reduce our exposure to interest rate risk, we hedge only a portion of our outstanding indebtedness. There is no assurance that our derivative contracts will provide adequate protection against adverse changes in interest rates or that our bank counterparties will be able to perform their obligations.
The derivative contracts used to hedge our exposure to fluctuations in interest rates could result in reductions in our owners equity as well as charges against our profit.
We enter into interest rate swaps from time to time for purposes of managing our exposure to fluctuations in interest rates applicable to floating rate indebtedness. As of June 30, 2014, we had three interest rate swaps in place with a notional amount of $221.44 million, none of which was designated
as a cash flow hedging instrument. The changes in the fair value of the three derivative contracts that have not been designated as cash flow hedging instruments are recognized in our statement of profit or loss. Changes in the fair value of any derivative contracts that do not qualify for treatment as cash
flow hedges for financial reporting purposes would affect, among other things, our profit and earnings per share and would affect compliance with the market value adjusted net worth covenants in our credit facilities. For future interest rate swaps that are designated as cash flow hedging instruments, the
changes in the fair value of the contracts will be recognized in our statement of other comprehensive income as cash flow hedge gains or losses for the period, and could affect compliance with the market value adjusted net worth covenants in our credit facilities.
There is no assurance that our derivative contracts will provide adequate protection against adverse changes in interest rates or that our bank counterparties will be able to perform their obligations. In addition, as a result of the implementation of new regulation of the swaps markets in the United
States, the European Union and elsewhere over the next few years, the cost and availability of interest rate and currency hedges may increase or suitable hedges may not be available.
Our earnings and business are subject to the credit risk associated with our contractual counterparties.
We will enter into, among other things, time charters and other contracts with our customers, shipbuilding contracts and refund guarantees relating to newbuildings, credit facilities and commitment letters with banks, insurance contracts and interest rate swaps. Such agreements subject us to
counterparty credit risk. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend upon a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the natural gas and
LNG markets and charter hire rates. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for
distribution to unitholders.
Our debt levels may limit our flexibility in obtaining additional financing, pursuing other business opportunities and paying distributions to unitholders.
Upon completion of this offering and the Pending Vessel Acquisition, assuming we have not refinanced our existing debt and the Citibank Facility with funds from the New Credit Facility, we estimate that our consolidated debt will be approximately $ . Following this offering, we will continue to
have the ability to incur additional debt, including by borrowing under our $30.0 million revolving credit facility with GasLog (or the sponsor credit facility). See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources. Our level of debt
could have important consequences to us, including the following:
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our ability to obtain additional financing, if necessary, for working capital, capital expenditures, ship acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;
we will need a substantial portion of our cash flow to make principal and interest payments on our debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;
our debt level may make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our industry or the economy generally;
our debt level may limit our flexibility in responding to changing business and economic conditions; and
if we are unable to satisfy the restrictions included in any of our financing agreements or are otherwise in default under any of those agreements, as a result of our debt levels or otherwise, we will not be able to make cash distributions to you, notwithstanding our stated cash distribution policy.
Our ability to service our debt depends upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not
sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or
bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.
Financing agreements containing operating and financial restrictions may restrict our business and financing activities.
The operating and financial restrictions and covenants in our existing vessel financing agreements and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, the financing
agreements may restrict the ability of us and our subsidiaries to:
incur or guarantee indebtedness;
change ownership or structure, including mergers, consolidations, liquidations and dissolutions;
make dividends or distributions;
make certain negative pledges and grant certain liens;
sell, transfer, assign or convey assets;
make certain investments; and
enter into a new line of business.
In addition, such financing agreements may require us or, in the case of our financing agreements that are guaranteed by GasLog or its affiliates, GasLog or such affiliates to comply with certain financial ratios and tests, including, among others, maintaining a minimum liquidity, maintaining positive
working capital, ensuring that EBITDA exceeds interest payable, any amounts payable for interest rate swap and debt installments calculated on a four quarter rolling average basis, maintaining a minimum collateral value, and maintaining a minimum book equity ratio. Our or GasLogs ability to comply
with the restrictions and covenants, including financial ratios and tests, contained in such financing agreements is dependent on future performance and may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions
deteriorate, our or GasLogs ability to comply with these covenants may be impaired. In addition, we do not have direct control over GasLogs ability to comply with these covenants. Further, the lenders under our debt financing agreements could declare a default under our debt financing agreements
that are guaranteed by GasLog if GasLog defaults on other debt agreements to which we are not a party.
If we or GasLog are unable to comply with the restrictions and covenants in the agreements governing our indebtedness or in current or future debt financing agreements, there could be a default under the terms of those agreements. If a default occurs under these agreements, or if
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GasLog is in default under any of its debt agreements lenders could terminate their commitments to lend and/or accelerate the outstanding loans and declare all amounts borrowed due and payable. We have pledged our vessels as security for our outstanding indebtedness. If our lenders were to foreclose
on our vessels in the event of a default, this may adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. If any of these events occur, we cannot guarantee that our assets will be sufficient to repay in full all of our outstanding
indebtedness, and we may be unable to find alternative financing. Even if we could obtain alternative financing, that financing might not be on terms that are favorable or acceptable. Any of these events would adversely affect our ability to make distributions to our unitholders and cause a decline in the
market price of our common units. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.
Restrictions in our debt agreements may prevent us or our subsidiaries from paying distributions.
The payment of principal and interest on our debt reduces cash available for distribution to us and on our units. In addition, our and our subsidiaries financing agreements prohibit the payment of distributions upon the occurrence of the following events, among others:
failure to pay any principal, interest, fees, expenses or other amounts when due;
breach or lapse of any insurance with respect to vessels securing the facilities;
breach of certain financial covenants;
failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases;
default under other indebtedness;
bankruptcy or insolvency events;
failure of any representation or warranty to be correct;
a change of control, as defined in the applicable agreement; and
a material adverse change, as defined in the applicable agreement.
Events of default under the sponsor credit facility include, among others, the following:
failure to pay any sum payable under the sponsor credit facility when due;
breach of certain covenants and obligations of the sponsor credit facility;
a material inaccuracy of any representation or warranty;
default under other indebtedness in excess of $10.0 million which results in the relevant creditor declaring such indebtedness prematurely due and payable;
a lien, arrest, distress or similar event is levied upon or against any substantial part of our assets which is not discharged or disputed in good faith within 10 business days after we become aware of such event;
a substantial part of our business or assets is destroyed, abandoned, seized, appropriated or forfeited for any reason;
bankruptcy or insolvency events;
suspension or cessation of our business;
GasLog Partners GP LLC ceases to be our general partner; and
an amendment to our limited partnership agreement that, in the reasonable opinion of the lender, is adverse to its interests in connection with the sponsor credit facility.
Furthermore, we expect that our future financing agreements will contain similar provisions. For more information regarding these financing agreements, see Managements Discussion and Analysis of Financial Conditions and Results of OperationsLiquidity and Capital Resources.
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The failure to consummate or integrate acquisitions, including the Pending Vessel Acquisition, in a timely and cost-effective manner could have an adverse effect on our financial condition and results of operations.
Acquisitions that expand our fleet are an important component of our strategy. Under the omnibus agreement, have the right to purchase for fair market value any of the
GasLog Seattle
, the
Solaris
, the six vessels recently acquired from BG (including the two vessels to be acquired pursuant to the
Pending Vessel Acquisition) and Hull Nos. 2072, 2073, 2102 and 2103 within 36 months after GasLog notifies our board of directors of their acceptances by their charterer (or, in the case of the
GasLog Seattle
and the six vessels recently acquired from BG Group, 36 months after the closing of the IPO).
We will not be obligated to purchase any of these vessels at the applicable determined price, and, accordingly, we may not complete the purchase of any of such vessels. Furthermore, even if we are able to agree on a price with GasLog, there are no assurances that we will be able to obtain adequate
financing on terms that are acceptable to us.
We believe that other acquisition opportunities may arise from time to time, and any such acquisition could be significant. Any acquisition of a vessel or business may not be profitable at or after the time of acquisition and may not generate cash flow sufficient to justify the investment. In addition,
our acquisition growth strategy exposes us to risks that may harm our business, financial condition, results of operations and ability to make cash distributions to our unitholders, including risks that we may:
fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;
be unable to attract, hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet;
decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;
significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;
incur or assume unanticipated liabilities, losses or costs associated with the business or vessels acquired; or
incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
In addition, unlike newbuildings, existing vessels typically do not carry warranties as to their condition. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessels condition as we would possess if it had been
built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flow and reduce our liquidity.
Certain acquisition and investment opportunities may not result in the consummation of a transaction. In addition, we may not be able to obtain acceptable terms for the required financing for any such acquisition or investment that arises. We cannot predict the effect, if any, that any announcement
or consummation of an acquisition would have on the trading price of our common units. Our future acquisitions could present a number of risks, including the risk of incorrect assumptions regarding the future results of acquired vessels or businesses or expected cost reductions or other synergies
expected to be realized as a result of acquiring vessels or businesses, the risk of failing to successfully and timely integrate the operations or management of any acquired vessels or businesses and the risk of diverting managements attention from existing operations or other priorities. We may also be
subject to additional costs related to compliance with various international laws in connection with such acquisition. If we fail to consummate and integrate our acquisitions in a timely and cost-effective manner, our business, financial condition, results of operations and cash available for distribution could
be adversely affected.
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We may experience operational problems with vessels that reduce revenue and increase costs.
LNG carriers are complex and their operations are technically challenging. Marine transportation operations are subject to mechanical risks and problems. Operational problems may lead to loss of revenue or higher than anticipated operating expenses or require additional capital expenditures. Any of
these results could harm our business, financial condition, results of operations and ability to make cash distributions to our unitholders.
We depend on GasLog and certain of its subsidiaries to assist us in operating and expanding our businesses and competing in our markets.
We and our operating subsidiaries have entered into various services agreements with GasLog and its subsidiaries, including GasLog LNG Services, pursuant to which GasLog and its subsidiaries will provide to us certain administrative, financial and other services and to our operating subsidiaries
substantially all of their crew, technical management services (including vessel maintenance, periodic drydocking, cleaning and painting, performing work required by regulations and human resources and financial services) and other advisory and commercial management services, including the sourcing of
new contracts and renewals of existing contracts. Our operational success and ability to execute our growth strategy depends significantly upon the satisfactory performance of these services by GasLog and its subsidiaries. Our business will be harmed if such subsidiaries fail to perform these services
satisfactorily or if they stop providing these services to us or our operating subsidiaries.
Our ability to compete for new charters and expand our customer relationships depends largely on our ability to leverage our relationship with GasLog and its reputation and relationships in the shipping industry. If GasLog suffers material damage to its reputation or relationships, it may harm the
ability of us or our subsidiaries to:
renew existing charters upon their expiration;
obtain new charters;
successfully interact with shipyards;
obtain financing on commercially acceptable terms;
maintain access to capital under the sponsor credit facility; or
maintain satisfactory relationships with suppliers and other third parties.
If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, financial condition, results of operations and ability to make cash distributions to our unitholders.
The required drydocking of our ships could be more expensive and time consuming than we anticipate, which could adversely affect our results of operations and cash flows.
Drydockings of our ships require significant capital expenditures and result in loss of revenue while our ships are off-hire. Any significant increase in either the number of off-hire days due to such drydockings or in the costs of any repairs carried out during the drydockings could have a material
adverse effect on our profitability and our cash flows. We may not be able to accurately predict the time required to drydock any of our ships or any unanticipated problems that may arise. If more than one of our ships is required to be out of service at the same time, or if a ship is drydocked longer
than expected or if the cost of repairs during the drydocking is greater than budgeted, our results of operations and our cash flows, including cash available for distribution to unitholders, could be adversely affected. The initial drydockings for the
Methane Rita Andrea
and the
Methane Jane Elizabeth
are
expected to be carrried out by 2016.
Delays in deliveries of newbuilding vessels could harm our operating results.
The delivery of any newbuildings we may order could be delayed, which would delay our receipt of revenues under the charters or other contracts related to the vessels. In addition, under
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some charters we may enter into that are related to a newbuilding, if our delivery of the newbuilding to our customer is delayed, we may be required to pay liquidated damages during the delay. For prolonged delays, the customer may terminate the charter and, in addition to the resulting loss of
revenues, we may be responsible for additional, substantial liquidated damages.
The completion and delivery of newbuildings could be delayed because of:
quality or engineering problems;
changes in governmental regulations or maritime self-regulatory organization standards;
work stoppages or other labor disturbances at the shipyard;
bankruptcy or other financial crisis of the shipbuilder;
a backlog of orders at the shipyard;
political or economic disturbances;
weather interference or a catastrophic event, such as a major earthquake or fire;
requests for changes to the original vessel specifications;
shortages of or delays in the receipt of necessary construction materials, such as steel;
the inability to finance the construction or conversion of the vessels; or
the inability to obtain requisite permits or approvals.
If delivery of a vessel is materially delayed, it could adversely affect our results of operations and financial condition and our ability to make cash distributions.
An oversupply of LNG carriers may lead to a reduction in the charter hire rates we are able to obtain when seeking charters in the future.
Driven in part by an increase in LNG production capacity, the market supply of LNG carriers has been increasing as a result of the construction of new ships. According to Clarkson Research, during the period from the start of 1996 to the start of 2011, the global fleet of LNG carriers grew from 90
ships (9.4 million cbm) to 361 ships (51.7 million cbm), due to the construction and delivery of new LNG carriers. Although the global newbuilding order book dropped steeply in 2009 and 2010, orders for 156 newbuilding LNG carriers were placed in the period from the start of 2011 to the start of July
2014, compared to a total of just 11 newbuilding LNG carriers between 2008 and 2010. As of July 1, 2014, the LNG carrier order book totaled 124 ships with an aggregate capacity of 18.7 million cbm. At 33% of the fleet (in terms of carrying capacity), the current order book is notably smaller than the
record highs recorded in mid-2006 when it was almost 100% of the existing fleet. Nevertheless, it is substantially larger than it was at the start of 2011 (6% of the existing fleet). We believe that this and any future expansion of the global LNG carrier fleet may have a negative impact on charter hire
rates, ship utilization and ship values, which impact could be amplified if the expansion of LNG production capacity does not keep pace with fleet growth.
If charter hire rates are lower when we are seeking new time charters, our revenues and cash flows, including cash available for distribution to unitholders, may decline.
If an active short-term or spot LNG carrier charter market continues to develop, our revenues and cash flows may become more volatile and may decline following expiration or early termination of our current charter arrangements.
Most shipping requirements for new LNG projects continue to be provided on a multi-year basis, though the level of spot voyages and short-term time charters of less than twelve months in duration has grown in the past few years. If an active short-term or spot charter market continues to develop,
we may enter into short-term time charters upon expiration or early termination of our current charters, for any ships for which we have not secured charters, or for any ships we acquire from GasLog. As a result, our revenues and cash flows may become more volatile. In addition, an active short-term
or spot charter market may require us to enter into charters based on changing market prices, as opposed to contracts based on fixed rates, which could result in a decrease in our
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revenues and cash flows, including cash available for distribution to unitholders, if we enter into charters during periods when the market price for shipping LNG is depressed.
Further technological advancements and other innovations affecting LNG carriers could reduce the charter hire rates we are able to obtain when seeking new employment, and this could adversely impact the value of our assets.
The charter rates, asset value and operational life of an LNG carrier are determined by a number of factors, including the ships efficiency, operational flexibility and physical life. Efficiency includes speed and fuel economy. Flexibility includes the ability to enter harbors, utilize related docking
facilities and pass through canals and straits. Physical life is related to the original design and construction, the ongoing maintenance and the impact of operational stresses on the asset. Ship and engine designs are continually evolving. At such time as newer designs are developed and accepted in the
market, these newer vessels may be found to be more efficient or more flexible or have longer physical lives than ours. Competition from these more technologically advanced LNG carriers and the older technology of the steam-powered vessels to be acquired pursuant to the Pending Vessel Acquisition,
could adversely affect our ability to charter or re-charter our ships and the charter hire rates we will be able to secure when we seek to charter or re-charter our ships, and could also reduce the resale value of our ships. This could adversely affect our revenues and cash flows, including cash available for
distribution to unitholders.
Risks associated with operating ocean-going ships could affect our business and reputation.
The operation of ocean-going ships carries inherent risks. These risks include the possibility of:
marine disaster;
piracy;
environmental accidents;
adverse weather conditions;
grounding, fire, explosions and collisions;
cargo and property loss or damage;
business interruptions caused by mechanical failure, human error, war, terrorism, disease and quarantine, or political action in various countries; and
work stoppages or other labor problems with crew members serving on our ships.
An accident involving any of our owned ships could result in any of the following:
death or injury to persons, loss of property or environmental damage;
delays in the delivery of cargo;
loss of revenues from termination of charter contracts;
governmental fines, penalties or restrictions on conducting business;
litigation with our employees, customers or third parties;
higher insurance rates; and
damage to our reputation and customer relationships generally.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
Changes in global and regional economic conditions could adversely impact our business, financial condition, results of operations and cash flows.
Weak global or regional economic conditions may negatively impact our business, financial condition, results of operations and cash flows in ways that we cannot predict. Our ability to expand our fleet will be dependent on our ability to obtain financing to fund the acquisition of additional
39
ships. In addition, uncertainty about current and future global economic conditions may cause our customers to defer projects in response to tighter credit, decreased capital availability and declining customer confidence, which may negatively impact the demand for our ships and services and could also
result in defaults under our current charters. Global financial markets and economic conditions have been volatile in recent years and remain subject to significant vulnerabilities. In particular, despite recent measures taken by the European Union, concerns persist regarding the debt burden of certain
Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. Furthermore, a tightening of the credit markets may further negatively impact our operations by affecting the solvency of our suppliers or customers, which could lead to disruptions in delivery of
supplies such as equipment for conversions, cost increases for supplies, accelerated payments to suppliers, customer bad debts or reduced revenues. Similarly, such market conditions could affect lenders participating in our financing agreements, making them unable to fulfill their commitments and
obligations to us. Any reductions in activity owing to such conditions or failure by our customers, suppliers or lenders to meet their contractual obligations to us could adversely affect our business, financial position, results of operation and ability to make cash distributions to our unitholders.
Disruptions in world financial markets could limit our ability to obtain future debt financing or refinance existing debt.
Global financial markets and economic conditions have been disrupted and volatile in recent years. Credit markets as well as the debt and equity capital markets were exceedingly distressed and at certain times in recent years it was difficult to obtain financing and the cost of any available financing
increased significantly. If global financial markets and economic conditions significantly deteriorate in the future, we may experience difficulties obtaining financing commitments, including commitments to refinance our existing debt as substantial balloon payments come due under our credit facilities, in
the future if lenders are unwilling to extend financing to us or unable to meet their funding obligations due to their own liquidity, capital or solvency issues. As a result, financing may not be available on acceptable terms or at all. If financing is not available when needed, or is available only on
unfavorable terms, we may be unable to meet our future obligations as they come due. Our failure to obtain the funds for these capital expenditures could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to
unitholders. In the absence of available financing, we also may be unable to take advantage of further business opportunities or respond to competitive pressures.
Compliance with safety and other requirements imposed by classification societies may be very costly and may adversely affect our business.
The hull and machinery of every commercial LNG carrier must be classed by a classification society. The classification society certifies that the ship has been built and subsequently maintained in accordance with the applicable rules and regulations of that classification society. Moreover, every ship
must comply with all applicable international conventions and the regulations of the ships flag state as verified by a classification society. Finally, each ship must successfully undergo periodic surveys, including annual, intermediate and special surveys performed under the classification societys rules.
If any ship does not maintain its class, it will lose its insurance coverage and be unable to trade, and the ships owner will be in breach of relevant covenants under its financing arrangements. Failure to maintain the class of one or more of our ships could have a material adverse effect on our
business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
The LNG shipping industry is subject to substantial environmental and other regulations, which may significantly limit our operations or increase our expenses.
Our operations are materially affected by extensive and changing international, national, state and local environmental laws, regulations, treaties, conventions and standards which are in force in
40
international waters, or in the jurisdictional waters of the countries in which our ships operate and in the countries in which our ships are registered. These requirements include those relating to equipping and operating ships, providing security and minimizing or addressing impacts on the environment
from ship operations. We may incur substantial costs in complying with these requirements, including costs for ship modifications and changes in operating procedures. We also could incur substantial costs, including cleanup costs, civil and criminal penalties and sanctions, the suspension or termination of
operations and third-party claims as a result of violations of, or liabilities under, such laws and regulations.
In addition, these requirements can affect the resale value or useful lives of our ships, require a reduction in cargo capacity, necessitate ship modifications or operational changes or restrictions or lead to decreased availability of insurance coverage for environmental matters. They could further result
in the denial of access to certain jurisdictional waters or ports or detention in certain ports. We are required to obtain governmental approvals and permits to operate our ships. Delays in obtaining such governmental approvals may increase our expenses, and the terms and conditions of such approvals
could materially and adversely affect our operations.
Additional laws and regulations may be adopted that could limit our ability to do business or increase our operating costs, which could materially and adversely affect our business. For example, new or amended legislation relating to ship recycling, sewage systems, emission control (including
emissions of greenhouse gases) as well as ballast water treatment and ballast water handling may be adopted. The United States has recently enacted ballast water management system legislation and regulations that require more stringent controls of air and water emissions from ocean-going ships. Such
legislation or regulations may require additional capital expenditures or operating expenses (such as increased costs for low-sulfur fuel) in order for us to maintain our ships compliance with international and/or national regulations. We also may become subject to additional laws and regulations if we
enter new markets or trades.
We also believe that the heightened environmental, quality and security concerns of insurance underwriters, regulators and charterers will generally lead to additional regulatory requirements, including enhanced risk assessment and security requirements, as well as greater inspection and safety
requirements on all LNG carriers in the marine transportation market. These requirements are likely to add incremental costs to our operations, and the failure to comply with these requirements may affect the ability of our ships to obtain and, possibly, recover from, insurance or to obtain the required
certificates for entry into the different ports where we operate.
Some environmental laws and regulations, such as the U.S. Oil Pollution Act of 1990, or OPA, provide for potentially unlimited joint, several and/or strict liability for owners, operators and demise or bareboat charterers for oil pollution and related damages. OPA applies to discharges of any oil
from a ship in U.S. waters, including discharges of fuel and lubricants from an LNG carrier, even if the ships do not carry oil as cargo. In addition, many states in the United States bordering a navigable waterway have enacted legislation providing for potentially unlimited strict liability without regard to
fault for the discharge of pollutants within their waters. We also are subject to other laws and conventions outside the United States that provide for an owner or operator of LNG carriers to bear strict liability for pollution, such as the Convention on Limitation of Liability for Maritime Claims of 1976,
or the London Convention.
Some of these laws and conventions, including OPA and the London Convention, may include limitations on liability. However, the limitations may not be applicable in certain circumstances, such as where a spill is caused by a ship owners or operators intentional or reckless conduct. These
limitations are also subject to periodic updates and may otherwise be amended in the future.
Compliance with OPA and other environmental laws and regulations also may result in ship owners and operators incurring increased costs for additional maintenance and inspection requirements, the development of contingency arrangements for potential spills, obtaining mandated insurance
coverage and meeting financial responsibility requirements.
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Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
Due to concern over the risks of climate change, a number of countries and the International Maritime Organization, or IMO, have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emission from ships. These regulatory measures may include adoption of
cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Although emissions of greenhouse gases from international shipping currently are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or
the Kyoto Protocol, a new treaty may be adopted in the future that includes additional restrictions on shipping emissions to those already adopted under the International Convention for the Prevention of Marine Pollution from Ships, or the MARPOL Convention. Compliance with future changes in
laws and regulations relating to climate change could increase the costs of operating and maintaining our ships and could require us to install new emission controls, as well as acquire allowances, pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions
program. Revenue generation and strategic growth opportunities may also be adversely affected.
Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also have an effect on demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to
climate change may reduce the demand for oil and natural gas in the future or create greater incentives for use of alternative energy sources. Any long-term material adverse effect on the oil and gas industry could have significant financial and operational adverse impacts on our business that we cannot
predict with certainty at this time.
We operate our ships worldwide, which could expose us to political, governmental and economic instability that could harm our business.
Because we operate our ships in the geographic areas where our customers do business, our operations may be affected by political, governmental and economic conditions in the countries where our ships operate or where they are registered. Any disruption caused by these factors could harm our
business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders. In particular, our ships frequent LNG terminals in countries including Egypt, Equatorial Guinea and Trinidad, as well as transit through the Gulf of Aden and the Strait of Malacca.
Economic, political and governmental conditions in these and other regions have from time to time resulted in military conflicts, terrorism, attacks on ships, mining of waterways, piracy and other efforts to disrupt shipping. Future hostilities or other political instability in the geographic regions where we
operate or may operate could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders. In addition, our business could also be harmed by tariffs, trade embargoes and other economic sanctions by the
United States or other countries against countries in the Middle East, Southeast Asia or elsewhere as a result of terrorist attacks, hostilities or diplomatic or political pressures that limit trading activities with those countries.
Our insurance may be insufficient to cover losses that may occur to our property or result from our operations.
The operation of any ship includes risks such as mechanical failure, personal injury, collision, fire, contact with floating objects, property loss or damage, cargo loss or damage and business interruption due to a number of reasons, including political circumstances in foreign countries, hostilities and
labor strikes. In addition, there is always an inherent possibility of a marine disaster, including explosion, spills and other environmental mishaps, and other liabilities arising from owning, operating or managing ships in international trade.
Although we carry protection and indemnity, hull and machinery and loss of hire insurance covering our ships consistent with industry standards, we can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. We also may be unable to
procure adequate insurance coverage at commercially reasonable rates in the future. Even
42
if our insurance coverage is adequate to cover our losses, we may not be able to obtain a timely replacement ship in the event of a loss of a ship. Any uninsured or underinsured loss could harm our business, financial condition, results of operations and cash flows, including cash available for distribution
to unitholders.
In addition, some of our insurance coverage is maintained through mutual protection and indemnity associations, and as a member of such associations we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves.
Terrorist attacks, international hostilities and piracy could adversely affect our business, financial condition, results of operations and cash flows.
Terrorist attacks, piracy and the current conflicts in the Middle East, and other current and future conflicts, may adversely affect our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders. The continuing hostilities in the Middle East
may lead to additional acts of terrorism, further regional conflicts, other armed actions around the world and civil disturbance in the United States or elsewhere, which may contribute to further instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain
additional financing on terms acceptable to us, or at all.
In the past, political conflicts have also resulted in attacks on ships, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region. Acts of terrorism and piracy have also affected ships trading in regions such as the South China Sea and the Gulf of
Aden. Since 2008, the frequency of piracy incidents against commercial shipping vessels has increased significantly, particularly in the Gulf of Aden and off the coast of Somalia. Any terrorist attacks targeted at ships may in the future negatively materially affect our business, financial condition, results of
operations and cash flows and could directly impact our ships or our customers.
We currently employ armed guards on board certain vessels operating in areas that may be prone to hijacking or terrorist attacks. The presence of armed guards may increase the risk of damage, injury or loss of life in connection with any attacks on our vessels, in addition to increasing crew costs.
We may not be adequately insured to cover losses from acts of terrorism, piracy, regional conflicts and other armed actions, including losses relating to the employment of armed guards.
LNG facilities, shipyards, ships, pipelines and gas fields could be targets of future terrorist attacks or piracy. Any such attacks could lead to, among other things, bodily injury or loss of life, as well as damage to the ships or other property, increased ship operating costs, including insurance costs,
reductions in the supply of LNG and the inability to transport LNG to or from certain locations. Terrorist attacks, war or other events beyond our control that adversely affect the production, storage or transportation of LNG to be shipped by us could entitle our customers to terminate our charter
contracts in certain circumstances, which would harm our cash flows and our business.
Terrorist attacks, or the perception that LNG facilities and LNG carriers are potential terrorist targets, could materially and adversely affect expansion of LNG infrastructure and the continued supply of LNG. Concern that LNG facilities may be targeted for attack by terrorists has contributed
significantly to local community and environmental group resistance to the construction of a number of LNG facilities, primarily in North America. If a terrorist incident involving an LNG facility or LNG carrier did occur, in addition to the possible effects identified in the previous paragraph, the incident
may adversely affect the construction of additional LNG facilities and could lead to the temporary or permanent closing of various LNG facilities currently in operation.
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GasLog may on our behalf be unable to attract and retain qualified, skilled employees or crew necessary to operate our business or may pay substantially increased costs for its employees and crew.
Our success will depend in large part on GasLogs ability to attract, hire, train and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract, hire, train and
retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase our hire rates to compensate for any crew cost increases, our business, financial condition, results of operations and ability to make cash distributions to our unitholders may be adversely
affected. Any inability we experience in the future to attract, hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.
In the future, the ships we own could be required to call on ports located in countries that are subject to restrictions imposed by the United States and other governments.
The United States and other governments and their agencies impose sanctions and embargoes on certain countries and maintain lists of countries they consider to be state sponsors of terrorism. For example, in 2010, the United States enacted the Comprehensive Iran Sanctions Accountability and
Divestment Act, or CISADA, which expanded the scope of the former Iran Sanctions Act. Among other things, CISADA expanded the application of the prohibitions imposed by the U.S. government to non-U.S. companies, such as us, and limits the ability of companies and persons to do business or
trade with Iran when such activities relate to the investment, supply or export of refined petroleum or petroleum products, as well as LNG.
In 2012, President Obama signed Executive Order 13608 which prohibits foreign persons from violating or attempting to violate, or causing a violation of any sanctions in effect against Iran or facilitating any deceptive transactions for or on behalf of any person subject to U.S. sanctions. The Secretary
of the Treasury may prohibit any transactions or dealings, including any U.S. capital markets financing, involving any person found to be in violation of Executive Order 13608. Also in 2012, the U.S. enacted the Iran Threat Reduction and Syria Human Rights Act of 2012, or the ITRA, which created
new sanctions and strengthened existing sanctions. Among other things, the ITRA intensifies existing sanctions regarding the provision of goods, services, infrastructure or technology to Irans petroleum or petrochemical sector. The ITRA also includes a provision requiring the President of the United
States to impose five or more sanctions from Section 6(a) of the Iran Sanctions Act, as amended, on a person the President determines is a controlling beneficial owner of, or otherwise owns, operates, or controls or insures a vessel that was used to transport crude oil from Iran to another country and (1)
if the person is a controlling beneficial owner of the vessel, the person had actual knowledge the vessel was so used or (2) if the person otherwise owns, operates, or controls, or insures the vessel, the person knew or should have known the vessel was so used. Such a person could be subject to a variety
of sanctions, including exclusion from U.S. capital markets, exclusion from financial transactions subject to U.S. jurisdiction, and exclusion of such persons vessels from U.S. ports for up to two years. The ITRA also includes a requirement that issuers of securities must disclose to the SEC in their annual
and quarterly reports filed after February 6, 2013 whether the issuer or any affiliate has knowingly engaged in certain sanctioned activities involving Iran during the timeframe covered by the report. Finally, in January 2013, the U.S. enacted the Iran Freedom and Counter-Proliferation Act of 2012
which expanded the scope of U.S. sanctions on any person that is part of Irans energy, shipping or shipbuilding sector and operators of ports in Iran, and imposes penalties on any person who facilitates or otherwise knowingly provides significant financial, material or other support to these entities.
Although the ships we own have not called on ports in countries subject to sanctions or embargoes or in countries identified as state sponsors of terrorism, including Iran, North Korea and Syria, we cannot assure you that these ships will not call on ports in these countries in the future. While we
intend to maintain compliance with all sanctions and embargoes applicable to us, U.S. and international sanctions and embargo laws and regulations do not necessarily apply to the same
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countries or proscribe the same activities, which may make compliance difficult. Additionally, the scope of certain laws may be unclear, and these laws may be subject to changing interpretations and application and may be amended or strengthened from time to time, including by adding or removing
countries from the proscribed lists. Violations of sanctions and embargo laws and regulations could result in fines or other penalties and could result in some investors deciding, or being required, to divest their investment, or not to invest, in us.
Failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract terminations and an adverse effect on our business.
We may operate in a number of countries through the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full
compliance with the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the
FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation
and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
Reliability of suppliers may limit our ability to obtain supplies and services when needed.
We rely, and will in the future rely, on a significant supply of consumables, spare parts and equipment to operate, maintain, repair and upgrade our fleet of ships. Delays in delivery or unavailability of supplies could result in off-hire days due to consequent delays in the repair and maintenance of our
fleet. This would negatively impact our revenues and cash flows. Cost increases could also negatively impact our future operations, although the impact of significant cost increases may be mitigated to some extent with respect to the vessels that are employed under charter contracts with automatic
periodic adjustment provisions or cost review provisions.
Governments could requisition our ships during a period of war or emergency, resulting in loss of earnings.
The government of a jurisdiction where one or more of our ships are registered could requisition for title or seize our ships. Requisition for title occurs when a government takes control of a ship and becomes its owner. Also, a government could requisition our ships for hire. Requisition for hire
occurs when a government takes control of a ship and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency, although governments may elect to requisition ships in other circumstances. Although we would expect to be entitled to
government compensation in the event of a requisition of one or more of our ships, the amount and timing of payments, if any, would be uncertain. A government requisition of one or more of our ships would result in off-hire days under our time charters and may cause us to breach covenants in certain
of our credit facilities, and could have a material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
Maritime claimants could arrest our ships, which could interrupt our cash flows.
Crew members, suppliers of goods and services to a ship, shippers or receivers of cargo and other parties may be entitled to a maritime lien against a ship for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a ship. The arrest or
attachment of one or more of our ships which is not timely discharged could cause us to
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default on a charter or breach covenants in certain of our credit facilities and, to the extent such arrest or attachment is not covered by our protection and indemnity insurance, could require us to pay large sums of money to have the arrest or attachment lifted. Any of these occurrences could have a
material adverse effect on our business, financial condition, results of operations and cash flows, including cash available for distribution to unitholders.
Additionally, in some jurisdictions, such as the Republic of South Africa, under the sister ship theory of liability, a claimant may arrest both the ship that is subject to the claimants maritime lien and any associated ship, which is any ship owned or controlled by the same owner. Claimants could
try to assert sister ship liability against one ship in our fleet for claims relating to another of our ships.
Because the Public Company Accounting Oversight Board is not currently permitted to inspect our former independent registered public accounting firm, you may not benefit from such inspections.
Auditors of U.S. public companies are required by law to undergo periodic PCAOB inspections that assess their compliance with U.S. law and professional standards in connection with performance of audits of financial statements filed with the SEC. Certain European Union countries, including
Greece, do not currently permit the PCAOB to conduct inspections of accounting firms established and operating in such European Union countries, even if they are part of major international firms. The PCAOB conducted inspections in Greece in 2008 and evaluated the performance of audits of SEC
registrants and quality controls of Deloitte Hadjipavlou Sofianos & Cambanis S.A., our independent auditor at that time. Currently, however, the PCAOB is unable to conduct inspections in Greece until a cooperation agreement between the PCAOB and the Greek Accounting & Auditing Standards
Oversight Board is reached. Accordingly, unlike for most U.S. public companies, should the PCAOB again wish to conduct an inspection, it is currently prevented from evaluating the performance of audits and quality control procedures of Deloitte Hadjipavlou Sofianos & Cambanis S.A., who served as our
independent auditor until 2014, and, unlike shareholders of most U.S. public companies, our unitholders would be deprived of the possible benefits of such inspections.
We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make distributions to unitholders.
We are a holding company. Our subsidiaries conduct all of our operations and own all of our operating assets, including our ships. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to pay our obligations and to make distributions to unitholders
depends entirely on our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, or by the law of its jurisdiction of incorporation which regulates the payment of
distributions. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to make distributions to unitholders.
We may be subject to litigation that could have an adverse effect on us.
We may in the future be involved from time to time in litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, toxic tort claims, employment matters and governmental claims for taxes or duties, as well as other
litigation that arises in the ordinary course of our business. We cannot predict with certainty the outcome of any claim or other litigation matter. The ultimate outcome of any litigation matter and the potential costs associated with prosecuting or defending such lawsuits, including the diversion of
managements attention to these matters, could have an adverse effect on us and, in the event of litigation that could reasonably be expected to have a material adverse effect on us, could lead to an event of default under certain of our credit facilities.
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Risks Inherent in an Investment in Us
GasLog and its affiliates may compete with us.
Pursuant to the omnibus agreement between us and GasLog, GasLog and its controlled affiliates (other than us, our general partner and our subsidiaries) generally have agreed not to acquire, own, operate or charter certain LNG carriers operating under charters of five full years or more. The
omnibus agreement, however, contains significant exceptions that may allow GasLog or any of its controlled affiliates to compete with us, which could harm our business. For example, these exceptions result in GasLog not being restricted from: acquiring, owning, operating or chartering Non-Five-Year
Vessels; acquiring a non-controlling equity ownership, voting or profit participation interest in any company, business or pool of assets; acquiring, owning, operating or chartering a Five-Year Vessel that GasLog would otherwise be restricted from owning if we are not willing or able to acquire such vessel
from GasLog within the periods set forth in the omnibus agreement; or owning or operating any Five-Year Vessel that GasLog owns on the closing date of the IPO and that was not part of our initial fleet as of such date. See Certain Relationships and Related Party TransactionsOmnibus
AgreementNoncompetition for a detailed description of those exceptions and the definitions of Five-Year Vessel and Non-Five-Year Vessel.
Unitholders have limited voting rights, and our partnership agreement restricts the voting rights of unitholders owning more than 4.9% of our common units.
Unlike the holders of common stock in a corporation, holders of common units have only limited voting rights on matters affecting our business. We will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that
are properly brought before the meeting. Our general partner has appointed each of our five initial directors, three of whom meet the independence standards of the New York Stock Exchange and also qualify as independent of GasLog under our partnership agreement, so as to be eligible for
membership on our conflicts committee. Our general partner has the right to appoint three of our directors. At our 2015 annual meeting, which will be the first annual meeting we will hold after the IPO, the common unitholders will elect two of our directors. The two directors elected by our common
unitholders at our 2015 annual meeting will be divided into classes to be elected by our common unitholders annually on a staggered basis. If our general partner exercises its right to transfer the power to elect a majority of our directors to the common unitholders, an additional director will thereafter be
elected by our common unitholders. That director would be added to the class that does not at such time have a director. Our general partner may exercise this right in order to permit us to claim, or continue to claim, an exemption from U.S. federal income tax under Section 883 of the Code. See
BusinessTaxation of the Partnership. The majority of our directors are non-United States citizens or residents. Three of our directors meet the above independence standards. We expect that following our first annual meeting in 2015, each of the elected directors and one of the appointed directors will
meet the independence standards established by the New York Stock Exchange, and that, at a minimum, each of the elected directors will also qualify as independent of GasLog under our partnership agreement so as to be eligible for membership on our conflicts committee.
The partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders ability to influence the manner or direction of management. Unitholders have no right to elect our
general partner, and our general partner may not be removed except by a vote of the holders of at least 66
2
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3
% of the outstanding common and subordinated units, including any units owned by our general partner and its affiliates, voting together as a single class.
Our partnership agreement further restricts unitholders voting rights by providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be
considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to our board of directors), determining the presence of a quorum or for other similar purposes, unless required by law.
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Effectively, this means that the voting rights of any unitholders not entitled to vote on a specific matter will be redistributed pro rata among the other common unitholders. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not
be subject to the 4.9% limitation, except with respect to voting their common units in the election of the elected directors.
GasLog and our general partner own a controlling interest in us and have conflicts of interest and limited fiduciary and contractual duties to us and our common unitholders, which may permit them to favor their own interests to your detriment.
Following this offering, GasLog will own a
% limited partner interest and a 2.0% general partner interest in us, assuming no exercise of the underwriters option to purchase additional common units, and will own and control our general partner. In addition, our general partner has the right to
appoint three of five, or a majority, of our directors. Certain of our directors and officers are directors and officers of GasLog or its affiliates, and, as such, they have fiduciary duties to GasLog or its affiliates that may cause them to pursue business strategies that disproportionately benefit GasLog or its
affiliates or which otherwise are not in the best interests of us or our unitholders. Conflicts of interest may arise between GasLog and its affiliates (including our general partner), on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner and its
affiliates may favor their own interests over the interests of our unitholders. See Our partnership agreement limits our general partners and our directors fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors. These
conflicts include, among others, the following situations:
neither our partnership agreement nor any other agreement requires our general partner or GasLog or its affiliates to pursue a business strategy that favors us or utilizes our assets, and GasLogs officers and directors have a fiduciary duty to make decisions in the best interests of the shareholders
of GasLog, which may be contrary to our interests;
our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. Specifically, our general partner will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights
or registration rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily
withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units or general partner interest or votes upon the dissolution of the partnership;
under our partnership agreement, as permitted under Marshall Islands law, our general partner and our directors have limited fiduciary duties. The partnership agreement also restricts the remedies available to our unitholders, as a result of purchasing common units, unitholders are treated as having
agreed to the modified standard of fiduciary duties and to certain actions that may be taken by our general partner and our directors, all as set forth in the partnership agreement;
our general partner is entitled to reimbursement of all reasonable costs incurred by it and its affiliates for our benefit;
our partnership agreement does not restrict us from paying our general partner or its affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf;
our general partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80.0% of our common units; and
our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of its limited call right.
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Even if our general partner relinquishes the power to elect one director to the common unitholders, so that they will elect a majority of our directors, our general partner will have substantial influence on decisions made by our board of directors. See Certain Relationships and Related Party
Transactions, Conflicts of Interest and Fiduciary Duties and The Partnership Agreement.
Our officers face conflicts in the allocation of their time to our business.
Our officers are all employed by GasLog or its applicable affiliate and are or will be performing executive officer functions for us pursuant to the administrative services agreement. Our officers, with the exception of our chief executive officer, Andrew J. Orekar, are not required to work full-time on
our affairs and also perform services for affiliates of our general partner (including GasLog). As a result, there could be material competition for the time and effort of our officers who also provide services to our general partners affiliates, which could have a material adverse effect on our business,
results of operations and financial condition. See Our Management.
Our partnership agreement limits our general partners and our directors fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors.
Under the partnership agreement, our general partner has delegated to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis, and such delegation will be binding on any successor general partner of the partnership. Our partnership
agreement also contains provisions that reduce the standards to which our general partner and directors would otherwise be held by Marshall Islands law. For example, our partnership agreement:
permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. Where our partnership agreement permits, our general partner may consider only the interests and factors that it desires, and in such cases it has no fiduciary
duty or obligation to give any consideration to any interest of, or factors affecting us, our affiliates or our unitholders. Decisions made by our general partner in its individual capacity will be made by its sole owner, GasLog. Specifically, pursuant to our partnership agreement, our general partner
will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the election of any director, votes or refrains from voting
on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units or general partner interest or votes upon the dissolution of
the partnership;
provides that our general partner and our directors are entitled to make other decisions in good faith if they reasonably believe that the decision is in our best interests;
generally provides that transactions with our affiliates and resolutions of conflicts of interest not approved by the conflicts committee of our board of directors and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from
unrelated third parties or be fair and reasonable to us and that, in determining whether a transaction or resolution is fair and reasonable, our board of directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly
advantageous or beneficial to us; and
provides that neither our general partner nor our officers or directors will be liable for monetary damages to us, our limited partners or assignees for any acts or omissions, unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our
general partner or our officers or directors or those other persons engaged in actual fraud or willful misconduct.
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In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above. See Conflicts of Interest and Fiduciary DutiesFiduciary Duties.
Fees and cost reimbursements, which GasLog or its applicable affiliate will determine for services provided to us and our subsidiaries, will be substantial, will likely be higher for future periods than reflected in our results of operations for the year ended December 31, 2013, will be payable regardless
of our profitability and will reduce our cash available for distribution to you.
Pursuant to the ship management agreements, our subsidiaries pay fees for services provided to them by GasLog LNG Services, and reimburses GasLog LNG Services for all expenses incurred on their behalf. These fees and expenses include all costs and expenses incurred in providing the crew and
technical management of the vessels in our fleet to our subsidiaries. In addition, our operating subsidiaries pay GasLog LNG Services a fixed management fee for costs and expenses incurred in connection with providing these services to our operating subsidiaries. For the three vessels in our initial fleet
and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect the amount of these fees and expenses to be approximately $2.8 million for the twelve months ending September 30, 2015.
In addition, pursuant to an administrative services agreement, GasLog provides us with certain administrative services. We pay a fixed fee to GasLog for its reasonable costs and expenses incurred in connection with the provision of the services under the administrative services agreement. For the
three vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect to pay GasLog approximately $2.9 million in total for the services under the administrative services agreement for the twelve months ending September 30, 2015.
In addition, pursuant to the commercial management agreements, GasLog provides us with commercial management services. We pay, and in the case of the two vessels to be acquired pursuant to the Pending Vessel Acquisition will pay, to GasLog a fixed commercial management fee in U.S. dollars
for costs and expenses incurred in connection with providing services. We expect to pay GasLog approximately $1.8 million in total for the services under the amended commercial management agreements for the twelve months ending September 30, 2015.
For a description of the ship management agreements, commercial management agreements and the administrative services agreement, see Certain Relationships and Related Party Transactions. The fees and expenses payable pursuant to the ship management agreements, commercial management
agreements and the administrative services agreement will likely be higher for future periods than reflected in our results of operations for the year ended December 31, 2013. Additionally, these fees and expenses will be payable without regard to our business, results of operation and financial condition.
The payment of fees to and the reimbursement of expenses of GasLog or its applicable affiliate, including GasLog LNG Services, could adversely affect our ability to pay cash distributions to you.
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner, and even if public unitholders are dissatisfied, they are unable to remove our general partner without GasLogs consent,
unless GasLogs ownership interest in us is decreased, all of which could diminish the trading price of our common units.
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.
The unitholders are unable to remove our general partner without its consent because our general partner and GasLog will own sufficient units upon completion of this offering to be able to prevent its removal. The vote of the holders of at least 66
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of all outstanding common and subordinated
units voting together as a single class is required to remove the general partner. Following the closing of this offering, GasLog will own
% of the
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outstanding common and subordinated units, assuming no exercise of the underwriters option to purchase additional common units.
If our general partner is removed without cause during the subordination period and units held by our general partner and GasLog are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units, any existing arrearages on the common units
will be extinguished, and our general partner will have the right to convert its general partner interest and the holders of the incentive distribution rights will have the right to convert such incentive distribution rights into common units or to receive cash in exchange for those interests based on the
fair market value of those interests at the time. A removal of our general partner under these circumstances would adversely affect the common units by prematurely eliminating their distribution and liquidation preference over the subordinated units, which would otherwise have continued until we
had met certain distribution and performance tests. Any conversion of the general partner interest or incentive distribution rights would be dilutive to existing unitholders. Furthermore, any cash payment in lieu of such conversion could be prohibitively expensive. Cause is narrowly defined to
mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable for actual fraud or willful or wanton misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor business decisions, such as charges
of poor management of our business by the directors appointed by our general partner. Therefore, the removal of our general partner because of the unitholders dissatisfaction with the general partners decisions in this regard would most likely result in the termination of the subordination period.
Common unitholders are entitled to elect only two of the five members of our board of directors. Our general partner, by virtue of its general partner interest, in its sole discretion will appoint the remaining directors (subject to its right to transfer the power to elect a majority of our directors to
the common unitholders).
The election of the directors by common unitholders is staggered, meaning that the members of only one of three classes of our elected directors will be selected each year. Prior to the exercise by our general partner of its right to transfer the power to elect a majority of our directors to the
common unitholders, one of the three classes will not have a director. Therefore, no director will be up for election by the common unitholders in the year that the empty class is up for election. In addition, the directors appointed by our general partner will serve for terms determined by our
general partner.
Our partnership agreement contains provisions limiting the ability of unitholders to call meetings of unitholders, to nominate directors and to acquire information about our operations as well as other provisions limiting the unitholders ability to influence the manner or direction of management.
Unitholders voting rights are further restricted by the partnership agreement provision providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter
and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to our board of directors), determining the presence of a quorum or for other similar purposes, unless required by law.
Effectively, this means that the voting rights of any such unitholders in excess of 4.9% will be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired
common units with the prior approval of our board of directors will not be subject to this 4.9% limitation, except with respect to voting their common units in the election of the elected directors.
There are no restrictions in our partnership agreement on our ability to issue equity securities.
The effect of these provisions may be to diminish the price at which the common units will trade.
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The control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. In addition, our partnership agreement does not restrict the ability of the members of our general partner from
transferring their respective membership interests in our general partner to a third party.
Substantial future sales of our common units in the public market could cause the price of our common units to fall.
We have granted registration rights to GasLog and certain of its affiliates. These unitholders have the right, subject to some conditions, to require us to file registration statements covering any of our common, subordinated or other equity securities owned by them or to include those securities in
registration statements that we may file for ourselves or other unitholders. Upon the closing of this offering and assuming no exercise of the underwriters option to purchase additional common units, GasLog will own 162,358 common units and 9,822,358 subordinated units and all of the incentive
distribution rights. Following their registration and sale under the applicable registration statement, those securities will become freely tradable. By exercising their registration rights and selling a large number of common units or other securities, these unitholders could cause the price of our common
units to decline.
GasLog, as the holder of all of the incentive distribution rights, may elect to cause us to issue additional common units to it in connection with a resetting of the target distribution levels related to its incentive distribution rights without the approval of the conflicts committee of our board of directors
or holders of our common units and subordinated units. This may result in lower distributions to holders of our common units in certain situations.
GasLog, as the holder of all of the incentive distribution rights, has the right, at a time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%) for each of the prior four consecutive fiscal quarters, to reset the
initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. Following a reset election by GasLog, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for
the two fiscal quarters immediately preceding the reset election (such amount is referred to as the reset minimum quarterly distribution), and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution
amount.
In connection with resetting these target distribution levels, GasLog will be entitled to receive a number of common units equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to it on the incentive distribution rights in the prior
two quarters. We anticipate that GasLog would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion; however, it is possible that GasLog could exercise this reset election
at a time when it is experiencing, or may be expected to experience, declines in the cash distributions it receives related to its incentive distribution rights and may therefore desire to be issued our common units, rather than retain the right to receive incentive distributions based on the initial target
distribution levels. As a result, a reset election may cause our common unitholders to experience dilution in the amount of cash distributions that they would have otherwise received had we not issued additional common units to GasLog in connection with resetting the target distribution levels related to
GasLogs incentive distribution rights. See Cash Distribution Policy and Restrictions on DistributionsIncentive Distribution Rights and Cash Distribution Policy and Restrictions on DistributionsGasLogs Right to Reset Incentive Distribution Levels.
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We may issue additional equity securities, including securities senior to the common units, without your approval, which would dilute your ownership interests.
We may, without the approval of our unitholders, issue an unlimited number of additional units or other equity securities. In addition, we may issue an unlimited number of units that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of additional
common units or other equity securities of equal or senior rank will have the following effects:
our unitholders proportionate ownership interest in us will decrease;
the amount of cash available for distribution on each unit may decrease;
because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;
the relative voting strength of each previously outstanding unit may be diminished; and
the market price of the common units may decline.
Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in distributions of available cash.
During the subordination period, which we define elsewhere in this prospectus, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.375 per unit, plus any arrearages in the payment of the
minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the
likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units. Upon the expiration of the subordination period, the subordinated units will convert into common units and will then participate pro rata with other common units in
distributions of available cash. See Cash Distribution Policy and Restrictions on DistributionsSubordination Period, Distributions of Available Cash From Operating Surplus During the Subordination Period and Distributions of Available Cash From Operating Surplus After the Subordination Period.
In establishing cash reserves, our board of directors may reduce the amount of cash available for distribution to you.
Our partnership agreement requires our board of directors to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. These reserves also will affect the amount of cash available for distribution to our unitholders and they are not subject
to any specified maximum dollar amount. Our board of directors may establish reserves for distributions on the subordinated units, but only if those reserves will not prevent us from distributing the full minimum quarterly distribution, plus any arrearages, on the common units for the following four
quarters. As described above in Risks Inherent in Our BusinessWe must make substantial capital expenditures to maintain and replace the operating capacity of our fleet, which will reduce cash available for distribution. In addition, each quarter we are required to deduct estimated maintenance and
replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted, our partnership agreement requires our board of directors each quarter to deduct from operating surplus
estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, which could reduce the amount of available cash for distribution. The amount of estimated maintenance and replacement capital expenditures deducted from operating
surplus is subject to review and change by our board of directors at least once a year, provided that any change must be approved by the conflicts committee of our board of directors.
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Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80.0% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a
price not less than the then-current market price of our common units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right. As a result, you may be required to sell your common units
at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your units. For additional information about the limited call right, see The Partnership AgreementLimited Call Right.
At the completion of this offering and assuming no exercise of the underwriters option to purchase additional common units, GasLog, which owns and controls our general partner, will own
% of our common units. At the end of the subordination period, assuming no additional issuances of
common units, no exercise of the underwriters option to purchase additional common units and the conversion of our subordinated units into common units, GasLog will own
% of our common units.
You may not have limited liability if a court finds that unitholder action constitutes control of our business.
As a limited partner in a partnership organized under the laws of the Marshall Islands, you could be held liable for our obligations to the same extent as a general partner if you participate in the control of our business. Our general partner generally has unlimited liability for the obligations of the
partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner. In addition, the limitations on the liability of holders of limited partner interests for the obligations of a limited
partnership have not been clearly established in some jurisdictions in which we do business. See The Partnership AgreementLimited Liability for a discussion of the implications of the limitations on liability of a unitholder.
We can borrow money to pay distributions, which would reduce the amount of credit available to operate our business.
Our partnership agreement allows us to make working capital borrowings to pay distributions. Accordingly, if we have available borrowing capacity, we can make distributions on all our units even though cash generated by our operations may not be sufficient to pay such distributions. Any working
capital borrowings by us to make distributions will reduce the amount of working capital borrowings we can make for operating our business. For more information, see Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.
The price of our common units after this offering may be volatile.
The price of our common units after this offering may be volatile and may fluctuate due to factors including:
our payment of cash distributions to our unitholders;
actual or anticipated fluctuations in quarterly and annual results;
fluctuations in the seaborne transportation industry, including fluctuations in the LNG carrier market;
mergers and strategic alliances in the shipping industry;
changes in governmental regulations or maritime self-regulatory organizations standards;
shortfalls in our operating results from levels forecasted by securities analysts;
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announcements concerning us or our competitors;
the failure of securities analysts to publish research about us after this offering, or analysts making changes in their financial estimates;
general economic conditions;
terrorist acts;
future sales of our units or other securities;
investors perceptions of us and the LNG shipping industry;
the general state of the securities markets; and
other developments affecting us, our industry or our competitors.
Securities markets worldwide are experiencing significant price and volume fluctuations. The market price for our common units may also be volatile. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common units despite of our
operating performance. Consequently, you may not be able to sell our common units at prices equal to or greater than those that you pay in this offering.
Increases in interest rates may cause the market price of our common units to decline.
An increase in interest rates may cause a corresponding decline in demand for equity investments in general, and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common units resulting from other relatively
more attractive investment opportunities may cause the trading price of our common units to decline.
Unitholders may have liability to repay distributions.
Under some circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under the Marshall Islands Limited Partnership Act, or the Marshall Islands Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair
value of our assets. Marshall Islands law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limited partnership for the
distribution amount. Assignees who become substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the assignee at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the
partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
Prior to the May 2014 IPO, we had no history operating as a separate publicly traded entity and will incur increased costs as a result of being a publicly traded limited partnership.
Prior to the completion of our IPO in May 2014, we had no history operating as a separate publicly traded entity. As a publicly traded limited partnership, we are required to comply with the SECs reporting requirements and with corporate governance and related requirements of the Sarbanes-
Oxley Act of 2002, or the Sarbanes-Oxley Act, the SEC and the NYSE. We will incur significant legal, accounting and other expenses in complying with these and other applicable regulations. We anticipate that our incremental general and administrative expenses as a publicly traded limited
partnership will be approximately $2.4 million annually and will include costs associated with annual reports to unitholders, tax return preparation, investor relations, registrar and transfer agents fees, incremental director and officer liability insurance costs and officer and director compensation. In
addition, we expect to incur approximately $1.8 million per annum of costs and fees for the three vessels in our initial fleet pursuant to the administrative services agreement that we will enter into with GasLog. These expenses may increase further after we are no longer an
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emerging growth company and are required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common units less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies as described under SummaryImplications of Being an
Emerging Growth Company. We have elected to opt out of the extended transition period for complying with new or revised accounting standards under Section 107(b) of the JOBS Act, which election is irrevocable. We cannot predict if investors will find our common units less attractive because we
may rely on these exemptions. If some investors find our common units less attractive as a result, there may be a less active trading market for our common units and our unit price may be more volatile.
In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company. For as long as
we take advantage of the reduced reporting obligations, the information that we provide unitholders may be different than information provided by other public companies.
We have been organized as a limited partnership under the laws of the Marshall Islands, which does not have a well-developed body of partnership law.
We are a partnership formed in the Republic of the Marshall Islands, which does not have a well-developed body of case law or bankruptcy law and, as a result, unitholders have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States. Our
partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it
is to be applied and construed to make it uniform with the Delaware Revised Uniform Partnership Act and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law (or case law) of the State of Delaware. There
have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same
conclusions as the courts in Delaware. For example, the rights of our unitholders and the fiduciary responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unitholders may have more difficulty in
protecting their interests in the face of actions by our general partner and its officers and directors than would unitholders of a similarly organized limited partnership in the United States. Further, the Republic of the Marshall Islands does not have a well-developed body of bankruptcy law. As such, in
the case of a bankruptcy of the Partnership, there may be a delay of bankruptcy proceedings and the ability of unitholders and creditors to receive recovery after a bankruptcy proceeding. See Service of Process and Enforcement of Civil Liabilities.
Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. In addition, our general partner is a Marshall Islands limited liability company, and our directors and officers generally are or will be non-residents of the United
States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or
56
against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a
judgment against our assets or the assets of our general partner or our directors or officers. For more information regarding the relevant laws of the Marshall Islands, see Service of Process and Enforcement of Civil Liabilities.
Our partnership agreement designates the Court of Chancery of the State of Delaware as the sole and exclusive forum, unless otherwise provided for by Marshall Islands law, for certain litigation that may be initiated by our unitholders, which could limit our unitholders ability to obtain a favorable
judicial forum for disputes with our general partner.
Our partnership agreement provides that, unless otherwise provided for by Marshall Islands law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any claims that:
arise out of or relate in any way to the partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or
restrictions on, the limited partners or us);
are brought in a derivative manner on our behalf;
assert a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners;
assert a claim arising pursuant to any provision of the Marshall Islands Act; or
assert a claim governed by the internal affairs doctrine,
regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims. any person or entity otherwise acquiring any interest in our common units shall be deemed
to have notice of and to have consented to the provisions described above. This forum selection provision may limit our unitholders ability to obtain a judicial forum that they find favorable for disputes with us or our directors, officers or other employees or unitholders.
Tax Risks
In addition to the following risk factors, you should read BusinessTaxation of the Partnership, Material U.S. Federal Income Tax Considerations and Non-United States Tax Considerations for a more complete discussion of the expected material U.S. federal and non-U.S. income tax
considerations relating to us and the ownership and disposition of our common units.
We may be subject to taxes, which may reduce our cash available for distribution to you.
We and our subsidiaries may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of cash available for distribution. In computing our tax obligation in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that
are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on
us or our subsidiaries, further reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or our subsidiaries in jurisdictions in which operations are conducted. See BusinessTaxation of the Partnership.
57
U.S. tax authorities could treat us as a passive foreign investment company under certain circumstances, which would have adverse U.S. federal income tax consequences to U.S. unitholders.
A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes if at least 75.0% of its gross income for any taxable year consists of passive income or at least 50.0% of the
average value of its assets produce, or are held for the production of, passive income. For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated
parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute passive income. U.S. unitholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income
derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their interests in the PFIC.
Based on our current and projected method of operation, and an opinion of our U.S. counsel, Cravath, Swaine & Moore LLP, we believe that we will not be a PFIC for our current taxable year, and we expect that we will not be treated as a PFIC for any future taxable year. We have received an
opinion of our U.S. counsel in support of this position that concludes that the income our subsidiaries earn from certain of our present time-chartering activities should not constitute passive income for purposes of determining whether we are a PFIC. In addition, we have represented to our U.S. counsel
that we expect that more than 25.0% of our gross income for our current taxable year and each future year will arise from such time-chartering activities or other income our U.S. counsel has opined does not constitute passive income, and more than 50.0% of the average value of our assets for each such
year will be held for the production of such nonpassive income. Assuming the composition of our income and assets is consistent with these expectations, and assuming the accuracy of other representations we have made to our U.S. counsel for purposes of their opinion, our U.S. counsel is of the opinion
that we should not be a PFIC for our current taxable year or any future year. This opinion is based and its accuracy is conditioned on representations, valuations and projections provided by us regarding our assets, income and charters to our U.S. counsel. While we believe these representations,
valuations and projections to be accurate, the shipping market is volatile and no assurance can be given that they will continue to be accurate at any time in the future.
Moreover, there are legal uncertainties involved in determining whether the income derived from time-chartering activities constitutes rental income or income derived from the performance of services. In
Tidewater Inc. v. United States
, 565 F.3d 299 (5th Cir. 2009), the Fifth Circuit held that income
derived from certain time-chartering activities should be treated as rental income rather than services income for purposes of a provision of the Code relating to foreign sales corporations. In that case, the Fifth Circuit did not address the definition of passive income or the PFIC rules; however, the
reasoning of the case could have implications as to how the income from a time charter would be classified under such rules. If the reasoning of this case were extended to the PFIC context, the gross income we derive or are deemed to derive from our time-chartering activities may be treated as rental
income, and we would likely be treated as a PFIC. In published guidance, the Internal Revenue Service, or IRS, stated that it disagreed with the holding in
Tidewater
, and specified that time charters similar to those at issue in the case should be treated as service contracts. We have not sought, and we
do not expect to seek, an IRS ruling on the treatment of income generated from our time-chartering activities, and the opinion of our counsel is not binding on the IRS or any court. As a result, the IRS or a court could disagree with our position. No assurance can be given that this result will not occur.
In addition, although we intend to conduct our affairs in a manner to avoid, to the extent possible, being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future, or that we will not be a PFIC in the future. If the IRS were
to find that we are or have been a PFIC for any taxable year (and regardless of whether we remain a PFIC for any subsequent taxable year), our U.S. unitholders would face adverse U.S. federal income tax consequences. See Material U.S. Federal Income Tax ConsiderationsU.S. Federal Income
Taxation of U.S. HoldersPFIC
58
Status and Significant Tax Consequences for a more detailed discussion of the U.S. federal income tax consequences to U.S. unitholders if we are treated as a PFIC.
We may have to pay tax on U.S.-source income, which will reduce our cash flow.
Under the Code, the U.S. source gross transportation income of a ship-owning or chartering corporation, such as ourselves, is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under a tax treaty or Section 883 of the
Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States. For 2013, GasLog did not have any U.S.
source gross transportation income.
We may not qualify for the exemption from U.S. federal income tax under Section 883. Even if we do not qualify, we do not currently expect any resulting U.S. federal income tax liability to be material or materially reduce the earnings available for distribution to our unitholders. For a more
detailed discussion, see the section entitled BusinessTaxation of the PartnershipUnited States.
You may be subject to income tax in one or more non-U.S. jurisdictions as a result of owning our common units if, under the laws of any such jurisdiction, we are considered to be carrying on business there. Such laws may require you to file a tax return with, and pay taxes to, those jurisdictions.
We intend to conduct our affairs and cause each of our subsidiaries to operate its business in a manner that minimizes income taxes imposed upon us and our subsidiaries. Furthermore, we intend to conduct our affairs and cause each of our subsidiaries to operate its business in a manner that
minimizes the risk that unitholders may be treated as having a permanent establishment or taxable presence in a jurisdiction where we or our subsidiaries conduct activities simply by virtue of their ownership of our common units. However, because we are organized as a partnership, there is a risk in
some jurisdictions that our activities or the activities of our subsidiaries may rise to the level of a taxable presence that is attributed to our unitholders for tax purposes. If you are attributed such a taxable presence in a jurisdiction, you may be required to file a tax return with, and to pay tax in, that
jurisdiction based on your allocable share of our income. In addition, we may be required to obtain information from you in the event a tax authority requires such information to submit a tax return. We may be required to reduce distributions to you on account of any tax withholding obligations
imposed upon us by that jurisdiction in respect of such allocation to you. The United States may not allow a tax credit for any foreign income taxes that you directly or indirectly incur by virtue of an investment in us.
The ratio of dividend income to distributions on our common units is subject to business, economic and other uncertainties as well as tax reporting positions with which the IRS may disagree, which could result in a higher ratio of dividend income to distributions and adversely affect the value of our
common units.
We estimate that approximately 60% of the total cash distributions made to a purchaser of common units in this offering who owns those units from the date of this offering through the period ending December 31, 2017 will constitute dividend income for U.S. tax purposes. The remaining portion of
the distributions will be treated first as a nontaxable return of capital to the extent of the purchasers tax basis in its common units and thereafter as capital gain. These estimates are based on certain assumptions that are subject to business, economic, regulatory, competitive and political uncertainties
beyond our control. In addition, these estimates are based on current U.S. federal income tax law and tax reporting positions that we will adopt and with which the IRS could disagree. As a result of these uncertainties, these estimates may be incorrect and the actual percentage of total cash distributions
that will constitute dividend income could be higher, and any difference could adversely affect the value of the common units. See Material U.S. Federal Income Tax ConsiderationsU.S. Federal Income Taxation of U.S. HoldersRatio of Dividend Income to Distributions.
59
Statements included in this prospectus which are not historical facts (including statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements. The disclosure and analysis set forth in this
prospectus includes assumptions, expectations, projections, intentions and beliefs about future events in a number of places, particularly in relation to our operations, cash flows, financial position, plans, strategies, business prospects, changes and trends in our business and the markets in which we operate.
These statements are intended as forward-looking statements. In some cases, predictive, future-tense or forward-looking words such as believe, intend, anticipate, estimate, project, forecast, plan, potential, may, should, could and expect and similar expressions are intended to
identify forward-looking statements, but are not the exclusive means of identifying such statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our periodic reports that we will file with the SEC,
other information sent to our unitholders, and other written materials.
Forward-looking statements include, but are not limited to, such matters as:
general LNG and LNG shipping market conditions and trends, including charter rates, ship values, factors affecting supply and demand, technological advancements and opportunities for the profitable operations of LNG carriers;
future supply of, and demand for, natural gas;
our ability to leverage GasLogs relationships and reputation in the shipping industry;
our ability to enter into time charters with our existing customers as well as new customers;
our contracted charter revenue;
our customers performance of their obligations under our time charters and other contracts;
future operating or financial results and future revenues and expenses;
our future financial condition and liquidity;
our ability to purchase vessels from GasLog in the future, including the
GasLog Seattle
, the
Solaris
, the six vessels recently acquired from BG Group (including the two vessels to be acquired pursuant to the Pending Vessel Acquisition) and Hull Nos. 2072, 2073, 2102 and 2103;
the ability to borrow under the sponsor credit facility;
our ability to obtain financing to fund capital expenditures, acquisitions and other corporate activities, funding by banks of their financial commitments, and our ability to meet our obligations under our credit facilities;
future, pending or recent acquisitions of ships or other assets, business strategy, areas of possible expansion and expected capital spending or operating expenses;
our ability to complete the Pending Vessel Acquisition and the New Credit Facility;
our expectations relating to making cash distributions on the units, including any increases in cash distributions, and our ability to make such distributions;
our ability to enter into shipbuilding contracts for newbuildings and our expectations about the availability of existing LNG carriers to purchase, as well as our ability to consummate any such acquisitions;
our expectations about the time that it may take to construct and deliver newbuildings and the useful lives of our ships;
acceptance of a vessel by its charterer;
number of off-hire days, drydocking requirements and insurance costs;
our anticipated general and administrative expenses;
fluctuations in currencies and interest rates;
our ability to maintain long-term relationships with major energy companies;
60
expiration dates and extensions of charters;
our fees and expenses payable under the amended ship management agreements, the administrative services agreement and the amended commercial management agreements;
the anticipated taxation of our partnership and distributions to our unitholders;
estimated future maintenance and replacement capital expenditures;
GasLogs ability to retain key employees and provide services to us;
future sales of our common units in the public market;
our ability to maximize the use of our ships, including the re-employment or disposal of ships no longer under time charter commitments;
environmental and regulatory conditions, including changes in laws and regulations or actions taken by regulatory authorities;
the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business;
requirements imposed by classification societies;
risks inherent in ship operation, including the discharge of pollutants;
availability of skilled labor, ship crews and management;
potential disruption of shipping routes due to accidents, political events, piracy or acts by terrorists;
potential liability from future litigation;
our business strategy and other plans and objectives for future operations; and
other factors discussed in the Risk Factors section of this prospectus.
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are subject to risks and uncertainties that are described more fully in the Risk Factors section of this prospectus. Any of these factors or a combination of these factors could
materially affect future results of operations and the ultimate accuracy of the forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following:
changes in law, governmental rules and regulations, or actions taken by regulatory authorities;
changes in economic and competitive conditions affecting our business;
potential liability from future litigation;
length and number of off-hire periods and dependence on affiliated managers; and
other factors discussed in the Risk Factors section of this prospectus.
We caution that these and other forward-looking statements included in this prospectus represent our estimates and assumptions only as of the date of this prospectus and are not intended to give any assurance as to future results. Many of the forward-looking statements included in this prospectus
are based on our assumptions about factors that are beyond our ability to control or predict. Assumptions, expectations, projections, intentions and beliefs about future events may, and often do, vary from actual results and these differences can be material. The reasons for this include the risks,
uncertainties and factors described in the Risk Factors section of this prospectus. As a result, the forward-looking events discussed in this prospectus might not occur and our actual results may differ materially from those anticipated in the forward-looking statements. Accordingly, you should not unduly
rely on any forward-looking statements.
We undertake no obligation to update or revise any forward-looking statements contained in this prospectus, whether as a result of new information, future events, a change in our views or expectations or otherwise. New factors emerge from time to time, and it is not possible for us to predict all of
these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.
61
We expect to receive net proceeds of approximately $
million from the sale of common units offered by this prospectus (including $
million from the sale of general partner units to our general partner to maintain its 2.0% interest in us), based on a public offering price of $
per
common unit and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We expect to receive additional net proceeds of approximately $
million if the underwriters option to acquire additional common units is exercised in full, which includes an
additional $
million from our general partners related capital contribution. We will use the net proceeds from this offering to partially finance the Pending Vessel Acquisition and to prepay or refinance related indebtedness outstanding under the Citibank Facility. In the event that the Pending
Vessel Acquisition is not consummated, the net proceeds from this offering will be used for general partnership purposes.
The Citibank Facility bears interest at a rate of LIBOR plus a margin and the applicable tranches mature in April 2016. At June 30, 2014, the six month LIBOR plus applicable spread on the Citibank Facility was 2.83%. See Managements Discussion and Analysis of Financial Condition and Results
of OperationsBorrowing ActivitiesVessel Financing Agreements for a description of this credit facility. Borrowings under this facility were used to finance the construction of the vessels to be acquired pursuant to the Pending Vessel Acquisition.
An affiliate of Citigroup Global Markets Inc. is a lender under the Citibank Facility and will receive a portion of the proceeds of this offering. Accordingly, this offering is being made in compliance with Rule 5121 of FINRA. See Underwriting (Conflicts of Interest).
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The following table shows (a) cash and cash equivalents and (b) capitalization as of June 30, 2014 on an:
actual basis;
as adjusted basis, giving effect to scheduled principal amortization payments totaling $2.01 million during the period July 1, 2014 to August 1, 2014, and to a cash distribution of $4.13 million, or $0.20604 per unit, payable on August 14, 2014 to the unitholders of record on August 11, 2014;
as further adjusted basis, giving effect to (i) the issuance and sale of common units in this offering at a public offering price of $
per unit and the capital contribution by our general partner to maintain its 2.0% general partner interest in us, assuming no exercise of the underwriters option to
purchase additional units, (ii) the Pending Vessel Acquisition, including the assumption of related debt outstanding under the Citibank Facility, and (iii) the prepayment of $
due under the Citibank Facility in connection with the Pending Vessel Acquisition.
This table does not give effect to borrowing under the New Credit Facility to refinance our existing debt and the Citibank Facility.
This table is derived from and should be read together with the condensed combined and consolidated financial statements of GasLog Partners LP and the accompanying notes contained elsewhere in this prospectus. You should also read this table in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations.
As of June 30, 2014
Actual
As Adjusted
As Further
(dollars in thousands)
CASH
Cash and cash equivalents
$
52,570
$
46,435
$
CAPITALIZATION
Debt:
(1)
GasLog Shanghai and GasLog Santiago facility
252,448
250,443
GasLog Sydney facility
48,991
48,991
Citibank facility
Unamortized deferred loan issuance costs
(4,824
)
(4,824
)
Total debt
296,615
294,610
Partners Capital:
Common unitholders: 9,822,358 units issued and outstanding as of June 30, 2014 and as adjusted and
units issued and outstanding as further adjusted
189,588
187,564
Subordinated unitholders: 9,822,358 units issued and outstanding as of June 30, 2014, as adjusted and as further adjusted
94,872
92,848
General partner: 400,913 units issued and outstanding as of June 30, 2014 and as adjusted and
units issued and outstanding as further adjusted
3,876
3,793
Total Partners Capital
288,336
284,205
Total capitalization
$
584,951
$
578,815
$
(1)
All of our outstanding debt has been incurred by our vessel owning subsidiaries. It is secured by our vessels and guaranteed by GasLog and GasLog Carriers Ltd., an intermediate holding company for GasLog. See Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources.
63
Adjusted
PRICE RANGE OF OUR COMMON UNITS
Our common units started trading on the New York Stock Exchange under the symbol GLOP on May 7, 2014. The following table sets forth the high and low closing sale prices for the common units since the date of listing for the periods indicated.
Price Range
High
Low
Second Quarter 2014 (May 7, 2014 to June 30, 2014)
$
36.39
$
26.11
May 2014 (May 7, 2014 to May 31, 2014)
26.96
26.11
June 2014
36.39
27.95
July 2014
36.91
32.30
August 2014 (August 1, 2014 to August 13, 2014)
34.06
31.82
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OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS
You should read the following discussion of our cash distribution policy and restrictions on distributions in conjunction with specific assumptions included in this section. In addition, you should read Forward-Looking Statements and Risk Factors for information regarding statements that do not
relate strictly to historical or current facts and certain risks inherent in our business.
General
Rationale for Our Cash Distribution Policy
Our cash distribution policy reflects a judgment that our unitholders are better served by our distributing our available cash (after deducting expenses, including estimated maintenance and replacement capital expenditures and reserves) rather than retaining it, because we believe we will generally
finance any expansion capital expenditures from external financing sources. Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly (after deducting expenses, including estimated maintenance and
replacement capital expenditures and reserves).
Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictions and may be changed at any time, including:
Our unitholders have no contractual or legal right to receive distributions unless there is available cash at the end of each quarter as defined in our partnership agreement. The determination of available cash is subject to the broad discretion of our board of directors to establish reserves and other
limitations.
We are subject to restrictions on distributions under our financing agreements. Our financing agreements contain material financial tests and covenants that must be satisfied in order to pay distributions. If we are unable to satisfy the restrictions included in any of our financing agreements or are
otherwise in default under any of those agreements, as a result of our debt levels or otherwise, we will not be able to make cash distributions to you, notwithstanding our stated cash distribution policy. These financial tests and covenants are described in this prospectus in Managements Discussion
and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.
We are required to make substantial capital expenditures to maintain and replace our fleet. These expenditures may fluctuate significantly over time, particularly as our vessels near the end of their useful lives. In order to minimize these fluctuations, our partnership agreement requires us to deduct
estimated, as opposed to actual, maintenance and replacement capital expenditures from the amount of cash that we would otherwise have available for distribution to our unitholders. In years when estimated maintenance and replacement capital expenditures are higher than actual maintenance and
replacement capital expenditures, the amount of cash available for distribution to unitholders will be lower than if actual maintenance and replacement capital expenditures were deducted.
Although our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions contained therein requiring us to make cash distributions, may be amended. During the subordination period, with certain exceptions, our partnership agreement
may not be amended without the approval of non-affiliated common unitholders. After the subordination period has ended, our partnership agreement can be amended with the approval of a majority of the outstanding common units. GasLog will own common units representing a
%
ownership interest in us and all of our subordinated units outstanding immediately after the closing of this offering. See The Partnership AgreementAmendment of the Partnership Agreement.
Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is
65
determined by our board of directors, taking into consideration the terms of our partnership agreement.
Under Section 51 of the Marshall Islands Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets.
We may lack sufficient cash to pay distributions to our unitholders due to decreases in total operating revenues, decreases in hire rates, the loss of a vessel, increases in operating or general and administrative expenses, principal and interest payments on outstanding debt, taxes, working capital
requirements, maintenance and replacement capital expenditures or anticipated cash needs. See Risk Factors for a discussion of these factors.
Our ability to make distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute cash to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness,
applicable limited partnership and limited liability company laws in the Marshall Islands and other laws and regulations.
Distributions of Available Cash
General
Within 45 days after the end of each quarter, we will distribute all of our available cash (defined below) to unitholders of record on the applicable record date.
Definition of Available Cash
Available cash generally means, for each fiscal quarter, all cash on hand at the end of the quarter (including our proportionate share of cash on hand of any subsidiaries we do not wholly own):
less
, the amount of cash reserves (including our proportionate share of cash reserves of any subsidiaries we do not wholly own) established by our board of directors and our subsidiaries to:
provide for the proper conduct of our business (including reserves for future capital expenditures and for our anticipated credit needs);
comply with applicable law, any of our debt instruments or other agreements; and/or
provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (except to the extent establishing such reserves would cause us to not be able to distribute the minimum quarterly distribution (plus any arrearage) for such quarter);
Intent to Distribute the Minimum Quarterly Distribution
We intend to distribute to the holders of common units and subordinated units on a quarterly basis at least the minimum quarterly distribution of $0.375 per unit, or $1.50 per unit per year, to the extent we have sufficient cash on hand to pay the distribution after we establish cash reserves and pay
fees and expenses.
66
plus
, all cash on hand (including our proportionate share of cash on hand of any subsidiaries we do not wholly own) on the date of determination of available cash for the quarter resulting from (1) working capital borrowings made after the end of the quarter and (2) cash distributions received
after the end of the quarter from any equity interest in any person (other than a subsidiary of us), which distributions are paid by such person in respect of operations conducted by such person during such quarter. Working capital borrowings are generally borrowings that are made under a
revolving credit facility and in all cases are used solely for working capital purposes or to pay distributions to partners.
If the Pending Vessel Acquisition is consummated, our management intends to recommend to our board of directors an increase in our quarterly cash distribution of between $0.05625 and $0.06250 (between $0.225 and $0.250 per unit on an annualized basis), which would become effective for our
distribution with respect to the quarter ending
, 2014. Combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase to between $0.43125 to $0.43750 per quarter would result in the quarterly distribution exceeding the first incentive distribution right threshold of
$0.43125. Any such increase would be conditioned upon, among other things, the closing of the Pending Vessel Acquisition, the approval of such increase by our board of directors and the absence of any material adverse developments or potentially attractive opportunities that would make such an
increase inadvisable.
There is no guarantee that we will pay the minimum quarterly distribution on the common units and subordinated units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is
determined by our board of directors, taking into consideration the terms of our partnership agreement. We are effectively prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default is then existing, under our financing agreements. See
Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources for a discussion of the restrictions contained in our financing agreements that may restrict our ability to make distributions.
Operating Surplus and Capital Surplus
General
All cash distributed to unitholders will be characterized as either operating surplus or capital surplus. We treat distributions of available cash from operating surplus differently than distributions of available cash from capital surplus.
Definition of Operating Surplus
Operating surplus for any period generally means:
$19.0 million;
plus
all of our cash receipts (including our proportionate share of cash receipts of any subsidiaries we do not wholly own and provided that cash receipts from the termination of an interest rate, currency or commodity hedge contract prior to its specified termination date will be included in operating
surplus in equal quarterly installments over the remaining scheduled life of such hedge contract), excluding cash from (1) borrowings, other than working capital borrowings, (2) sales of equity and debt securities, (3) sales or other dispositions of assets outside the ordinary course of business, (4)
capital contributions or (5) corporate reorganizations or restructurings;
plus
working capital borrowings (including our proportionate share of working capital borrowings for any subsidiaries we do not wholly own) made after the end of a quarter but before the date of determination of operating surplus for the quarter;
plus
interest paid on debt incurred (including periodic net payments under related hedge contracts) and cash distributions paid on equity securities issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights and our proportionate share of such
interest and cash distributions paid by any subsidiaries we do not wholly own), in each case, to finance all or any portion of the construction, replacement or improvement of a capital asset (such as a vessel) in respect of the period from such financing until the earlier to occur of the date the capital
asset is put into service or the date that it is abandoned or disposed of;
plus
interest paid on debt incurred (including periodic net payments under related hedge contracts) and cash distributions paid on equity securities issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights and our
67
proportionate share of such interest and cash distributions paid by any subsidiaries we do not wholly own), in each case, to pay the construction period interest on debt incurred (including periodic net payments under related interest rate swap agreements), or to pay construction period distributions
on equity issued, to finance the construction projects described in the immediately preceding bullet;
less
all of our operating expenditures (which includes estimated maintenance and replacement capital expenditures and is further described below; including our proportionate share of operating expenditures by any subsidiaries we do not wholly own);
less
the amount of cash reserves (including our proportionate share of cash reserves for any subsidiaries we do not wholly own) established by our board of directors to provide funds for future operating expenditures;
less
any cash loss realized on dispositions of assets acquired using investment capital expenditures;
less
all working capital borrowings (including our proportionate share of working capital borrowings by any subsidiaries we do not wholly own) not repaid within twelve months after having been incurred.
If a working capital borrowing, which increases operating surplus, is not repaid during the twelve-month period following the borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will not
be treated as a reduction in operating surplus because operating surplus will have been previously reduced by the deemed repayment.
As described above, operating surplus includes a provision that will enable us, if we choose, to distribute as operating surplus up to $19.0 million of cash we receive in the future from non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be
distributed as capital surplus. In addition, the effect of including, as described above, certain cash distributions on equity securities or interest payments on debt in operating surplus would be to increase operating surplus by the amount of any such cash distributions or interest payments. As a result, we
may also distribute as operating surplus up to the amount of any such cash distributions or interest payments we receive from non-operating sources.
Operating expenditures generally means all of our cash expenditures, including but not limited to taxes, employee and director compensation, reimbursement of expenses to our general partner, repayment of working capital borrowings, debt service payments and payments made under any interest
rate, currency or commodity hedge contracts (provided that payments made in connection with the termination of any hedge contract prior to the expiration of its specified termination date be included in operating expenditures in equal quarterly installments over the remaining scheduled life of such
hedge contract), provided that operating expenditures will not include:
deemed repayments of working capital borrowings deducted from operating surplus pursuant to the last bullet point of the definition of operating surplus above when such repayment actually occurs;
payments (including prepayments and payment penalties) of principal of and premium on indebtedness, other than working capital borrowings;
expansion capital expenditures, investment capital expenditures or actual maintenance and replacement capital expenditures (which are discussed in further detail under Capital Expenditures below);
payment of transaction expenses (including taxes) relating to interim capital transactions; or
distributions to partners.
Capital Expenditures
For purposes of determining operating surplus, capital expenditures are classified as either maintenance and replacement capital expenditures, expansion capital expenditures or investment
68
capital expenditures. Maintenance and replacement capital expenditures are those capital expenditures required to maintain, over the long-term, the operating capacity of or the revenue generated by our capital assets.
Expansion capital expenditures are those capital expenditures that increase the operating capacity of or the revenue generated by our capital assets. To the extent, however, that capital expenditures associated with acquiring a new vessel or improving an existing vessel increase the revenues or the
operating capacity of our fleet, those capital expenditures would be classified as expansion capital expenditures.
Investment capital expenditures are those capital expenditures that are neither maintenance and replacement capital expenditures nor expansion capital expenditures. Investment capital expenditures largely will consist of capital expenditures made for investment purposes. Examples of investment
capital expenditures include traditional capital expenditures for investment purposes, such as purchases of equity securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes.
Examples of maintenance and replacement capital expenditures include capital expenditures associated with drydocking, modifying an existing vessel or acquiring a new vessel, to the extent such expenditures are incurred to maintain the operating capacity of or the revenue generated by our fleet.
Maintenance and replacement capital expenditures also include interest (and related fees) on debt incurred and distributions on equity issued (including the amount of any incremental distributions made to the holders of our incentive distribution rights) to finance the acquisition or construction of a
replacement vessel and paid in respect of the construction period. We define construction period as the period beginning on the date that we enter into a binding acquisition or construction contract and ending on the earlier of the date that the replacement vessel commences commercial service or the
date that the replacement vessel is abandoned or disposed of. Debt incurred to pay or equity issued to fund construction period interest payments, and distributions on such equity (including the amount of any incremental distributions made to the holders of our incentive distribution rights) are also
considered maintenance and replacement capital expenditures.
Because our maintenance and replacement capital expenditures can be very large and vary significantly in timing, the amount of our actual maintenance and replacement capital expenditures may differ substantially from period to period. In order to avoid these fluctuations having a similar effect on
operating surplus, adjusted operating surplus and available cash for distribution to our unitholders, our partnership agreement requires that an amount equal to an estimate of the average quarterly maintenance and replacement capital expenditures necessary to maintain the operating capacity of or the
revenue generated by our capital assets over the long term be subtracted from operating surplus each quarter, as opposed to the actual amounts spent. In our partnership agreement, we refer to these estimated maintenance and replacement capital expenditures to be subtracted from operating surplus as
estimated maintenance capital expenditures. The amount of estimated maintenance and replacement capital expenditures deducted from operating surplus is subject to review and change by our board of directors at least once a year, provided that any change must be approved by our conflicts
committee. The estimate is made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of our maintenance and replacement capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will affect our
fleet. For purposes of calculating operating surplus, any adjustment to this estimate will be prospective only. For a discussion of the amounts we have allocated toward estimated maintenance and replacement capital expenditures, see Our Cash Distribution Policy and Restrictions on Distributions.
The use of estimated maintenance and replacement capital expenditures in calculating operating surplus has the following effects:
it reduces the risk that actual maintenance and replacement capital expenditures in any one quarter will be large enough to make operating surplus less than the minimum quarterly distribution to be paid on all the units for that quarter and subsequent quarters;
it may reduce the need for us to borrow to pay distributions;
69
it may make it more difficult for us to raise our distribution above the minimum quarterly distribution and pay incentive distributions to GasLog; and
it reduces the likelihood that a large maintenance and replacement capital expenditure in a period will prevent GasLog from being able to convert some or all of its subordinated units into common units since the effect of an estimate is to spread the expected expense over several periods,
mitigating the effect of the actual payment of the expenditure on any single period.
Definition of Capital Surplus
Capital surplus generally will be generated only by:
borrowings other than working capital borrowings;
sales of debt and equity securities; and
sales or other dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or non-current assets sold as part of normal retirements or replacements of assets.
Characterization of Cash Distributions
We treat all available cash distributed as coming from operating surplus until the sum of all available cash distributed since we began operations equals the operating surplus as of the most recent date of determination of available cash. We treat any amount distributed in excess of operating surplus,
regardless of its source, as capital surplus. As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders. For example, it includes a provision that enables us, if we choose, to distribute as operating surplus up to $19.0 million of cash we
receive in the future from non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be distributed as capital surplus. We do not anticipate that we will make any distributions from capital surplus.
Subordination Period
General
During the subordination period, which we define below, the common units will have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.375 per unit, plus any arrearages in the payment of the minimum quarterly
distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. Distribution arrearages do not accrue on the subordinated units. The purpose of the subordinated units is to increase the likelihood that during
the subordination period there will be available cash from operating surplus to be distributed on the common units.
Definition of Subordination Period
The subordination period will extend until the second business day following the distribution of available cash from operating surplus in respect of any quarter, ending on or after March 31, 2017, that each of the following tests are met:
distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded the sum of the minimum quarterly distribution for each of the three consecutive four-quarter periods immediately preceding that date;
the adjusted operating surplus (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distributions on all of the outstanding common
70
units and subordinated units during those periods on a fully diluted weighted average basis and the related distribution on the 2.0% general partner interest during those periods; and
there are no outstanding arrearages in payment of the minimum quarterly distribution on the common units.
If the unitholders remove our general partner without cause, the subordination period will end before March 31, 2017.
For purposes of determining whether the tests in the bullets above have been met, the three consecutive, non-overlapping four-quarter periods for which the determination is being made may include one or more quarters with respect to which arrearages in the payment of the minimum quarterly
distribution on the common units have accrued, provided that all such arrearages have been repaid prior to the end of each such four-quarter period.
If the expiration of the subordination period occurs as a result of us having met the tests described above, each outstanding subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash.
Definition of Adjusted Operating Surplus
Adjusted operating surplus for any period generally means:
operating surplus generated with respect to that period (excluding any amounts attributable to the item described in the first bullet point under Operating Surplus and Capital SurplusDefinition of Operating Surplus above);
less
the amount of any net increase in working capital borrowings (including our proportionate share of any changes in working capital borrowings of any subsidiaries we do not wholly own) with respect to that period;
less
the amount of any net reduction in cash reserves for operating expenditures (including our proportionate share of cash reserves of any subsidiaries we do not wholly own) over that period not relating to an operating expenditure made during that period;
plus
the amount of any net decrease in working capital borrowings (including our proportionate share of any changes in working capital borrowings of any subsidiaries we do not wholly own) with respect to that period;
plus
the amount of any net increase in cash reserves for operating expenditures (including our proportionate share of cash reserves of any subsidiaries we do not wholly own) over that period required by any debt instrument for the repayment of principal, interest or premium;
plus
the amount of any net decrease made in subsequent periods to cash reserves for operating expenditures initially established with respect to such period to the extent such decrease results in a reduction in adjusted operating surplus in subsequent periods.
Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net increases in working capital borrowings and net drawdowns of reserves of cash generated in prior periods.
Effect of Removal of Our General Partner on the Subordination Period
If the unitholders remove our general partner other than for cause and units held by our general partner and its affiliates are not voted in favor of such removal:
the subordination period will end and each subordinated unit will immediately convert into one common unit and will then participate pro rata with the other common units in distributions of available cash;
any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and
71
our general partner will have the right to convert its general partner interest into common units or to receive cash in exchange for that interest.
Distributions of Available Cash From Operating Surplus During the Subordination Period
We will make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:
first
, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;
second
, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination
period;
third,
98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and
thereafter,
in the manner described in General Partner Interest and Incentive Distribution Rights below.
The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.
Distributions of Available Cash From Operating Surplus After the Subordination Period
We will make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:
first,
98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and
thereafter,
in the manner described in General Partner Interest and Incentive Distribution Rights below.
The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.
General Partner Interest
Our partnership agreement provides that our general partner initially will be entitled to 2.0% of all distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its 2.0% general partner
interest if we issue additional units. Our general partners 2.0% interest, and the percentage of our cash distributions to which it is entitled, will be proportionately reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us in order
to maintain its 2.0% general partner interest. Our general partner will be entitled to make a capital contribution in order to maintain its 2.0% general partner interest in the form of the contribution to us of common units based on the current market value of the contributed common units.
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. GasLog currently holds the incentive distribution rights.
The incentive distribution rights may be transferred separately from any other interests, subject to restrictions in the partnership agreement. Except for transfers of incentive distribution
72
rights to an affiliate or another entity as part of a merger or consolidation with or into, or sale of substantially all of the assets to, such entity, the approval of a majority of our common units (excluding common units held by our general partner and its affiliates), voting separately as a class, generally is
required for a transfer of the incentive distribution rights to a third party prior to March 31, 2019. See The Partnership AgreementTransfer of Incentive Distribution Rights. Any transfer by GasLog of the incentive distribution rights would not change the percentage allocations of quarterly distributions
with respect to such rights.
If for any quarter:
we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and
we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;
then, we will distribute any additional available cash from operating surplus for that quarter among the unitholders and our general partner in the following manner:
first,
98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total of $0.43125 per unit for that quarter (the first target distribution);
second,
85.0% to all unitholders, pro rata, 2.0% to our general partner and 13.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.46875 per unit for that quarter (the second target distribution);
third,
75.0% to all unitholders, pro rata, 2.0% to our general partner and 23.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives a total of $0.5625 per unit for that quarter (the third target distribution); and
thereafter,
50.0% to all unitholders, pro rata, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights, pro rata.
In each case, the amount of the target distribution set forth above is exclusive of any distributions to common unitholders to eliminate any cumulative arrearages in payment of the minimum quarterly distribution. The percentage interests set forth above assume that our general partner maintains its
2.0% general partner interest and that we do not issue additional classes of equity securities.
Percentage Allocations of Available Cash From Operating Surplus
The following table illustrates the percentage allocations of the additional available cash from operating surplus among the unitholders, our general partner and the holders of the incentive distribution rights up to the various target distribution levels. The amounts set forth under Marginal Percentage
Interest in Distributions are the percentage interests of the unitholders, our general partner and the holders of the incentive distribution rights in any available cash from operating surplus we distribute up to and including the corresponding amount in the column Total Quarterly Distribution Target
Amount, until available cash from operating surplus we distribute reaches the next target distribution level, if any. The percentage interests shown for the unitholders, our general partner and the holders of the incentive distribution rights for the minimum quarterly distribution are also applicable to
quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests shown for our general partner include its 2.0% general partner interest only and assume that our general partner has contributed any capital necessary to maintain its 2.0% general partner
interest.
73
Marginal Percentage Interest in Distributions
Total Quarterly
Unitholders
General
Holders of
Minimum Quarterly Distribution
$
0.375
98.0
%
2.0
%
0
%
First Target Distribution
up to
$
0.43125
98.0
%
2.0
%
0
%
above
$
0.43125
Second Target Distribution
up to
$
0.46875
85.0
%
2.0
%
13.0
%
above
$
0.46875
Third Target Distribution
up to
$
0.5625
75.0
%
2.0
%
23.0
%
Thereafter
above
$
0.5625
50.0
%
2.0
%
48.0
%
Distribution
Target Amount
Partner
IDRs
GasLogs Right to Reset Incentive Distribution Levels
GasLog, as the initial holder of our incentive distribution rights, has the right under our partnership agreement to elect to relinquish the right of the holders of our incentive distribution rights to receive incentive distribution payments based on the initial cash target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and cash target distribution levels upon which the incentive distribution payments to GasLog would be set. GasLogs right to reset the minimum quarterly distribution amount and the cash target distribution levels upon which the incentive distributions payable to GasLog are based may be exercised, without approval of our unitholders or the conflicts committee of our board of directors, at any time when there are no subordinated units outstanding and we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters. If at the time of any election to reset the minimum quarterly distribution amount and the cash target distribution levels GasLog and its affiliates are not the holders of a majority of the incentive distribution rights, then any such election to reset shall be subject to the prior written concurrence of our board of directors that the conditions described in the immediately preceding sentence have been satisfied. The reset minimum quarterly distribution amount and cash target distribution levels will be higher than the minimum quarterly distribution amount and the cash target distribution levels prior to the reset such that there will be no incentive distributions paid under the reset cash target distribution levels until cash distributions per unit following this event increase as described below. We anticipate that GasLog would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to GasLog.
In connection with the resetting of the minimum quarterly distribution amount and the cash target distribution levels and the corresponding relinquishment by GasLog of incentive distribution payments based on the cash target distribution levels prior to the reset, GasLog will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the cash parity value of the average cash distributions related to the incentive distribution rights received by GasLog for the two quarters prior to the reset event as compared to the average cash distributions per common unit during this period. We will also issue an additional amount of general partner units in order to maintain the general partners ownership interest in us relative to the issuance of the additional common units.
The number of common units that GasLog would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the cash target distribution levels then in effect would be equal to (x) the average amount of cash distributions received by GasLog in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election divided by (y) the average of the amount of cash distributed per common unit during each of these two quarters. The issuance of the additional common units will be conditioned upon approval of the listing or admission for trading of such common units by the national securities exchange on which the common units are then listed or admitted for trading.
74
Following a reset election, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the reset minimum quarterly distribution) and
the cash target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:
first,
98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount equal to 115.0% of the reset minimum quarterly distribution for that quarter;
second,
85.0% to all unitholders, pro rata, 2.0% to our general partner and 13.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for that quarter;
third,
75.0% to all unitholders, pro rata, 2.0% to our general partner and 23.0% to the holders of the incentive distribution rights, pro rata, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for that quarter; and
thereafter,
50.0% to all unitholders, pro rata, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights, pro rata.
Assuming that it continues to hold a majority of our incentive distribution rights, GasLog will be entitled to cause the minimum quarterly distribution amount and the cash target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time
when the holders of the incentive distribution rights have received incentive distributions for the prior four consecutive fiscal quarters based on the highest level of incentive distributions that the holders of incentive distribution rights are entitled to receive under our partnership agreement.
Distributions From Capital Surplus
How Distributions From Capital Surplus Will Be Made
We will make distributions of available cash from capital surplus, if any, in the following manner:
first,
98.0% to all unitholders, pro rata, and 2.0% to our general partner, until the minimum quarterly distribution is reduced to zero, as described below;
second,
98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and
thereafter,
we will make all distributions of available cash from capital surplus as if they were from operating surplus.
The preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.
Effect of a Distribution from Capital Surplus
The partnership agreement treats a distribution of capital surplus as the repayment of the consideration for the issuance of the units, which is a return of capital. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the cash target distribution levels will be
reduced in the same proportion as the distribution had to the fair market value of the common units prior to the announcement of the distribution. Because distributions of capital surplus will reduce the minimum quarterly distribution, after any of these distributions are made, it may be easier for
GasLog to receive incentive distributions and for the subordinated units to convert into common units. However, any distribution of capital surplus before the minimum quarterly distribution is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.
75
Once we reduce the minimum quarterly distribution and the cash target distribution levels to zero, we will then make all future distributions 50.0% to the holders of units, 2.0% to our general partner and 48.0% to the holders of the incentive distribution rights (initially, GasLog). The 2.0% interests
shown for our general partner assumes that our general partner maintains its 2.0% general partner interest.
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjusting the minimum quarterly distribution and cash target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide our units into a greater number of units, we will proportionately adjust:
the minimum quarterly distribution;
the cash target distribution levels; and
the initial unit price.
For example, if a two-for-one split of the common and subordinated units should occur, the minimum quarterly distribution, the cash target distribution levels and the initial unit price would each be reduced to 50.0% of its initial level. If we combine our common units into a lesser number of units or
subdivide our common units into a greater number of units, we will combine our subordinated units or subdivide our subordinated units, using the same ratio applied to the common units. We will not make any adjustment by reason of the issuance of additional units for cash or property.
Distributions of Cash Upon Liquidation
If we dissolve in accordance with the partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will apply the proceeds of liquidation in the manner set forth below.
If, as of the date three trading days prior to the announcement of the proposed liquidation, the average closing price for our common units for the preceding 20 trading days (or the current market price) is greater than the sum of:
any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;
plus
the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation);
then the proceeds of the liquidation will be applied as follows:
first,
98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the current market price of our common units;
second,
98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the current market price of our common units; and
thereafter,
50.0% to all unitholders, pro rata, 48.0% to holders of incentive distribution rights and 2.0% to our general partner.
If, as of the date three trading days prior to the announcement of the proposed liquidation, the current market price of our common units is equal to or less than the sum of:
any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;
plus
the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial liquidation);
then the proceeds of the liquidation will be applied as follows:
76
first,
98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial
liquidation);
second,
98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination
period;
third,
98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding subordinated unit an amount equal to the initial unit price (less any prior capital surplus distributions and any prior cash distributions made in connection with a partial
liquidation); and
thereafter,
50.0% to all unitholders, pro rata, 48.0% to holders of incentive distribution rights and 2.0% to our general partner.
The immediately preceding paragraph is based on the assumption that our general partner maintains its 2.0% general partner interest and that we do not issue additional classes of equity securities.
77
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table presents, in each case for the periods and as of the dates indicated, selected historical financial and operating data. Our historical combined and consolidated financial statements were prepared on the basis that the acquisition of our initial fleet constituted a reorganization of
companies under common control. The selected historical financial data as of and for the years ended December 31, 2012 and 2013 has been derived from the audited combined and consolidated financial statements of GasLog Partners LP, and the selected historical financial data as of June 30, 2014 and
for the six month periods ended June 30, 2013 and 2014 has been derived from the interim unaudited condensed combined and consolidated financial statements of GasLog Partners LP. The financial statements have been prepared in accordance with International Financial Reporting Standards, or
IFRS, as issued by the International Accounting Standards Board, or the IASB, which are included elsewhere in this prospectus.
The Pending Vessel Acquisition will be accounted for as a reorganization of companies under common control. Beginning with the first quarter following the completion of the Pending Vessel Acquisition, the Partnerships historical results will be retroactively restated to reflect the historical results of
the
Methane Rita Andrea
and
Methane Jane Elizabeth
during the periods they were owned by GasLog.
The following financial data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, the historical combined and consolidated financial statements of GasLog Partners LP, the interim unaudited condensed combined and
consolidated financial statements, and the notes thereto included elsewhere in this prospectus.
The results of operations reflect operations of the
GasLog Shanghai,
the
GasLog Santiago
and the
GasLog Sydne
y, which commenced operations under their respective charters from January 2013, March 2013 and May 2013, respectively.
Our results of operations, cash flows and financial conditions could differ from those that would have resulted if we operated autonomously or as an entity independent of GasLog in the periods prior to our IPO for which historical financial data is presented below, and such data may not be
indicative of our future operating results or financial performance.
Year Ended
Six Months Ended
2012
2013
2013
2014
(dollars in thousands)
Statement of Profit or Loss:
Revenues
$
$
64,143
$
21,735
$
41,717
Vessel operating costs
(13,097
)
(4,983
)
(7,946
)
Depreciation
(12,238
)
(4,129
)
(7,967
)
General and administrative expenses
(30
)
(1,525
)
(661
)
(1,707
)
(Loss)/profit from operations
(30
)
37,283
11,962
24,097
Financial costs
(1
)
(12,133
)
(4,117
)
(10,229
)
Financial income
110
32
16
9
(Loss)/gain on interest rate swaps
(940
)
1,036
2,747
(3,616
)
Total other expense
(831
)
(11,065
)
(1,354
)
(13,836
)
(Loss)/profit for the year/period
$
(861
)
$
26,218
$
10,608
$
10,261
Earnings per unit for the period May 12, 2014
Common unit
0.21
Subordinated unit
0.18
General partner unit
0.19
78
December 31,
June 30,
to June 30, 2014, Basic and Diluted:
(1)
As of
As of
2012
2013
2014
(dollars in thousands)
Statement of Financial Position Data:
Cash and cash equivalents
$
2
$
14,404
$
52,570
Vessels
(2)
562,531
554,732
Vessels under construction
118,482
Total assets
128,765
581,770
613,762
Loanscurrent portion
22,075
17,697
Loansnon-current portion
363,917
278,917
Total equity
106,629
156,169
288,336
Year Ended
Six Months Ended
2012
2013
2013
2014
(dollars in thousands)
Cash Flow Data:
Net cash (used in)/from operating activities
$
(110
)
$
32,159
$
15,545
$
12,779
Net cash from/(used in) investing activities
110
(454,263
)
(452,780
)
(1,491
)
Net cash from financing activities
436,506
448,754
26,878
Year Ended
Six Months Ended
2012
2013
2013
2014
Fleet Data:
Number of LNG carriers at end of period
3
3
3
Average number of LNG carriers during period
2.3
1.6
3
Average age of LNG carriers (years)
0.76
0.26
1.26
Total calendar days for fleet
833
282
543
Total operating days for fleet
(3)
833
282
543
Year Ended
Six Months Ended June 30,
2012
2013
2013
2014
(dollars in thousands)
Other Financial Data:
EBITDA
(4)
$
(30
)
$
49,521
$
16,091
$
32,064
Adjusted EBITDA
(4)
(42
)
49,559
16,105
32,133
Capital expenditures:
Payment for vessels under construction
452,792
452,792
December 31,
June 30,
December 31,
June 30,
December 31,
June 30,
December 31,
|
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(1) |
As disclosed in Note 1 to our audited combined and consolidated financial statements, the general partner interest, the common units and the subordinated units were issued to GasLog in exchange for the shares in GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd., which owned the three LNG vessels in our initial fleet, and to the other common unitholders in connection with the IPO on May 12, 2014. Earnings per unit is presented for the period in which the units were outstanding. |
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(2) |
Represents vessels in our initial fleet less accumulated depreciation. See Note 3 to our audited combined and consolidated financial statements and Note 4 to our interim unaudited condensed combined and consolidated financial statements included elsewhere in this prospectus. |
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(3) |
The operating days for our fleet is the total number of days in a given period that the vessels were in our possession less the total number of days off-hire. We define days off-hire as days lost to, among other things, operational deficiencies, drydocking for repairs, maintenance or inspection, equipment breakdowns, special surveys and vessel upgrades, delays due to accidents, crew strikes, certain vessel detentions or similar problems, our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, or periods of commercial waiting time during which we do not earn charter hire. |
79
(4)
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA.
We define EBITDA as earnings before interest income and expense, gain/loss on interest rate swaps, depreciation and amortization and taxes. Adjusted EBITDA is defined as EBITDA before foreign exchange gains/(losses). EBITDA is used as a supplemental
financial measure by management and external users of financial statements, such as our lenders, to assess our operating performance and ability to generate cash for debt service and capital expenditures, as well as our compliance with the financial covenants and restrictions contained in our financing
agreements. Adjusted EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as investors, to assess our operating performance and ability to generate cash for debt service and capital expenditures. We believe that adjusted EBITDA assists
our management and investors by increasing the comparability of our performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on interest rate swaps, foreign exchange gains/(losses), depreciation and
amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods. We believe that including adjusted EBITDA as an operating measure benefits
investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing operational strength and cash generating ability in assessing whether to continue to hold common units.
EBITDA and adjusted EBITDA have limitations as analytical tools and should not be considered alternatives to profit/(loss), profit/(loss) from operations, cash flow (used in)/from operating activities or any other measure of operating performance or liquidity presented in accordance with IFRS. Some
of these limitations include the fact that they do not reflect (i) our cash expenditures or future requirements for capital expenditures or contractual commitments, (ii) changes in, or cash requirements for our working capital needs and (iii) the significant interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such
replacements. They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows and other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure.
EBITDA and adjusted EBITDA exclude some, but not all, items that affect profit/(loss) and net cash from operating activities, and these measures may vary among other companies. Therefore, EBITDA and adjusted EBITDA as presented below may not be comparable to similarly titled measures of
other companies. The following tables reconcile EBITDA and adjusted EBITDA to profit/(loss) and net cash from operating activities, the most directly comparable IFRS financial measures, for the periods presented:
Year Ended
Six Months Ended
2012
2013
2013
2014
(dollars in thousands)
Reconciliation to profit/(loss):
(Loss)/profit
$
(861
)
$
26,218
$
10,608
$
10,261
Financial income
(110
)
(32
)
(15
)
(9
)
Financial costs
1
12,133
4,116
10,229
Loss/(gain) on interest rate swaps
940
(1,036
)
(2,747
)
3,616
Depreciation
12,238
4,129
7,967
EBITDA
$
(30
)
$
49,521
$
16,091
$
32,064
Foreign exchange (gains)/losses
(12
)
38
14
69
Adjusted EBITDA
$
(42
)
$
49,559
$
16,105
$
32,133
80
December 31,
June 30,
Year Ended
Six Months Ended
2012
2013
2013
2014
(dollars in thousands)
Reconciliation to net cash from operating activities:
Net cash (used in)/from operating activities
$
(110
)
$
32,159
$
15,545
$
14,793
Net increase in operating assets
960
1,543
1,780
791
Net increase in operating liabilities
(408
)
(8,324
)
(1,953
)
(1,444
)
Net change in related parties
(472
)
13,646
(1,852
)
10,280
Interest paid
9,223
2,237
6,418
Non-cash contributed services
(627
)
(421
)
Realized loss on interest rate swaps
1,901
755
1,226
EBITDA
$
(30
)
$
49,521
$
16,091
$
32,064
Foreign exchange (gains)/losses
(12
)
38
14
69
Adjusted EBITDA
$
(42
)
$
49,559
$
16,105
$
32,133
December 31,
June 30,
81
MANAGEMENTS DISCUSSION AND ANALYSIS OF
The following is a discussion of our financial condition and results of operations for the years 2013 and 2012 and for the six month periods ended June 30, 2014 and June 30, 2013. References to GasLog Partners, we, our, us and the Partnership or similar terms when used for the period
until the completion of the IPO refer to GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. When used for periods after the completion of the IPO, those terms refer to GasLog Partners LP and its subsidiaries. You should read this section in conjunction with the annual combined and consolidated
financial statements of the Partnership and the interim unaudited condensed combined and consolidated financial statements of GasLog Partners LP and its subsidiaries included elsewhere in this prospectus. Among other things, those financial statements include more detailed information regarding the
basis of presentation for the following information. The financial statements have been prepared in accordance with IFRS, as issued by the IASB, and are presented in U.S. dollars. This discussion contains forward-looking statements which, although based on assumptions that we consider reasonable, are
subject to risks and uncertainties. As a result of many factors, such as those set forth under Risk Factors and elsewhere in this prospectus, our actual results or events or conditions may differ materially from those anticipated in these forward-looking statements. Please see the section Forward-Looking
Statements at the beginning of this prospectus.
On May 12, 2014, the Partnership completed its IPO with the sale and issuance of 9,660,000 common units (including 1,260,000 units in relation to the overallotment option exercised in full by the underwriters), resulting in gross proceeds of $202.86 million and representing a 48.2% limited partner
interest. Concurrently with the IPO, the Partnership acquired a 100% ownership interest in GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. from GasLog in exchange for (i) 162,358 common units and 9,822,538 subordinated units issued to GasLog, representing a 49.8% limited partner interest and all
of the incentive distribution rights that entitle GasLog to increasing percentages of the cash that the Partnership distributes in excess of $0.43125 per unit per quarter, (ii) 400,913 general partner units issued to GasLog Partners GP LLC, a wholly owned subsidiary of GasLog, representing a 2.0% general
partner interest and (iii) $65.70 million of cash consideration paid directly to GasLog from the IPO proceeds.
As of June 30, 2014, GasLog holds a 51.8% interest of the Partnership and, as a result of its ownership of the general partner, and the fact that the general partner elects the majority of the Partnerships directors in accordance with Partnership agreement, GasLog has the ability to control the
Partnerships affairs and policies.
In addition to the cash consideration of $65.70 million paid to GasLog, GasLog Partners used the net IPO proceeds of $186.03 million to (a) prepay $82.63 million of debt plus accrued interest of $0.42 million and (b) make a payment of $2.28 million (including $0.27 million accrued interest) to settle
the marked-to-market loss on termination of one interest rate swap and reduction of a second interest rate swap in connection with the aforementioned debt prepayment. The balance of $35.00 million was retained by the Partnership for general partnership purposes.
Prior to the closing of the IPO, we did not own any vessels. The following discussion assumes that our business was operated as a separate entity prior to its inception. The Partnership was accounted for as a reorganization of entities under common control. The consideration for the 100% interests in
the subsidiaries which own a 100% interest in the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
that were contributed to us was determined based on fair values; however, since GasLog and the Partnership are entities under common control, the consideration was accounted for at
historical carrying values.
The annual combined and consolidated financial statements and the interim unaudited condensed combined and consolidated financial statements, the results of which are discussed below, include the accounts of the Partnership and its subsidiaries assuming that they are consolidated for all periods
presented, as they were under the common control of GasLog. All significant intra-group transactions and balances are eliminated.
For the periods prior to the closing of the IPO, our financial position, results of operations and cash flows reflected in our financial statements include all expenses allocable to our business, but
82
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
may not be indicative of those that would have been incurred had we operated as a separate public entity for all years presented or of future results. Other than as discussed below under Items You Should Consider When Evaluating Our Historical Financial Performance and Assessing Our Future
Prospects, the vessels and all of their related assets, liabilities, revenues, expenses and cash flows contributed to us in connection with the IPO reflect all of the net assets included in the financial statements in the years discussed below. We manage our business and analyze and report our results of
operations in a single segment.
Overview
We are a growth-oriented limited partnership focused on owning, operating and acquiring LNG carriers engaged in LNG transportation under long-term charters, which we define as charters of five full years or more. Our initial fleet of three LNG carriers, which have charter terms expiring in 2018
and 2019, were contributed to us by GasLog, which controls us through its ownership of our general partner.
Our initial fleet consists of three LNG carriers, built in 2013, with modern tri-fuel diesel electric propulsion technology that operate under long-term charters with subsidiaries of BG Group. We also have options and other rights under which we may acquire additional LNG carriers from GasLog, as
described below. We believe that such options and rights provide us with significant built-in growth opportunities. We may also acquire vessels from shipyards or other owners. We intend to operate our vessels under long-term charters with predictable cash flows and to grow our position in the LNG
market through further acquisitions of LNG carriers from GasLog and third parties. We believe we can grow our distributions per unit organically by providing reliable customer service to our charterers and leveraging GasLogs relationships, expertise and reputation. We intend to make further
acquisitions of LNG carriers from GasLog, including the Pending Vessel Acquisition, and third parties to grow our fleet. However, we cannot assure you that we will make any particular acquisition or that as a consequence we will successfully grow our per unit distributions. Among other things, our
ability to acquire additional LNG carriers will be dependent upon our ability to raise additional equity and debt financing.
GasLog is, we believe, a leading independent international owner, operator and manager of LNG carriers and provides support to international energy companies as part of their LNG logistics chain. GasLog was founded and is effectively controlled by its chairman, Peter G. Livanos, whose familys
shipping activities commenced more than 100 years ago. On April 4, 2012, GasLog completed its initial public offering, and its common shares began trading on the New York Stock Exchange on March 30, 2012, under the symbol GLOG. At the time of its initial public offering, GasLogs owned fleet
consisted of ten LNG carriers, including eight newbuildings on order. Since its initial public offering, GasLog has increased by approximately 126% the total carrying capacity of vessels in its fleet, which includes vessels on the water and newbuildings on order. This increase includes: two LNG newbuilding
orders announced in February 2013, two LNG newbuilding orders announced in August 2013, two LNG newbuilding orders and two exercised options for newbuilding orders announced in June 2014, all of which are expected to be delivered through the second half of 2017; the acquisition of one 2010
built LNG carrier announced in September 2013; and six secondhand steam-powered ships that were acquired from BG Group in April and June 2014. Each of the four newbuildings announced in 2013 is under a long-term charter, which will commence upon delivery. Since January 1, 2013, GasLog has
taken delivery of five LNG carriers. As of August 1, 2014, GasLog has a fully owned 22 ship fleet, including 12 ships on the water and 10 LNG carriers on order from Samsung and Hyundai, as well as a 51.8% ownership in the Partnership.
83
Initial Fleet
Our initial fleet consists of:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
GasLog Shanghai
2013
155,000
BG Group
January 2018
20212026
GasLog Santiago
2013
155,000
BG Group
March 2018
20212026
GasLog Sydney
2013
155,000
BG Group
May 2019
20222027
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
The charters may be extended for up to two extension periods of three or four years, and each charter requires that the charterer provide us with 90 days notice before the charter expiration of its exercise of any extension option. The period shown reflects the expiration of the minimum optional
period and the maximum optional period.
Pending Vessel Acquisition
On August 14, 2014, we entered into a Share Purchase Agreement to purchase from GasLog Carriers, a direct subsidiary of GasLog, 100% of the ownership interests in GAS-sixteen Ltd. and GAS-seventeen Ltd., the entities that own the
Methane Rita Andrea
and the
Methane Jane Elizabeth
,
respectively, for an aggregate purchase price of $328.0 million, which will be funded with a combination of new or existing debt (as discussed above) and proceeds raised in this offering. GasLog purchased the
Methane Rita Andrea
and the
Methane Jane Elizabeth
from BG Group in April 2014. In
connection with the transaction, the Partnership will acquire GAS-sixteen Ltd. and GAS-seventeen Ltd. with $2.0 million of positive net working capital existing at the time of closing. GasLog supervised the construction of each ship and has provided technical management for the ships since delivery.
The entities being purchased pursuant to the Pending Vessel Acquisition currently have $217.0 million of outstanding indebtedness in respect of the two vessels to be acquired. In connection with the Pending Vessel Acquisition, such indebtedness is expected to be partially prepaid with a portion of
the proceeds of this offering. In addition, at or shortly following the closing of the Pending Vessel Acquisition, we expect to refinance all our outstanding indebtedness and the indebtedness of the entities being acquired pursuant to the Pending Vessel Acquisition with borrowing under the New Credit
Facility (as defined below). See Recent Developments.
The following table provides information about the ships to be purchased under the Pending Vessel Acquisition:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
Methane Rita Andrea
2006
145,000
BG Group
April 2020
20212026
Methane Jane Elizabeth
2006
145,000
BG Group
October 2019
20212026
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
Charterer may extend either or both of these charters for one extension period of three or five years, and each charter requires that the charterer provide us with advance notice of its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the
maximum optional period.
The Pending Vessel Acquisition and the purchase price were approved by our board of directors and the conflicts committee of our board of directors. The conflicts committee retained an independent financial advisor to assist it in evaluating the Pending Vessel Acquisition. In determining that the
Pending Vessel Acquisition is fair and reasonable to us, the conflicts committee obtained the views of its financial advisor as to the fairness of the purchase price.
84
Capacity
(cbm)
Expiration
Period
(2)
Capacity
(cbm)
Expiration
Period
(2)
We have agreed to the Pending Vessel Acquisition for the following reasons:
the long-term, fixed-rate charters with BG Group fits our objective of generating stable cash flows;
the Pending Vessel Acquisition will increase the scale and diversity of our operations;
the Pending Vessel Acquisition is expected to increase our financial strength and flexibility by increasing our cash flow; and
the Pending Vessel Acquisition is expected to increase our cash available for distribution to our unitholders.
We estimate that the vessels being acquired will generate $47.7 million of incremental contracted revenue over their initial charter terms and add over $34.5 million per annum to our EBITDA
(1)
. However, we may not realize that level of revenue or EBITDA from the acquisition of these vessels.
If the Pending Vessel Acquisition is consummated, our management intends to recommend to our board of directors an increase in our quarterly cash distribution of between $0.05625 and $0.06250 (between $0.225 and $0.250 per unit on an annualized basis), which would become effective for our
distribution with respect to the quarter ending
, 2014. Combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase to between $0.43125 to $0.43750 per quarter would result in the quarterly distribution exceeding the first incentive distribution right threshold of
$0.43125. Any such increase would be conditioned upon, among other things, the closing of the Pending Vessel Acquisition, the approval of such increase by our board of directors and the absence of any material adverse developments or potentially attractive opportunities that would make such an
increase inadvisable.
(1)
Non-GAAP Financial Measures
EBITDA.
We define EBITDA as earnings before interest income and expense, gain/loss on interest rate swaps, depreciation and amortization and taxes. EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as our lenders, to assess our
operating performance and ability to generate cash for debt service and capital expenditures, as well as our compliance with the financial covenants and restrictions contained in our financing agreements. We believe that EBITDA assists our management and investors by increasing the comparability of
our performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on interest rate swaps, depreciation and amortization and taxes, which items are affected by various and possibly changing financing
methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods. We believe that including EBITDA as an operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring
our ongoing operational strength and cash generating ability in assessing whether to continue to hold common units.
EBITDA has limitations as an analytical tool (see Selected Historical Financial and Operating Data) and should not be considered an alternative to profit/(loss), profit/(loss) from operations, cash flow (used in)/from operating activities or any other measure of operating performance or liquidity
presented in accordance with IFRS. EBITDA excludes some, but not all, items that affect profit/(loss) and net cash from operating activities, and these measures may vary among other companies. Therefore, EBITDA may not be comparable to similarly titled measures of other companies.
Estimated EBITDA for the two LNG carriers we are purchasing for the first twelve months of operation is based on the following assumptions:
closing of the Pending Vessel Acquisition in the third quarter of 2014 and timely receipt of charter hire specified in the charter contracts;
utilization of 363 days per year and no drydocking;
85
vessel operating and supervision costs and charter commissions per current internal estimates; and
general and administrative expenses based on managements current internal estimates.
We consider the above assumptions to be reasonable as of the date of this prospectus, but if these assumptions prove to be incorrect, actual EBITDA for the vessels could differ materially from our estimates. The prospective financial information was not prepared with a view toward public disclosure
or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants. Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial
information contained above, nor have they expressed any opinion or any other form of assurance on such information or its achievability and assume no responsibility for, and disclaim any association with, such prospective financial information.
We intend to use the proceeds of this offering, and the related capital contribution to us by our general partner, to partially fund the purchase price for the Pending Vessel Acquisition and to prepay or refinance related indebtedness.
We expect the Pending Vessel Acquisition to close following the closing of this offering, subject to the Partnership obtaining the funds necessary to pay the purchase price and the satisfaction of certain other closing conditions. The Pending Vessel Acquisition may not close as anticipated or it may
close with adjusted terms. See Risk FactorsRisks Inherent in Our BusinessThe Pending Vessel Acquisition may not close as anticipated or it may close with adjusted terms. This offering is not conditioned on the closing of the Pending Vessel Acquisition. If the Pending Vessel Acquisition does not close,
we will use the net proceeds from this offering and the related capital contribution to us by our general partner for general partnership purposes.
The Pending Vessel Acquisition will be accounted for as a reorganization of companies under common control. Beginning with the first quarter following the completion of the Pending Vessel Acquisition, the Partnerships historical results will be retroactively restated to reflect the historical results of
the
Methane Rita Andrea
and
Methane Jane Elizabeth
during the periods they were owned by GasLog.
Recent Developments
GasLog Partners LP
On August 1, 2014, we announced a partial cash distribution for the second quarter of 2014 of $4.13 million, or $0.20604 per unit, pro-rated from the IPO closing date through June 30, 2014, payable on August 14, 2014 to all unitholders of record as of August 11, 2014. This distribution corresponds to
a quarterly distribution of $0.375 per unit, or $1.50 per unit per year.
On August 5, 2014, we entered into a commitment letter and a coordination letter with Citibank for a credit facility for up to $450 million to refinance the existing debt facilities for our initial fleet, as well as the debt facilities for the vessels to be acquired pursuant to the Pending Vessel Acquisition.
The refinanced debt is expected to have a tenor of five years and an amortization profile of 20 years, which we believe will increase our financial flexibility. The New Credit Facility will be secured by a first priority mortgage on each of our current vessels and, when delivered, the vessels to be acquired
pursuant to the Pending Vessel Acquisition, a specific assignment of each of the existing charters and a first assignment of earnings and insurances in relation to the vessels. The New Credit Facility will bear interest at LIBOR plus a margin and will be payable in 20 equal quarterly payments of $5.625
million each and a balloon payment of $337.5 million together with the final quarterly payment. We expect that the New Credit Facility will have financial and restrictive covenants that are consistent with our existing debt. The closing of the New Credit Facility is subject to conditions precedent, including
the negotiation and execution of final documentation and final lender approvals. We expect the New Credit Facility to be entered into and funded at or shortly following the closing of the Pending Vessel Acquisition. In addition, at the closing of the Pending Vessel Acquisition, we expect to use a portion
of the proceeds from this offering to prepay amounts related to the
Methane Rita Andrea
and
Methane Jane Elizabeth
86
currently outstanding under the Facility Agreement between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. as borrowers, Citibank, N.A., London Branch, as mandated lead arranger, the financial institutions listed in Schedule 1 thereto as lenders, Citibank as bookrunner, Citibank
International Plc as agent of the other finance parties and Citibank as security agent and trustee, which such borrowers entered into to finance the purchase of the
Methane Rita Andrea
and the
Methane Jane Elizabeth
(as well as the
Methane Lydon Volney
, which is not being acquired in the Pending
Vessel Acquisition). See Liquidity and Capital Resources.
If the New Credit Facility described above is not entered into and funded at or prior to the closing of the Pending Vessel Acquisition, (1) the Citibank Facility will remain in place and (2) as required by the Citibank Facility, we and GasLog Partners Holdings LLC, our wholly owned subsidiary, will
enter into a guarantee agreement with Citibank pursuant to which we and GasLog Partners Holdings LLC will guarantee the obligations of the borrowers under the Citibank Facility (including GAS-eighteen Ltd., an entity that will not be acquired from GasLog under the Pending Vessel Acquisition). See
Liquidity and Capital Resources. The funding of the New Credit Facility is not a condition to the completion of this offering or the Pending Vessel Acquisition.
GasLog Ltd.
In May 2014, subsidiaries of GasLog entered into shipbuilding contracts with Samsung for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the first and second half of 2017, respectively.
In June 2014, subsidiaries of GasLog entered into shipbuilding contracts with Hyundai for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the second half of 2017.
On June 30, 2014, GasLog took delivery of the
Solaris
, a 155,000 cbm LNG carrier constructed by Samsung that commenced her seven year charter party agreement with Shell.
Option Vessels
We have the option to purchase the following 12 LNG carriers from GasLog, including the two vessels to be acquired pursuant to the Pending Vessel Acquisition, within 36 months after each such vessels acceptance by its charterer (or, in the case of the
GasLog Seattle
and the six vessels recently
acquired from BG Group, including the two vessels subject to the Pending Vessel Acquisition, 36 months after the closing of the IPO), in each case at fair market value as determined pursuant to the omnibus agreement.
Our ability to purchase these optional vessels, should we exercise our right to purchase such vessels, is dependent on our ability to obtain financing to fund all or a portion of the acquisition costs of these vessels and may be dependent on the consent of existing lenders to GasLog with respect to
these optional vessels. See Risk FactorsRisks Inherent in Our BusinessWe may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or financing agreement. As of the date of this prospectus, we have not secured any financing in connection with the 12 optional
vessels (other than those to be acquired pursuant to the Pending Vessel Acquisition). In connection with the Pending Vessel Acquisition, we will enter into the New Credit Facility or the Guarantee. See Recent Developments.
87
LNG Carrier
Year Built
(1)
Cargo
Charterer
(2)
Charter
GasLog Seattle
2013
155,000
Shell
December 2020
Solaris
2014
155,000
Shell
June 2021
Hull No. 2072
Q1 2016
174,000
BG Group
2026
Hull No. 2073
Q2 2016
174,000
BG Group
2026
Hull No. 2102
Q3 2016
174,000
BG Group
2023
Hull No. 2103
Q4 2016
174,000
BG Group
2023
Methane Rita Andrea
(4)
2006
145,000
BG Group
April 2020
Methane Jane Elizabeth
(4)
2006
145,000
BG Group
October 2019
Methane Lydon Volney
2006
145,000
BG Group
October 2020
Methane Shirley Elisabeth
2007
145,000
BG Group
December 2019
Methane Heather Sally
2007
145,000
BG Group
December 2020
Methane Alison Victoria
2007
145,000
BG Group
June 2020
Capacity
(cbm)
Expiration
(3)
|
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(1) |
For newbuildings, expected delivery quarters are presented. |
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(2) |
Vessels are chartered to a subsidiary of BG Group or a subsidiary of Shell, as applicable. |
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(3) |
Indicates the expiration of the initial term. The charterer of the Methane Rita Andrea , the Methane Jane Elizabeth and the Methane Lydon Volney has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. In addition, the charterer of the Methane Shirley Elisabeth , the Methane Heather Sally and the Methane Alison Victoria has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. For the other vessels in the above table, the charterers have unilateral options to extend the term of the time charters for periods ranging from 5 to 10 years, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter. |
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(4) |
Vessels to be acquired pursuant to the Pending Vessel Acquisition. See Pending Vessel Acquisition. |
GasLog also has the following 10 additional carriers in its fleet, which it will be required to offer to us for purchase at fair market value as determined pursuant to the omnibus agreement if charters are secured with committed terms of five full years or more:
|
|
|
|
|
|
|
|
|
|||||
LNG Carrier |
Year Built (1) |
Cargo
|
Charterer (2) |
Charter
|
|||||||||
GasLog Savannah |
2010 |
|
|
155,000 |
BG Group |
September 2015 (3) |
|||||||
GasLog Singapore |
2010 |
|
|
155,000 |
BG Group |
September 2016 (3) |
|||||||
GasLog Skagen |
2013 |
|
|
155,000 |
BG Group |
April 2021 (4) |
|||||||
GasLog Chelsea |
2010 |
|
|
153,600 |
Spot Market |
N/A |
|||||||
Hull No. 2043 |
Q4 2014 |
|
|
155,000 |
N/A |
N/A |
|||||||
Hull No. 2044 |
Q1 2015 |
|
|
155,000 |
N/A |
N/A |
|||||||
Hull No. 2130 |
Q2 2017 |
|
|
174,000 |
N/A |
N/A |
|||||||
Hull No. 2131 |
Q3 2018 |
|
|
174,000 |
N/A |
N/A |
|||||||
Hull No. 2800 |
Q3 2017 |
|
|
174,000 |
N/A |
N/A |
|||||||
Hull No. 2801 |
Q4 2017 |
|
|
174,000 |
N/A |
N/A |
|
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(1) |
For newbuildings, expected delivery quarters are presented. |
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(2) |
Vessels are chartered to a subsidiary of BG Group or a spot market counterparty, as indicated. |
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(3) |
Indicates the expiration of the initial term. The charterers have unilateral options to extend the term of the time charters for periods ranging from 30 to 90 months, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter. |
88
(4)
Time charter provides for full employment for three years and a subsequent five year seasonal charter under which the ship is employed for seven months and available to accept other charters for five months.
In addition to the LNG carriers described in the preceding paragraphs, we intend to leverage our relationship with GasLog to make accretive acquisitions of LNG carriers with long-term charters from GasLog and third parties to increase our distributions per unit. Pursuant to the omnibus agreement,
GasLog will be required to offer to us for purchase any other LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or acquires if charters are secured with committed terms of five full years or more. Except as discussed elsewhere in
this prospectus, this right will continue throughout the entire term of the omnibus agreement. In addition to GasLogs committed order book, GasLog currently holds fixed price options from Samsung on two additional 174,000 cbm newbuildings with delivery dates in 2017 and early 2018. If GasLog
exercises these options, Samsung has agreed to grant GasLog two additional options. GasLog also holds fixed price options from Hyundai on four additional 174,000 cbm newbuildings with delivery dates in late 2017 and during 2018. In addition, we will have a right of first offer with regard to any
proposed sale, transfer or other disposition of any LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation under a charter of five full years or more that GasLog owns, as discussed elsewhere in this prospectus. Our ability to acquire additional LNG carriers
from GasLog is subject to obtaining any applicable consents of governmental authorities and other non-affiliated third parties, including the relevant lenders and charterers. Under the omnibus agreement, GasLog will be obligated to use reasonable efforts to obtain any such consents. Our ability to
exercise any right to acquire additional LNG carriers will also be subject to our ability to obtain additional equity and debt financing. We cannot assure you that in any particular case the necessary consent will be obtained. See Certain Relationships and Related Party TransactionsOmnibus Agreement.
Our Charters
We generate revenues by charging customers for the transportation of their LNG using our LNG carriers. These services are provided under time charters, whereby the vessels that we operate, and for which we are responsible for providing crews, are chartered to customers for a fixed period of time
at hire rates that are generally fixed. In the case of our initial fleet, such hire rates increase annually based on a fixed percentage, although existing charters on certain of the vessels subject to the purchase options do not have similar provisions. Where included, such adjustment provisions may enable us
to offset expected increases in operating costs to the extent that such provisions are included in our charter contracts. Under our time charters, hire payments may be reduced if the vessel does not perform to certain of its specifications, such as if the average vessel speed falls below a guaranteed speed or
the amount of fuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount and the customer is responsible for substantially all voyage expenses incurred.
When the vessel is off-hire, as described below, the customer generally is not required to pay the hire rate and we are responsible for all costs. Prolonged off-hire may lead to vessel substitution or termination of the time charter. A vessel generally will be deemed off-hire if there is a loss of time
due to, among other things:
operational deficiencies; scheduled and unscheduled drydocking for repairs, maintenance or inspection; equipment breakdowns; or delays due to accidents, crew strikes, certain vessel detentions or similar problems; or
our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew.
For more information on our charters, see BusinessShip Time Charters.
89
Historical Employment of Our Fleet
All vessels in our initial fleet have operated under a time charter with a subsidiary of BG Group, which commenced upon each vessels delivery date.
Items You Should Consider When Evaluating Our Historical Financial Performance and Assessing Our Future Prospects
Our result of operations, cash flows and financial conditions could differ from those that would have resulted if we operated autonomously or as an entity independent of GasLog in the years for which historical financial data is presented below, and such data may not be indicative of our future
operating results or financial performance.
You should consider the following facts when evaluating our historical results of operations and assessing our future prospects:
The size of our fleet continues to change.
Our historical results of operations reflect changes in the size and composition of our fleet due to certain vessel deliveries. For example, each of the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
were delivered from the shipyard during
2013 and did not have any historical operations prior to that time. In addition, pursuant to the omnibus agreement, (i) we have the option to purchase from GasLog 12 additional LNG carriers, the
GasLog Seattle
, the
Solaris
, the six vessels recently acquired from BG Group (including the two
vessels to be acquired pursuant to the Pending Vessel Acquisition), and Hull Nos. 2072, 2073, 2102 and 2103, at fair market value as determined in accordance with the provisions of the omnibus agreement, and (ii) GasLog will be required to offer to us for purchase at fair market value any LNG
carrier with a cargo capacity greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or acquires (including the newbuildings covered under option contracts with Samsung and Hyundai if GasLog exercises such options) if charters are secured with committed terms of
five full years or more. Furthermore, we may grow through the acquisition in the future of other vessels as part of our growth strategy. Our historical results do not reflect the results of the vessels to be acquired pursuant to the Pending Vessel Acquisition.
Our leverage and associated finance expenses have been reduced after the IPO.
We amended and obtained waivers and confirmations under certain of our existing financing agreements in connection with the IPO to permit the transactions pursuant to which we acquired our initial fleet, prepaid
certain outstanding balances with the proceeds of the IPO, and, we therefore, reduced our debt outstanding and interest expense deriving from the respective financing agreements. We intend to enter into the New Credit Facility to refinance our existing financing agreements and those of the
entities being acquired pursuant to the Pending Vessel Acquisition. For descriptions of our financing agreements, see Liquidity and Capital ResourcesBorrowing Activities.
Our future results of operations may be affected by fluctuations in currency exchange rates.
All of the revenue generated from our initial fleet is denominated in U.S. dollars, and the majority of our expenses, including debt repayment obligations under our credit facilities and a portion of our
administrative expenses, are denominated in U.S. dollars. However, a portion of the ship operating expenses, primarily crew wages of officers, and a large portion of our administrative expenses are denominated in euros. The composition of our vessel operating expenses may vary over time
depending upon the location of future charters and/or the composition of our crews. All of our financing and interest expenses are also denominated in U.S. dollars. We anticipate that all of our future financing agreements will also be denominated in U.S. dollars.
Our historical results of operations reflect administrative costs that are not necessarily indicative of future administrative costs.
The administrative costs included in our historical results of operations are the actual administrative costs of the Partnership and are not necessarily indicative of our
future administrative costs or the costs that we would have incurred as a stand-alone business. Upon the completion of the IPO, we entered into an
90
administrative services agreement with GasLog, pursuant to which we pay an annual fixed fee of $0.6 million per vessel to GasLog in exchange for GasLogs providing administrative services to us. For a more detailed description of this arrangement, see Certain Relationships and Related Party
TransactionsAdministrative Services Agreement.
Our commercial management agreements and ship management agreements were amended after the completion of the IPO.
Our operating subsidiaries are party to commercial management agreements, which were amended in connection with the IPO, pursuant to which we will reimburse GasLog
for the reasonable costs and expenses incurred in connection with providing commercial management services to us. For the three vessels in our initial fleet, we expect that we will pay approximately $1.1 million under the amended commercial management agreements for the twelve months ending
September 30, 2015. For a more detailed description of this arrangement, see Certain Relationships and Related Party TransactionsCommercial Management Agreements. In addition, our operating subsidiaries are party to ship management agreements, which were amended upon the completion of
the IPO, with GasLog LNG Services that govern the crew and technical management of the vessels in our fleet. For the three vessels in our initial fleet, we expect that our operating subsidiaries will pay GasLog LNG Services $1.7 million in total under the amended ship management agreements
for the twelve months ending September 30, 2015. For a more detailed description of this arrangement, see Certain Relationships and Related Party TransactionsShip Management Agreements. While we currently expect that the aggregate annualized payments under the amended commercial
management agreements and ship management agreements for the twelve months ended September 30, 2015 will be generally consistent with the aggregate annualized expenses we incurred for commercial management and ship management for the twelve months ended December 31, 2013 (however,
because our initial vessels were delivered from the shipyard during 2013, the expenses during the 2013 period reflect only a portion of the year) and reflected in our historical results of operations, we may incur higher expenses for commercial management and ship management under these
agreements in future periods.
We will incur additional general and administrative expense as a publicly traded partnership.
We expect to incur approximately $2.4 million in additional general and administrative expenses as a publicly traded limited partnership that we had not incurred before the IPO, including costs associated
with the preparation of disclosure documents, increased legal and accounting costs, investor relations costs, incremental director and officer liability insurance costs, as well as costs related to compliance with the Sarbanes-Oxley Act and the Dodd Frank Wall Street Reform and Consumer Protection
Act, or the Dodd-Frank Act.
Factors Affecting Our Results of Operations
We believe the principal factors that will affect our future results of operations include:
the number and availability of our LNG carriers, including the two vessels to be acquired pursuant to the Pending Vessel Acquisition which operate under charters with initial terms that expire in 2019 and 2020, and the other 10 LNG carriers that will be subject to charters with committed terms of
five full years or more upon delivery and our ability to acquire any of GasLog s other existing or future LNG carriers with cargo capacities greater than 75,000 cbm, engaged in oceangoing LNG transportation including the newbuildings covered under option contracts with Samsung and Hyundai, to
the extent that charters are secured on these vessels with committed terms of five full years or more;
our ability to maintain good working relationships with our existing customers and our ability to increase the number of our customers through the development of new working relationships;
the performance of our charterers;
the supply and demand relationship for LNG shipping services;
our ability to successfully re-employ our ships at economically attractive rates;
91
the effective and efficient technical management of our ships;
our ability to obtain acceptable debt financing in respect of our capital commitments;
our ability to obtain and maintain regulatory approvals and to satisfy technical, health, safety and compliance standards that meet our customers requirements; and
economic, regulatory, political and governmental conditions that affect shipping and the LNG industry, which include changes in the number of new LNG importing countries and regions, as well as structural LNG market changes impacting LNG supply that may allow greater flexibility and
competition of other energy sources with global LNG use.
In addition to the general factors discussed above, we believe certain specific factors have impacted, and will continue to impact, our results of operations. These factors include:
the hire rate earned by our ships;
unscheduled off-hire days;
the level of our ship operating expenses, including crewing costs, insurance and maintenance costs;
our level of debt, the related interest expense and the timing of required payments of principal;
mark-to-market changes in any interest rate swaps and foreign currency fluctuations; and
the level of our general and administrative expenses, including salaries and costs of consultants.
See Risk Factors for a discussion of certain risks inherent in our business.
Principal Components of Revenues and Expenses
Revenues
Our revenues are driven primarily by the number of LNG carriers in our fleet, the amount of daily charter hire that they earn under time charters and the number of operating days during which they generate revenues. These factors, in turn, are affected by our decisions relating to ship acquisitions
and disposals, the amount of time that our ships spend in drydock undergoing repairs, maintenance and upgrade work, the age, condition and technical specifications of our ships, as well as the relative levels of supply and demand in the LNG carrier charter market. Under the terms of our time charter
arrangements for our initial fleet, the operating cost component of the daily hire rate is intended to correspond to the costs of operating the ship. Accordingly, we will receive additional revenue under such time charters through an annual escalation of the operating cost component of the daily hire rate.
To the extent that such provisions are included in charters for any additional vessels we acquire, we believe these adjustment provisions can provide substantial protection against significant cost increases. See BusinessShip Time ChartersHire Rate Provisions for a more detailed discussion of the hire rate
provisions of our charter contracts.
Our LNG carriers are employed through time charter contracts. Revenues under our time charters are recognized when services are performed, revenue is earned and the collection of the revenue is reasonably assured. The charter hire revenue is recognized on a straight-line basis over the term of
the relevant time charter. We do not recognize revenue during days when the ship is off-hire. Advance payments under time charter contracts are classified as liabilities until such time as the criteria for recognizing the revenue are met.
Vessel Operating Costs
Vessel operating costs of our initial fleet consist of two components: voyage expenses and ship operating expenses. Under our time charter arrangements, charterers bear substantially all voyage expenses, including bunker fuel, port charges and canal tolls, but not commissions. Commissions are
recognized as expenses on a pro rata basis over the duration of the period of the time charter.
92
We are generally responsible for ship operating expenses, which include costs for crewing, insurance, repairs, modifications and maintenance, including drydocking, lubricants, spare parts and consumable stores and other miscellaneous expenses, as well as the associated cost of providing these items
and services. However, as described above, the hire rate provisions of our time charters are intended to reflect the operating costs borne by us. The charters on the three vessels in our initial fleet contain hire rate provisions that provide for an automatic periodic adjustment, which is designed to reduce
our exposure to increases in operating costs. Ship operating expenses are recognized as expenses when incurred.
Depreciation
We depreciate the cost of our ships on the basis of two components: a vessel component and a drydocking component. The vessel component is depreciated on a straight-line basis over the expected useful life of each ship, based on the cost of the ship less its estimated residual value. We estimate
the useful lives of our ships to be 35 years from the date of delivery from the shipyard. Furthermore, we estimate the residual values of our ships to be 10% of the initial ship cost, which represents our estimate of the market value of the ship at the end of its useful life.
We must periodically drydock each of our ships for inspection, repairs and maintenance and any modifications to comply with industry certification or governmental requirements. All our ships are required to be drydocked for these inspections at least once every five years. At the time of delivery of
a ship, we estimate the drydocking component of the cost of the ship, which represents the estimated cost of the ships first drydocking based on our historical experience with similar types of ships. The drydocking component of the ships cost is depreciated over a five-year period.
General and Administrative Expenses
Historically, general and administrative expenses have principally consisted of travel and accommodation expenses, legal and professional expenses, consultancy services, naming ceremony expenses, commercial management fees and other advisor costs.
After the completion of the IPO, we incurred and expect to incur additional general and administrative expenses going forward as a public company, including costs associated with the preparation of disclosure documents, increased legal and accounting costs, investor relations costs, incremental
director and officer liability insurance costs, as well as costs related to compliance with Sarbanes-Oxley Act and Dodd-Frank Act. We also incurred and will continue to incur personnel costs for administrative and support staff pursuant to the administrative services agreement with GasLog.
Financial Costs
We incur interest expense on the outstanding indebtedness under our credit facilities and the swap arrangements that qualify for treatment as cash flow hedges for financial reporting purposes, which we include in our financial costs. Financial costs also include amortization of other loan issuance costs
incurred in connection with establishing our credit facilities. Despite the fact that our total debt was reduced by using the proceeds of the IPO, we will incur additional interest expense and other borrowing costs in the future to the extent we incur additional debt to acquire additional ships, including in
connection with the Pending Vessel Acquisition.
Interest expense and amortization of loan issuance costs are expensed as incurred.
Financial Income
Financial income consists of interest income, which will depend on the level of our cash deposits, investments and prevailing interest rates. Interest income is recognized on an accrual basis.
93
Gain/(Loss) on Interest Rate Swaps
Any gain or loss derived from the fair value of the interest rate swaps at their inception, the ineffective portion of changes in the fair value of the interest rate swaps that meet hedge accounting criteria and net interest on interest rate swaps held for trading, the movement in the fair value of the
interest rate swaps that have not been designated as hedges and the amortization of the cumulative unrealized loss for the interest rate swaps that hedge accounting was discontinued are presented as gain or loss on interest rate swaps.
Results of Operations
Six month period ended June 30, 2014 compared to the six month period ended June 30, 2013
The table below presents our operating results for the six months ended June 30, 2014 and for the six months ended June 30, 2013. Our three LNG carriers, the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
were delivered and immediately commenced their time charter with BG
Group in January, March and May 2013, respectively; therefore, our results for the two periods are not comparable because prior to the delivery of our vessels, we only incurred general and administrative expenses and financial costs. In addition, following the completion of the IPO on May 12, 2014,
total debt was significantly reduced and additional public company general and administrative expenses have been incurred.
Period ended June 30,
2013
2014
Change
Statement of profit or loss
(in thousands of U.S. dollars)
Revenues
$
21,735
$
41,717
$
19,982
Vessel operating costs
(4,983
)
(7,946
)
(2,963
)
Depreciation
(4,129
)
(7,967
)
(3,838
)
General and administrative expenses
(661
)
(1,707
)
(1,046
)
Profit from operations
11,962
24,097
12,135
Financial costs
(4,117
)
(10,229
)
(6,112
)
Financial income
16
9
(7
)
Gain/(loss) on interest rate swaps
2,747
(3,616
)
(6.363
)
Profit for the period
$
10,608
$
10,261
$
(347
)
Revenues:
Revenues increased by $19.98 million or 91.90% from $21.74 million for the six month period ended June 30, 2013, to $41.72 million for the same period in 2014. The increase is mainly attributable to the deliveries of the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
on
January 28, 2013, March 25, 2013 and May 30, 2013, respectively, and the commencement of their charter party agreements. As a result of the vessel deliveries, the operating days increased to 543 days for the six month period ended in 2014, as compared to 282 days for the six month period ended in
2013.
Vessel Operating Costs:
Vessel operating costs increased by $2.96 million or 59.44% from $4.98 million for the six month period ended June 30, 2013, to $7.94 million for the same period in 2014. The increase was mainly attributable to the increased operating days in the six month period ended June
30, 2014.
Depreciation:
Depreciation increased by $3.84 million or 92.98% from $4.13 million for the six month period ended June 30, 2013, to $7.97 million for the same period in 2014. The increase is mainly attributable to the deliveries of the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
in various days during the first six months of 2013 and the fact that depreciation charges for that period commenced from each vessels delivery date to June 30, 2013, compared to the first six months of 2014 where the vessels were in operation for the whole period.
General and Administrative Expenses:
General and administrative expenses increased by $1.05 million or 159.09% from $0.66 million for the six month period ended June 30, 2013, to $1.71 million for the same period in 2014. The increase is mainly attributable to board of directors fees of $0.21
million, the increase in commercial management and administrative fees of $0.56 million
94
deriving from the amended and new agreements that became effective after the completion of the IPO, a $0.18 million increase in legal and professional fees and an increase of $0.10 million in all other expenses.
Financial Costs:
Financial costs increased by $6.11 million or 148.30% from $4.12 million for the six month period ended June 30, 2013, to $10.23 million for the same period in 2014. The increase is mainly attributable to the $3.26 million write-off of the unamortized loan fees of the prepaid debt and
an increase in interest expense deriving from higher weighted average outstanding debt and weighted average interest rate. During the six month period ended June 30, 2014, we had an average of $367.5 million of outstanding indebtedness, having an aggregate weighted average interest rate of 3.87%,
compared to an average of $227.8 million of outstanding indebtedness with a weighted average interest rate of 3.72% during the six month period ended June 30, 2013. These weighted average interest rates include both floating and hedged debt (including the effect from the swaps classified as held for
trading). During the period from the completion of the IPO until June 30, 2014, the average outstanding indebtedness was decreased to $303.52 million at a weighted average interest rate of 3.83%.
Gain/(Loss) on Interest Rate Swaps:
Gain/(loss) on interest rate swaps increased by $6.37 million or 231.63% from a $2.75 million gain for the six month period ended June 30, 2013, to a $3.62 million loss for the same period in 2014. The increase in loss is mainly attributable to a $4.26 million
increase in loss from the mark-to-market valuation of our interest rate swaps which are carried at fair value through profit or loss, an increase of $1.62 million in loss that was reclassified from equity to the profit or loss statement related to the interest rate swaps for which hedge accounting was
discontinued mainly because the debt was repaid, and an increase of $0.47 million in realized loss from interest rate swaps held for trading.
Financial Income:
Financial income slightly decreased by $0.01 million or 50% from $0.02 million for the six month period ended June 30, 2013, to $0.01 million for the same period in 2014.
Profit for the Period:
Profit for the period decreased by $0.35 million or 3.30% from $10.61 million for the six month period ended June 30, 2013 to $10.26 million for the same period in 2014, as a result of the aforementioned factors.
Year ended December 31, 2013 compared to the year ended December 31, 2012
The below table presents our operating results for the year ended December 31, 2013 and for the year ended December 31, 2012. Our three LNG carriers, the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
were delivered and immediately commenced their time charter with BG
Group in January, March and May 2013, respectively; therefore, our results for the two years are not comparable because prior to the delivery of our vessels, we only incurred general and administrative expenses and financial costs.
Year ended December 31,
2012
2013
Change
Statement of profit or loss
(in thousands of U.S. dollars)
Revenues
$
$
64,143
$
64,143
Vessel operating costs
(13,097
)
(13,097
)
Depreciation
(12,238
)
(12,238
)
General and administrative expenses
(30
)
(1,525
)
(1,495
)
(Loss)/profit from operations
(30
)
37,283
37,313
Financial costs
(1
)
(12,133
)
(12,132
)
Financial income
110
32
(78
)
(Loss)/gain on interest rate swaps
(940
)
1,036
1,976
(Loss)/profit for the year
$
(861
)
$
26,218
$
27,079
Revenues:
Revenues for the year ended December 31, 2013 amounted to $64.14 million and represent time charter hire earned by the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
from January 28, 2013, March 25, 2013 and May 30, 2013, the respective vessels delivery date, to
December 31, 2013, which were all related to current time charters with the BG Group.
95
Vessel Operating Costs:
Vessel operating costs for the year ended December 31, 2013 amounted to $13.10 million mainly due to the daily costs associated with running the vessels from their delivery dates until December 31, 2013.
Depreciation:
Depreciation for the year ended December 31, 2013 amounted to $12.24 million and represents the depreciation charge of the
GasLog Shanghai
, the GasLog Santiago and the
GasLog Sydney
for the period from each vessels delivery date to December 31, 2013.
General and Administrative Expenses:
General and administrative expenses increased by $1.50 million, to $1.53 million during the year ended December 31, 2013, from $0.03 million during the year ended December 31, 2012. The increase was mainly attributable to $1.24 million of commercial
management services provided by GasLog, an increase of $0.20 million in naming ceremony expenses, an increase of $0.01 million in legal and professional fees for the three vessels delivered in the first half of 2013 and an increase in foreign exchange loss of $0.05 million.
Financial Costs:
Financial costs for the year ended December 31, 2013 amounted to $12.13 million mainly representing interest costs on our bank financing received on delivery of our vessels and net interest paid on our interest rate swaps that are hedge accounted. Prior to the delivery of our vessels,
we had no outstanding indebtedness. During the year ended December 31, 2013, we had an average of $315.51 million of outstanding indebtedness with a weighted average interest rate of 3.24% and amortization of deferred financing fees of $1.70 million.
Financial Income:
Financial income decreased by 72.73%, or $0.08 million, to $0.03 million for the year ended December 31, 2013, from $0.11 million for the year ended December 31, 2012 due to the decrease in time deposits placed during the year ended December 31, 2013.
Gain/(Loss) on Interest Rate Swaps:
Gain/(loss) on interest rate swaps increased by $1.98 million, to a $1.04 million gain during the year ended December 31, 2013, from a $0.94 million loss during the year ended December 31, 2012. The increase is mainly attributable to an increase of $3.88 million
in unrealized gain on interest rate swaps, partially offset by the $1.90 million realized loss on interest rate swaps held for trading.
Unrealized gain on interest rate swaps, increased by $3.88 million to a $2.94 million gain during the year ended December 31, 2013, from a $0.94 million loss during the year ended December 31, 2012. The increase is mainly attributable to (i) a $3.58 million gain from the mark-to-market valuation of
our two interest rate swaps for which hedge accounting was discontinued during 2013 and (ii) a loss recognized of $0.93 million in 2012, relating to a loss at inception of two interest rate swaps signed in the first half of 2012 (no interest rate swaps were entered into in 2013), partially offset by $0.65
million that was reclassified from equity to the statement of profit or loss relating to the interest rate swaps for which hedge accounting was discontinued.
(Loss)/Profit for the Year:
Profit for the year ended December 31, 2013 increased by $27.08 million to $26.22 million, from a loss of $0.86 million during the year ended December 31, 2012 as a result of the aforementioned factors.
Customers
We currently derive all of our revenues from one customer, BG Group.
Seasonality
Since our vessels are employed under multi-year, fixed-rate charter arrangements, seasonal trends do not impact the revenues during the year.
Liquidity and Capital Resources
We operate in a capital-intensive industry, and we expect to finance the purchase of additional vessels and other capital expenditures through a combination of borrowings from commercial banks, cash generated from operations and debt and equity financings. In addition to paying distributions, our
other liquidity requirements relate to servicing our debt, funding investments (including the equity portion of investments in vessels and maintenance capital expenditures during drydockings),
96
funding working capital and maintaining cash reserves against fluctuations in operating cash flows. In connection with the IPO, we amended our existing vessel financing agreements to permit the transactions pursuant to which we acquired our initial fleet. Following the completion of the IPO, we entered
into a $30.0 million revolving credit facility with GasLog (which we refer to as the sponsor credit facility). We believe our current resources, including the sponsor credit facility, are sufficient to meet our working capital requirements for our current business. Generally, our sources of funds will be cash
from operations, long-term bank borrowings and other debt and equity financings. Because we expect to distribute all of our available cash, we expect that we will rely upon external financing sources, including bank borrowings and the issuance of debt and equity securities, to fund any acquisitions and
other capital expenditures.
Our funding and treasury activities are intended to maximize investment returns while maintaining appropriate liquidity. We have not made use of derivative instruments other than for interest rate risk management purposes, and we expect to economically hedge all or a majority of our exposure to
interest rate fluctuations in the future by entering into new interest rate swap contracts.
As of June 30, 2014, we had $52.57 million of cash and cash equivalents, of which $1.95 million was held in a retention account in connection with the next installment and interest payment due under the credit facility of GAS-three Ltd., and $35.00 million was held in time deposits. Moreover, as of
June 30, 2014, we had $3.00 million held in time deposits with an initial duration of more than three months but less than a year that have been classified as short-term investments.
As of June 30, 2014, we had an aggregate of $301.44 million of indebtedness outstanding under two credit agreements, of which $19.10 million is repayable within one year.
The Partnership has hedged 73.5% of its floating interest rate exposure at a weighted average interest rate of approximately 4.14% (including margin) until January 2018.
Capital Structure and Cash Distributions
Following the IPO, 9,822,358 common units and 9,822,358 subordinated units, representing a 49.0% and 49.0% limited partner interest in us, respectively, are outstanding. As of August 1, 2014, GasLog owns 162,358 of our common units. In addition, GasLog owns all of our subordinated units and all
of our incentive distribution rights, which entitle GasLog to increasing percentages of the cash we distribute in excess of $0.43125 per unit per quarter, and GasLog Partners GP LLC, a wholly owned subsidiary of GasLog, owns the 2.0% general partner interest in us. For a description of the relative rights
and privileges of holders of common units and subordinated units, and of holders of general partner units and incentive distribution rights, in and to partnership distributions, see this section and Our Cash Distribution Policy and Restrictions on Distributions. For a description of the rights and privileges
of the partners under our partnership agreement, including voting rights, see The Partnership Agreement.
The principal difference between our common units and subordinated units is that in any quarter during the subordination period, the subordinated units are entitled to receive the minimum quarterly distribution of $0.375 per unit only after the common units have received the minimum quarterly
distribution and arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. The subordination period generally will end if we have earned and paid at least $0.375 on each outstanding common and subordinated unit and the
corresponding distribution on our general partners 2.0% interest for any three consecutive four-quarter periods ending on or after March 31, 2017. If the subordination period ends as a result of us having met the tests described above, all subordinated units will convert into common units on a one-for-
one basis, and the common units will no longer be entitled to arrearages. See Our Cash Distribution Policy and Restrictions on DistributionsSubordination Period.
If at any time our general partner and its affiliates own more than 80.0% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all, but not less than all, of the remaining common units at a price equal to the greater of (x) the average of the daily
closing prices of the common units over the 20 trading days preceding the date three days
97
before the notice of exercise of the call right is first mailed and (y) the highest price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. Our general partner is not obligated to obtain a fairness opinion regarding the
value of the common units to be repurchased by it upon the exercise of this limited call right.
We can issue an unlimited number of additional units, including units that are senior to the common units in rights of distribution, liquidation and voting, on the terms and conditions determined by our board of directors, without the consent of our unitholders. See Units Eligible for Future Sale
and The Partnership AgreementIssuance of Additional Interests.
GasLog, as the initial holder of all of our incentive distribution rights, has the right, at a time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48.0%) for each of the prior four consecutive fiscal quarters, to reset
the initial cash target distribution levels at higher levels based on the distribution at the time of the exercise of the reset election. If GasLog transfers all or a portion of the incentive distribution rights it holds in the future, then the holder or holders of a majority of our incentive distribution rights will be
entitled to exercise this right. Following a reset election by GasLog, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (we refer to such amount as the
reset minimum quarterly distribution amount), and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution amount as our current target distribution levels. In connection with resetting these target
distribution levels, GasLog will be entitled to receive a number of common units equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to it on the incentive distribution rights in the prior two quarters. The general partner will also
receive additional general partner units in order to maintain its ownership interest relative to the common units. For a more detailed description of GasLogs right to reset the target distribution levels upon which the incentive distribution payments are based, see Our Cash Distribution Policy and
Restrictions on DistributionsGasLogs Right to Reset Incentive Distribution Levels.
According to the distribution policy, as it is stated by the partnership agreement, we intend to make minimum quarterly distributions of $0.375 per common unit ($1.50 per unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and
payment of fees and expenses, including payments to our general partner. In general, we will pay any cash distributions we make each quarter in the following manner:
first, 98.0% to the holders of common units and 2.0% to our general partner, until each common unit has received a minimum quarterly distribution of $0.375 plus any arrearages from prior quarters;
second, 98.0% to the holders of subordinated units and 2.0% to our general partner, until each subordinated unit has received a minimum quarterly distribution of $0.375; and
third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unit has received an aggregate distribution of $0.43125.
Within 45 days after the end of each fiscal quarter, we distribute all of our available cash to unitholders of record on the applicable record date. We adjusted the minimum quarterly distribution for the period from the closing of the IPO through June 30, 2014 based on the actual length of the period.
Our ability to pay our minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption Our Cash Distribution Policy and Restrictions on Distributions. If cash distributions to our unitholders exceed $0.43125 per unit in a quarter, holders of
our incentive distribution rights (initially, GasLog) will receive increasing percentages, up to 48.0%, of the cash we distribute in excess of that amount. We refer to these distributions as incentive distributions. We must distribute all of our cash on hand at the end of each quarter, less reserves
established by our board of directors to provide for the proper conduct of our business, to comply with any applicable debt instruments or to provide funds for future distributions. We refer to this cash as available cash, and we define its meaning in our partnership
98
agreement. The amount of available cash may be greater than or less than the aggregate amount of the minimum quarterly distribution to be distributed on all units. See Description of the Common Units and The Partnership Agreement.
Working Capital Position
Taking into account generally expected market conditions, we anticipate that cash flow generated from operations will be sufficient to fund our operations, including our working capital requirements, and to make the required principal and interest payments on our indebtedness during the next 12
months.
As of June 30, 2014, our total current assets exceeded total current liabilities by $12.07 million.
Estimated Maintenance and Replacement Capital Expenditures
Our partnership agreement requires our board of directors to deduct from operating surplus each quarter estimated maintenance and replacement capital expenditures, as opposed to actual maintenance and replacement capital expenditures, in order to reduce disparities in operating surplus caused by
fluctuating maintenance and replacement capital expenditures, such as drydocking and vessel replacement. Because of the substantial capital expenditures we are required to make to maintain our fleet, our initial annual estimated maintenance and replacement capital expenditures for purposes of
estimating maintenance and replacement capital expenditures will be $13.57 million per year for our initial fleet, which is composed of $2.87 million for drydocking and $10.70 million, including financing costs, for replacing our vessels at the end of their useful lives.
The $10.70 million for future vessel replacement is based on assumptions and estimates regarding the remaining useful lives of our vessels, a long-term net investment rate equivalent to our current expected long-term borrowing costs, vessel replacement values based on current market conditions and
residual value of the vessels at the end of their useful lives. The actual cost of replacing the vessels in our fleet will depend on a number of factors, including prevailing market conditions, time charter hire rates and the availability and cost of financing at the time of replacement. Our board of directors,
with the approval of the conflicts committee, may determine that one or more of our assumptions should be revised, which could cause our board of directors to increase the amount of estimated maintenance and replacement capital expenditures. We may elect to finance some or all of our maintenance
and replacement capital expenditures through the issuance of additional common units, which could be dilutive to existing unitholders. See Risk FactorsRisks Inherent in Our BusinessWe must make substantial capital expenditures to maintain the operating capacity of our fleet, which will reduce cash
available for distribution. In addition, each quarter we are required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
For the six month period ended June 30, 2014, the maintenance capital expenditure and replacement capital expenditure reserves formed by the board of directors were $0.39 million and $1.44 million respectively.
Cash Flows
Six month period ended June 30, 2014 compared to the six month period ended June 30, 2013
The following table summarizes our net cash flows from operating, investing and financing activities for the periods indicated:
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Six months ended
2013
2014
(in thousands of
Net cash from operating activities
$
15,545
$
12,779
Net cash used in investing activities
(452,780
)
(1,491
)
Net cash from financing activities
448,754
26,878
Net increase in cash and cash equivalents
11,518
38,166
Cash and cash equivalents at beginning of the period
2
14,404
Cash and cash equivalents at end of the period
11,521
52,570
June 30,
U.S. dollars)
Net Cash from Operating Activities:
Net cash from operating activities decreased by $2.76 million, from $15.54 million in the six month period ended June 30, 2013, to $12.78 million in the six month period ended June 30, 2014. The decrease of $2.76 million is mainly attributable to an increase of $15.94 million in payments for general and administrative expenses, operating expenses and inventories, an increase of $6.19 million in cash paid for interest (including the payment of $2.01 million for the swap termination and reduction of the GasLog Sydney facility), a decrease of $0.89 million in security collaterals and an increase of $0.47 million in realized losses for interest rate swaps held for trading, partially offset by an increase of $20.73 million in revenue collections.
Net Cash Used in Investing Activities:
Net cash used in investing activities decreased by $451.29 million, from $452.78 million in the six month period ended June 30, 2013, to $1.49 million in the six month period ended June 30, 2014. The decrease of $451.29 million is mainly attributable to payments for vessels of $452.79 million made in 2013. This decrease is partially offset by a net outflow of $1.50 million from short-term investments.
Net Cash from Financing Activities:
Net cash from financing activities decreased by $421.87 million, from $448.75 million in the six month period ended June 30, 2013, to $26.88 million in the six month period ended June 30, 2014. The decrease of $421.87 million is mainly attributable to the $411.00 million drawn from loan facilities and the capital contributions and advances received from shareholders of $41.79 million in 2013. No similar transaction occurred in 2014. The decrease is also affected by an increase of $89.45 million in bank loan repayments and the cash remittance of $65.70 million to GasLog in exchange for its contribution of net assets in connection with the IPO, partially offset by the net IPO proceeds of $186.30 million.
Year ended December 31, 2013 compared to the year ended December 31, 2012
The following table summarizes our net cash flows from operating, investing and financing activities for the years indicated:
|
|
|
|
|
||||||||||
|
Year Ended
|
|||||||||||||
|
2012 |
2013 |
||||||||||||
|
(in thousands of
|
|||||||||||||
Net cash (used in)/from operating activities |
|
|
$ |
|
(110 |
) |
|
|
|
$ |
|
32,159 |
||
Net cash from/(used in) investing activities |
|
|
110 |
|
|
(454,263 |
) |
|
||||||
Net cash from financing activities |
|
|
|
|
|
436,506 |
||||||||
Net increase in cash and cash equivalents |
|
|
|
|
|
14,402 |
||||||||
Cash and cash equivalents at beginning of year |
|
|
2 |
|
|
2 |
||||||||
Cash and cash equivalents at end of year |
|
|
2 |
|
|
14,404 |
100
Net Cash (Used in)/from Operating Activities:
Net cash (used in)/from operating activities increased by $32.27 million to a $32.16 million inflow in the year ended December 31, 2013, from a $0.11 million outflow in the year ended December 31, 2012. The increase of $32.27 million was due to an increase of $70.14 million in revenue collections,
partially offset by an increase of $9.22 million in cash paid for interest and an increase of $26.75 million in payments for general and administrative expenses, operating expenses and inventories and $1.9 million net interest settlement payments relating to interest rate swaps held for trading.
Net Cash from/(Used in) Investing Activities:
Net cash from/(used in) investing activities increased by $454.37 million, to a $454.26 million outflow in the year ended December 31, 2013, from a $0.11 million inflow in the year ended December 31, 2012. The increase is mainly attributable to payments of $452.79 million for the construction costs of
newbuildings, a decrease of $0.08 million in interest income received and $1.50 million increase in short-term investments.
Net Cash from Financing Activities:
Net cash from financing activities increased to $436.51 million in the year ended December 31, 2013, compared to nil during the year ended December 31, 2012. The increase is mainly attributable to $411.00 million drawn from loan facilities, partially offset by an increase of $0.18 million in payment
of loan issuance costs and an increase of $16.1 million in bank loan repayments. The increase was further affected by capital contributions and advances received from shareholders of $41.79 million.
Borrowing Activities
Vessel Financing Agreements.
GasLog and its subsidiaries entered into the following financing agreements in connection with the acquisition of the vessels in our initial fleet and the vessels to be acquired pursuant to the Pending Vessel Acquisition. Terms of the vessel financing agreements include
covenants applicable to the GasLog subsidiaries that will not be our subsidiaries following completion of this offering. We amended and obtained waivers and confirmations under the financing agreements for our initial fleet in connection with the IPO to permit the transactions pursuant to which we
acquired our initial fleet and, in the case of the GasLog Sydney Facility, we prepaid a portion of the amounts outstanding under the GasLog Sydney Facility. The covenants in these facilities apply to us and our subsidiaries as well as to GasLog. In addition, GasLog and, in the case of the GasLog
Shanghai and GasLog Santiago Facility and the Citibank Facility, one of its subsidiaries continues to guarantee these facilities after the completion of the IPO. We do not pay GasLog any fees for providing these guarantees. GasLog Partners Holdings LLC also guarantees the facilities for our initial fleet
since the completion of the IPO.
101
Lender(s)
Subsidiary Party
Outstanding
Interest
Maturity
Remaining Payment
DNB Bank ASA,
London Branch,
and the Export-
Import Bank of
Korea
GAS-three Ltd.
(GasLog Shanghai)
and GAS-four Ltd.
(GasLog Santiago)
$252.4
million
LIBOR +
applicable
margin
2025
43 consecutive quarterly installments of $2.01 million under each tranche, with two balloon payments of up to $40 million each due under each tranche 12 years from delivery of the collateral ships; the lenders will have a put option giving them the right to
request full repayment in 2018
Nordea Bank
Finland Plc,
London Branch,
ABN AMRO
Bank N.V. and
Citibank
International Plc,
London Branch
GAS-five Ltd.
(GasLog Sydney)
$48.99
million
LIBOR +
applicable
margin
2019
20 consecutive quarterly installments of $0.77 million, with a balloon payment of up to $33.68 million due in May 2019
Citibank
International Plc,
London Branch,
Nordea Bank
Finland Plc,
London Branch,
DVB Bank
America N.V.,
ABN AMRO
Bank N.V. and
Commonwealth
Bank of
Australia
GAS-sixteen Ltd.
(Methane Rita
Andrea)
, GAS-
seventeen Ltd.
(Methane Jane
Elizabeth)
(1)
$217.0
million
(2)
LIBOR +
applicable
margin
2016
two balloon payments of up to $108.5 million under each tranche due in April 2016
(Collateral Ship)
Principal
Amount as of
June 30,
2014
Rate
Installments as of
June 30, 2014
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(1) |
GAS-eighteen Ltd., a subsidiary of GasLog, is also a borrower under the Citibank Facility, with an additional $108.5 million of debt outstanding related to the Methane Lydon Volney. |
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(2) |
We expect to prepay $ of the amount outstanding under the Citibank Facility in connection with the Pending Vessel Acquisition. |
GasLog Shanghai and GasLog Santiago Facility. In March 2012, GAS-three Ltd. and GAS-four Ltd., as borrowers, entered into a $272.5 million senior secured credit facility with DNB Bank ASA, London Branch, and the Export-Import Bank of Korea to fund the installment payments on the construction of the GasLog Shanghai and the GasLog Santiago , which we refer to as the GasLog Shanghai and GasLog Santiago Facility. This credit facility is secured by a first priority mortgage over the ships owned by the respective borrowers, guarantees from GasLog and its subsidiary, GasLog Carriers, a pledge of the share capital of the respective borrower and a first priority assignment of all earnings and insurance related to the ship owned by the respective borrower.
The GasLog Shanghai and GasLog Santiago Facility includes two tranches. Each tranche is repayable in quarterly installments over 12 years with final balloon payments due at maturity of up to $40 million each in January 2025 and March 2025, subject to a put option that gives the lenders the right to request repayment of the facility in full on the fifth anniversary of the delivery of the first vessel which was delivered in January 2013. The GasLog Shanghai and GasLog Santiago Facility bears interest at floating LIBOR, plus a margin. We amended the GasLog Shanghai and
102
GasLog Santiago Facility in connection with the IPO, to permit, among other things, the transactions pursuant to which GasLog contributed the
GasLog Shanghai
and
GasLog Santiago
to the Partnership, and to add GasLog Partners Holdings LLC as a guarantor.
GasLog Sydney Facility.
In October 2011, GAS-five Ltd. and GAS-six Ltd. (a subsidiary of GasLog but not contributed to the Partnership), jointly and severally entered into a $277 million senior secured credit facility with Nordea Bank Finland PLC, ABN Amro Bank N.V. and Citibank
International PLC to fund the installment payments on the construction of the
GasLog Sydney
and the
GasLog Skagen
(the vessel owned by GAS-six Ltd.), which we refer to as the GasLog Sydney Facility. In connection with the IPO, we amended the existing facility agreements, dividing the GasLog
Sydney Facility into two separate facilities on substantially the same terms as the current facility, with one facility executed by GAS-five Ltd. for the portion allocated to the
GasLog Sydney
and one facility executed by GAS-six Ltd. for the portion allocated to the
GasLog Skagen.
This new GasLog
Sydney Facility is secured by a first priority mortgage over the
GasLog Sydney
and guarantees from GasLog and GasLog Partners Holdings LLC, a pledge of the share capital of the respective borrower and a first priority assignment of all earnings and insurance related to the ship owned by the
respective borrower. The Partnership prepaid $82.63 million of the new GasLog Sydney Facility with the IPO proceeds. The new GasLog Sydney Facility is repayable in quarterly installments over five years with a balloon payment of $33.68 million due at maturity in May 2019. The facility bears interest
at LIBOR, plus a margin. We are not an obligor under the facility executed by GAS-six Ltd., related to the
GasLog Skagen.
Citibank Facility
.
In April 2014, GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd., as borrowers, entered into a $325.5 million senior secured credit facility with Citibank International Plc, London Branch, Nordea Bank Finland Plc, London Branch, DVB Bank America N.V., ABN
AMRO Bank N.V. and Commonwealth Bank of Australia to fund the purchase price of the
Methane Rita Andrea
,
Methane Jane Elizabeth
and
Methane Lydon Volney
, which we refer to as the Citibank Facility. The Citibank Facility is secured by a first priority mortgage over the
Methane Rita Andrea
,
Methane Jane Elizabeth
and
Methane Lydon Volney
and guarantees from GasLog and GasLog Carriers, a pledge of the share capital of the respective borrower and a first priority assignment of all earnings and insurance related to the ship owned by the respective borrower. We expect to prepay $
of the amount outstanding under the Citibank Facility related to the
Methane Rita Andrea
and the
Methane Jane Elizabeth
in connection with the Pending Vessel Acquisition. Unless the New Credit Facility described below is entered into and funded at or prior to the closing of the Pending Vessel
Acquisition, the Citibank Facility will remain in place and, as required by the Citibank Facility, we and GasLog Partners Holdings LLC will enter into a guarantee agreement with Citibank, pursuant to which we and GasLog Partners Holdings LLC will guarantee the obligations of GAS-sixteen Ltd. and
GAS-seventeen Ltd. related to the
Methane Rita Andrea
and the
Methane Jane Elizabeth.
Each advance made under the Citibank Facility is repayable in full on the date twenty-four months after the advance is made. The facility bears interest at LIBOR, plus a margin.
The primary financial covenants for our existing facilities for our initial fleet and for the Citibank Facility are applicable to GasLog, as guarantor and are set out below:
market value adjusted net worth must at all times exceed $350 million;
net working capital (excluding the current portion of long-term debt) must be positive;
the ratio of EBITDA over debt service obligations (including interest and debt repayments) on a trailing twelve months basis must be no less than 110%;
total indebtedness divided by total capitalization must not exceed 75%;
the aggregate amount of all unencumbered cash and cash equivalents must exceed the higher of 3% of total indebtedness or $20 million; and
GasLog is permitted to pay dividends, provided that GasLog Group holds unencumbered cash equal to at least 4% of its total indebtedness, subject to no event of default having occurred or occurring as a consequence of the payment of such dividend.
The covenants under the above facilities are measured at the GasLog Group level.
103
The facilities include a fair market value covenant pursuant to which an event of default could occur under the facilities if the aggregate fair market value of the collateral vessels (without taking into account any charter arrangements) were to fall below 120% of the aggregate outstanding principal
balance under the facilities and, solely in the case of the GasLog Shanghai and GasLog Santiago Facility, any negative mark-to-market value arising under any hedging transaction.
The borrowers and the guarantors were in compliance with the above covenants as of June 30, 2014. As of June 30, 2014, the fair market value of our initial fleet, as defined in the relevant loan agreements, was approximately 211% of the aggregate outstanding debt. A decrease of 10% of the
aggregate fair market values of our vessels would not cause any violation of the covenants contained in our credit facilities.
New Credit Facility.
On August 5, 2014 we entered into a binding commitment letter and a coordination letter with Citibank for a credit facility for up to $450 million to refinance the existing debt facilities for our initial fleet as well as the debt facilities for the vessels to be acquired pursuant to the
Pending Vessel Acquisition. The refinanced debt is expected to have a tenor of five years and an amortization profile of 20 years, which we believe will increase our financial flexibility. The New Credit Facility will be secured by a first priority mortgage on each of our existing vessels and, when delivered,
the vessels to be acquired pursuant to the Pending Vessel Acquisition, a specific assignment of each of the existing charters and a first assignment of earnings and insurances in relation to the vessels. The New Credit Facility will bear interest at LIBOR plus 2.60% per annum and will be payable in 20
equal quarterly payments of $5.625 million each and a balloon payment of $337.5 million together with the final quarterly payment. We expect that the New Credit Facility will have financial and restrictive covenants that are consistent with our existing debt. The closing of the New Credit Facility is
subject to conditions precedent, including the negotiation and execution of final documentation. We expect the New Credit Facility to be entered into and funded at the closing of the Pending Vessel Acquisition or within a reasonable period of time thereafter. We expect to prepay $ of the amount
outstanding under the Citibank Facility in connection with the Pending Vessel Acquisition.
The commitment letter provides that the primary financial covenants for the New Credit Facility will be as follows:
the aggregate amount of all unencumbered cash and cash equivalents must be no less than the higher of 3% of total indebtedness or $15 million;
total indebtedness divided by total capitalization must not exceed 60%;
the ratio of EBITDA over debt service obligations (including interest and debt repayments) on a trailing twelve months basis must be no less than 110%; and
the Partnership is permitted to pay dividends subject to no event of default having occurred or occurring as a consequence of the payment of such dividend.
The covenants under the New Credit Facility will be measured at the Partnership level.
The facilities include a fair market value covenant pursuant to which an event of default could occur under the facilities if the aggregate fair market value of the collateral vessels were to fall below 120% of the aggregate outstanding principal balance under the facilities.
Revolving Credit Facility with GasLog.
Following the IPO, we entered into a $30.0 million revolving credit facility with GasLog, to be used for general partnership purposes. The facility agreement provides for a term of 36 months, is unsecured, and bears interest at a rate of 5% per annum, with no
commitment fee for the first year. After the first year, the interest will increase to a rate of 6% per annum, with an annual 2.4% commitment fee on the undrawn balance. The sponsor credit contains covenants that require us to, among other things:
notify GasLog of any event which constitutes or may constitute an event of default or which may adversely affect our ability to perform our obligations under the credit facility; and
provide GasLog with information in respect of our business and financial status as GasLog may reasonably require including, but not limited to, copies of our unaudited quarterly financial statements and our audited annual financial statements.
104
Events of default under the sponsor credit facility include, among others, the following:
failure to pay any sum payable under the sponsor credit facility when due;
breach of certain covenants and obligations of the sponsor credit facility;
a material inaccuracy of any representation or warranty;
default under other indebtedness in excess of $10.0 million which results in the relevant creditor declaring such indebtedness prematurely due and payable;
a lien, arrest, distress or similar event is levied upon or against any substantial part of our assets which is not discharged or disputed in good faith within 10 business days after we become aware of such event;
a substantial part of our business or assets is destroyed, abandoned, seized, appropriated or forfeited for any reason;
bankruptcy or insolvency events;
suspension or cessation of our business;
GasLog Partners GP LLC ceasing to be our general partner; and
an amendment to our limited partnership agreement that, in the reasonable opinion of the lender, is adverse to its interests in connection with the sponsor credit facility.
Derivative Instruments and Hedging Activities
We intend to use derivative financial instruments to reduce the risks associated with fluctuations in interest rates. The existing derivative instruments entered into by GasLog in connection with the vessel financing agreements described above were transferred to us upon the closing of the IPO.
Contractual Obligations
Our contractual obligations as of June 30, 2014 before giving effect to the Pending Vessel Acquisition were:
Payments Due by Period
Total
Less than
Between
Between
More than
(in thousands of U.S. dollars)
Long-term debt obligations
(1)
$
301,439
$
19,104
$
38,207
$
244,128
$
Interest on long-term debt obligations
(2)
38,718
11,261
20,147
7,310
Amounts due to related parties
(3)
24,674
24,674
Amounts due for management, commercial and administrative services fees
(3)
1,125
1,125
Total
$
365,956
$
56,164
$
58,354
$
251,438
$
(1)
For the GasLog Shanghai and GasLog Santiago Facility, the lenders have a put option giving them the right to request full repayment in 2018. In the above table, we have assumed that the aforementioned facility will be fully repaid in 2018. The put option can be exercised provided that there is
timely notification to the Partnership. There are no prepayment charges. The put option is closely related to the loan agreement because the option exercise price approximates the outstanding amount of the debt on the exercise date and hence no embedded derivative was recognized.
(2)
Our interest commitment on long-term debt is calculated based on an assumed average applicable interest rate ranging from 2.88% to 4.21% which represents LIBOR of 0.23% as of June 30, 2014 and our various applicable margin rates and fixed-rate interest rate swaps associated with each debt.
(3)
Amounts due to related parties represent mainly payments made by GasLog LNG Services Ltd., GasLog Ltd. and GasLog Carriers Ltd. to cover expenses during the construction period and
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1 year
13 years
35 years
5 years
operating expenses, as well as amounts owed for management and commercial services. See Note 3 to the unaudited condensed combined and consolidated financial statements of the Partnership included elsewhere in this prospectus.
(4)
This includes the amounts due under our contractual obligations under our amended ship management agreements and our amended commercial management agreements signed with GasLog LNG Services Ltd. and GasLog Ltd., respectively, for their non-terminable periods. In addition, it includes the
amounts due under the administrative services agreement for its non-terminable period. The amended ship management agreements provide for a monthly management fee of $46,000 per vessel and amended commercial management agreements provide for a fixed annual fee of $360,000 per vessel and
may be terminated by either party giving a three months notice. The administrative services agreement provides for a fixed annual fee of $588,000 per vessel and may be terminated by either party at any time giving the other party not less than three months written notice. The contractual obligations
table includes administrative services fees for 3 months.
Capital Expenditures
As of June 30, 2014, there are no commitments for capital expenditures related to the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney.
In the event we decide to exercise our options to purchase additional ships from GasLog, we expect to finance the costs with cash from operations
and a combination of debt and equity financing.
On August 14, 2014, we entered into a Share Purchase Agreement to purchase from GasLog Carriers, a direct subsidiary of GasLog, 100% of the ownership interests in GAS-sixteen Ltd. and GAS-seventeen Ltd., the entities that own the
Methane Rita Andrea
and the
Methane Jane Elizabeth
,
respectively, for an aggregate purchase price of $328.0 million, which will be funded with a combination of new or existing debt (as discussed below) and proceeds raised in this offering.
Off-Balance Sheet Arrangements
Currently, we do not have any off-balance sheet arrangements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our annual combined and consolidated financial statements and the interim unaudited condensed combined and consolidated financial statements, which have been prepared in accordance with IFRS as issued
by the IASB. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and expenses during the reporting periods. The
Partnerships management evaluates whether estimates should be made on an ongoing basis, utilizing historical experience, consultation with experts and other methods management considers reasonable in the particular circumstances. However, uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future. Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions.
We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of all our principal accounting policies, see Note 2 to our annual combined and consolidated financial
statements included elsewhere in this prospectus.
Vessel Cost, Lives and Residual Value
When determining vessel cost, we recognize both the installment payments paid to the shipyard along with any directly attributable costs of bringing the vessels to their working condition incurred during the construction periods as vessel costs. Directly attributable costs incurred during the vessel
construction periods consist of commissions, on-site supervision costs, costs for sea trials, certain
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spare parts and equipment, costs directly incurred for negotiating the construction contracts, lubricants and other vessel delivery expenses. Any vendor discounts are deducted from the vessel cost. Subsequent expenditures for conversions and major improvements are also capitalized when the recognition
criteria are met.
The vessel cost component is depreciated on a straight-line basis over the expected useful life of each ship, based on the cost of the vessel less its estimated residual value. We estimate the useful lives of our ships to be 35 years from the date of delivery from the shipyard, which we believe is within
industry standards and represents the most reasonable useful life for each of our ships. Furthermore, we estimate the residual values of our ships to be 10% of the initial ship cost, which represents our estimate of the current market value of the ships as if they were at the end of their useful lives at the
time we make such estimate. The estimated residual value of our ships may not represent the fair market value at any one time, in part because there has historically been very little scrapping of LNG carriers and because market prices of scrap values tend to fluctuate. We might revise our estimate of
the residual values of our ships in the future in response to changing market conditions.
An increase in the estimated useful lives of our ships or in their residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of our ships or their residual value would have the effect of increasing the annual
depreciation charge and possibly resulting in an impairment charge.
When we are faced with regulations that place significant limitations on the ability of one of our ships to trade on a worldwide basis, we adjust the ships useful life to end at the date such regulations become effective.
We must periodically drydock each of our ships for inspection, repairs and any modifications. At the time of delivery of a ship from the shipyard, we estimate the drydocking component of the cost of the ship, representing estimated costs to be incurred during the first drydocking at the drydock yard
for a special survey and parts and supplies used in making required major repairs that meet the recognition criteria, based on our historical experience with similar types of ships.
We use judgment when estimating the period between drydockings performed, which can result in adjustments to the estimated amortization of the drydocking expense. If a ship is disposed of before its next drydocking, the remaining balance of the deferred drydock is written off and forms part of
the gain or loss recognized upon disposal of ships in the period when contracted. We expect that our ships will be required to be drydocked approximately 60 months after their delivery from the shipyard and thereafter every 60 months our ships will be required to undergo special or intermediate surveys
and be drydocked for major repairs and maintenance that cannot be performed while the ships are operating. We amortize our estimated drydocking expenses for the first special survey over five years, but this estimate might be revised in the future.
Costs that will be capitalized as part of the future drydockings will include a variety of costs incurred directly attributable to the drydocking and costs incurred to meet classification and regulatory requirements, as well as expenses related to the dock preparation and port expenses at the drydock
shipyard, general shipyard expenses, expenses related to hull, external surfaces and decks, expenses related to machinery and engines of the vessel, as well as expenses related to the testing and correction of findings related to safety equipment on board. Drydocking costs do not include vessel operating
expenses such as replacement parts, crew expenses, provisions, lubricants consumption, insurance, management fees or management costs during the drydocking period. Expenses related to regular maintenance and repairs of our vessels are expensed as incurred, even if such maintenance and repair occurs
during the same time period as our drydocking.
Ordinary maintenance and repairs that do not extend the useful life of the asset are expensed as incurred. Major renovation costs and modifications are capitalized and depreciated over the estimated remaining useful life.
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Impairment of Vessels
At the end of each reporting period we perform an assessment of whether there is any indication that our vessels may be impaired by considering both internal and external sources of information as provided by IAS 36 paragraph 12.
If any such indication exists, the recoverable amount of the vessel is determined based on the higher of a vessels net selling price and value in use. The net selling price is the amount obtainable from the sale of a vessel in an arms-length transaction less the costs of disposal, which is estimated
based on independent broker valuations, while value in use is the present value of estimated future cash flows expected to arise from the continuing use of a vessel. The assumptions to be used in the estimated future cash flows require estimates for future charter hires, increases in future operating
costs, future drydocking costs and days, off-hire days and discount rate applied.
Fair value of derivative financial instruments
Our risk management policies permit the use of derivative financial instruments to manage interest rate risk. Changes in fair value of derivative financial instruments that are not designated as cash flow hedges for accounting purposes are recognized in earnings.
A substantial majority of the fair value of our derivative instruments and the change in fair value of our derivative instruments from period to period result from our use of interest rate swap agreements. The fair value of our interest rate swap agreements is the estimated amount that we would
receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current creditworthiness of both us and the swap counterparties. The estimated amount is the present value of estimated future cash flows, being equal to the difference between the
benchmark interest rate and the fixed rate in the interest rate swap agreement, multiplied by the notional principal amount of the interest rate swap agreement at each interest reset date.
The fair value of our interest swap agreements at the end of each period are most significantly affected by the interest rate implied by market-observable data such as LIBOR yield curve. While the fair value of our interest swap agreements are typically more sensitive to changes in short-term rates,
significant changes in the long-term benchmark interest also materially impact our interest swap agreements.
The fair value of our interest swap agreements are also affected by changes in our specific credit risk included in the discount factor. Following the implementation of IFRS 13 Fair Value Measurement on January 1, 2013, the Partnership adjusts its derivative liabilities fair value to reflect its own
credit risk and the counterparties risk. The estimate of the Partnerships credit risk is based on the credit rating of other companies in the LNG industry where publicly available, the rating of the global transportation industry where the shipping industry is included and the feedback that the Partnership
receives from its lenders as part of the margin setting for the new loan agreements. The counterparties credit risk is estimated either by using the credit default swap rates obtained from public information or, if not available, by using the credit rating of the counterparties.
The LIBOR yield curve and our specific credit risk are expected to vary over the life of the interest rate swap agreements. The larger the notional amount of the interest rate swap agreements outstanding and the longer the remaining duration of the interest rate swap agreements, the larger the
impact of any variability in these factors will be on the fair value of our interest rate swaps. We economically hedge the interest rate exposure on a significant amount of our long-term debt and for long durations. As such, we have historically experienced, and we expect to continue to experience,
material variations in the period-to-period fair value of our derivative instruments.
Although we measure the fair value of our derivative instruments utilizing the inputs and assumptions described above, if we were to terminate the agreements at the reporting date, the amount we would pay or receive to terminate the derivative instruments may differ from our estimate of fair
value. If the estimated fair value differs from the actual termination amount, an adjustment to the carrying amount of the applicable derivative asset or liability would be recognized in earnings for the current period. Such adjustments could be material. See Note 8 to our interim unaudited condensed
combined and consolidated financial statements for the effects on the change
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in fair value of our derivative instruments on our combined and consolidated statements of profit or loss.
Classification of the Partnership Interests
The interests in the Partnership comprise common units, subordinated units, a general partner interest and incentive distribution rights. Under the terms of the partnership agreement, the Partnership is required to distribute 100% of available cash (as defined in our partnership agreement) with respect
to each quarter within 45 days of the end of the quarter to the partners. Available cash can be summarized as cash and cash equivalents less an amount equal to cash reserves established by the board of directors to (i) provide for the proper conduct of the business of the Partnership group (including
reserves for future capital expenditures and for anticipated future credit needs of the Partnership group) subsequent to such quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any Partnership group
member is a party or by which it is bound or its assets are subject and/or (iii) provide funds for certain distributions relating to future periods.
In reaching a judgement as to whether the interests in the Partnership should be classified as liabilities or equity interests, the Partnership has considered the wide discretion of the board of directors to determine whether any portion of the amount of cash available to the Partnership constitutes
available cash and that it is possible that there could be no available cash. In the event that there is no available cash, as determined by the board of directors, the Partnership does not have a contractual obligation to make a distribution. Accordingly, the Partnerships management has concluded that the
Partnership interests do not represent a contractual obligation on the Partnership to deliver cash and therefore should be classified as equity within the financial statements.
JOBS Act Status
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies as described under Summary-Implications of Being
an Emerging Growth Company. We have elected to opt out of the extended transition period for complying with new or revised accounting standards under Section 107(b) of the JOBS Act, which election is irrevocable.
In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company.
Recent Accounting Pronouncements
See Note 2 to our interim unaudited condensed combined and consolidated financial statements included elsewhere in this prospectus.
Quantitative and Qualitative Information About Market Risk
We are exposed to various market risks, including interest rate and foreign currency exchange risks. From time to time, we may make use of derivative financial instruments such as interest rate swaps to maintain the desired level of exposure arising from these risks.
A discussion of our accounting policies for derivative financial instruments is included in Note 2 to our annual combined and consolidated financial statements included elsewhere in this prospectus. Further information on our exposure to market risk is included in Note 8 to our interim unaudited
condensed combined and consolidated financial statements and Note 16 to our annual combined and consolidated financial statements included elsewhere in this prospectus.
The following analysis provides quantitative information regarding our exposure to market risks.
Interest Rate Risk
We are subject to market risks relating to changes in interest rates because we have floating rate debt outstanding. Significant increases in interest rates could adversely affect our operating
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margins, results of operations and our ability to service our debt. We have used interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize economic risks and costs associated with our floating rate debt and not for
speculative or trading purposes. The principal terms of the interest rate swaps are disclosed in Note 8 to our interim unaudited condensed combined and consolidated financial statements included elsewhere in this prospectus. As of December 31, 2013 and June 30, 2014, the notional amount of the swaps
accounted as held for trading was $180.47 million and $221.49 million, respectively, while the notional amount of the swaps designated as cash flow hedging instruments was $131.03 million as of December 31, 2013. As of June 30, 2014, no swap was designated as a cash flow hedging instrument. Under
these swap transactions, the bank counterparty effects quarterly floating-rate payments to the Partnership for the relevant amount based on the three-month U.S. dollar LIBOR, and the Partnership effects quarterly payments to the bank on the relevant amount at the respective fixed rates. We expect to
continue to use interest rate swaps in the future as we deem appropriate to manage our exposure to interest rate risk.
The aggregate principal amount of our outstanding floating rate debt which was not economically hedged as of June 30, 2014 was $80.00 million. As an indication of the extent of our sensitivity to interest rate changes, an increase in LIBOR by 10 basis points would have decreased our profit during
the six month period ended June 30, 2014 by approximately 0.37% or $0.04 million, based upon our debt level during the period (June 30, 2013: 0.27% or $0.03 million).
We expect our sensitivity to interest rate changes to increase in the future as a result of increased future borrowings under new loan agreements to finance acquisitions of additional ships.
Foreign Currency Exchange Risk
We generate all of our revenue in U.S. dollars, and the majority of our expenses, including debt repayment obligations under our credit facilities and a portion of our administrative expenses, are denominated in U.S. dollars. However, a portion of the ship operating expenses, primarily crew wages of
officers, and a large portion of our administrative expenses are denominated in euros. Specifically, for the six month periods ended June 30, 2014 and June 30, 2013, approximately $4.17 million and $2.86 million, respectively, of the operating and administrative expenses were denominated in euros. As of
June 30, 2014 and December 31, 2013, approximately $2.21 million and $1.57 million, respectively, of our outstanding trade payables and accruals were denominated in euros.
Depreciation in the value of the U.S. dollar relative to the euro will increase the U.S. dollar cost of us paying expenses denominated in euros. Accordingly, there is a risk that currency fluctuations will have a negative effect on our cash flows. As an indication of the extent of our sensitivity to
changes in exchange rate, a 10% increase in the average euro/dollar exchange rate would have decreased our profit during the year ended June 30, 2014 by approximately $0.42 million, based upon our expenses recognized during the period (June 30, 2013: 0.29 million). We do not currently hedge
movements in currency exchange rates, but our management monitors exchange rate fluctuations on a continuous basis. We may seek to hedge this currency fluctuation risk in the future.
Inflation and Cost Increases
In the current economic environment, inflation has not had a significant impact on us. In the near term, assuming the continuation of current economic conditions, crewing costs are the most likely expense to be affected by inflation. LNG transportation is a specialized area and the number of LNG
carriers has increased rapidly in recent years. As a result, there has been an increased demand for qualified crews, which has and will continue to put inflationary pressure on crew costs. The impact of cost increases would be mitigated to some extent by certain provisions in our time charters, including
automatic periodic adjustment provisions and cost review provisions.
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The information and data contained in this prospectus relating to the global shipping industry has been provided by Clarkson Research Services Limited, or Clarkson Research, and is taken from Clarkson Researchs database and other sources. Clarkson Research has advised that: (i) some information in
Clarkson Researchs database is derived from estimates or subjective judgments; (ii) the information in the databases of other maritime data collection agencies may differ from the information in Clarkson Researchs database; and (iii) while Clarkson Research has taken reasonable care in the compilation of the
statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures.
Unless otherwise indicated, the following information relating to the global shipping industry reflects information and data available as of July 1, 2014.
Summary
Natural gas is one of the fastest growing primary energy sources globally. It is supported by significant reserves, competitive pricing and relatively cleaner air emissions from combustion compared with other hydrocarbons. Within the natural gas industry, the volume of LNG traded increased at a rate
36% higher than pipeline trade and at almost three times the rate of overall natural gas consumption between 1990 and 2013. A continuing disparity between the prices of gas in various geographies compared to the relatively low cost of LNG shipping has enhanced the economics of LNG trade.
Significant expansion of LNG liquefaction and regasification facilities has taken place in recent years and a large number of additional facilities have been planned. Including all of the projects currently under construction and at Final Investment Decisions (FID) or Front End Engineering and Design
(FEED) stages, liquefaction capacity is expected to increase by 32% by the end of 2016. Taking into consideration projects scheduled to start-up between 2017 and 2020, a further 81% increase of current liquefaction capacity is implied over this period. These plans are potentially subject to delays,
postponements and cancellations. However, if they proceed on schedule, the demand for LNG shipping capacity is expected to increase significantly. There have also been significant increases in the number of LNG exporting and importing nations, the number of individual trading routes and the average
trading distance. Overall, world seaborne trade in LNG has grown strongly over the past two decades, with a compound annual growth rate of 7.1% between 1990 and 2011, before declining by 1.6% in 2012. However, seaborne LNG trade marginally improved in 2013, increasing by 0.5%. Despite the
market weakening in the first half of 2014, an overall improvement in seaborne trade compared to 2013 is expected in full year 2014.
The current order book of LNG carriers, which having grown in size since the start of 2011, is still relatively small in historic terms at 33% of the global LNG carrier fleet capacity, while tonnage equivalent to only 7.5% of the current global LNG carrier fleet capacity is due for delivery in the last
six months of 2014. The fleet grew 0.1% in 2012 and 4.0% in 2013, but growth is expected to accelerate in full year 2014 and 2015, and will depend on the level of newbuilding orders and their successful delivery thereafter. In recent years, newbuildings sized between 145,000 cbm and 175,000 cbm with
diesel electric propulsion have been the most popular, given the trading flexibility and fuel cost savings. Although there have been a number of new entrants over the past 10 years, the LNG shipping sector is characterized by relatively high barriers to entry compared to other shipping sectors. These
barriers include stringent customer standards requiring a strong safety track record and strong technical management capabilities, limited supply of highly qualified personnel and significant capital requirements for new ships. The charter rates paid in the LNG charter market are governed by the supply of
and demand for carrying capacity and as such they have fluctuated and may continue to further fluctuate in the future.
Overview of the Natural Gas Market
Over the last two decades, natural gas has been one of the worlds fastest growing energy sources. Natural gas is the third largest global energy source, after oil and coal respectively, and accounted for 24% of the worlds energy consumption in 2013. Natural gas is used primarily to generate
electricity and as a heating source. Between 1990 and 2013, consumption grew at an
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average rate of 2.4% per year, approximately twice the growth rate of oil consumption over the same period.
A number of forecasting agencies expect consumption of natural gas to continue to rise, with the International Energy Agency, or IEA, projecting a 48% growth in demand between 2011 and 2035. This equates to a compound annual growth rate of 1.6% during this period, with demand for oil and
coal both expected to grow by lower volumes over the same period. Natural gas consumption is expected to grow for a number of reasons, including:
diversification from oil, coal and nuclear energy;
global economic growth that is expected to lead to additional energy demand, particularly from non-Organisation for Economic Co-operation and Development, or non-OECD, economies such as China and India;
replacement demand from the shutdown of nuclear electricity generators in Japan;
the combustion of natural gas being viewed as more environmentally friendly than other fossil fuels;
the wide applicability of natural gas as a fuel source;
known natural gas reserves that totaled 186 trillion cbm at the end of 2013, a reserves to production ratio of 55 years; and
further market deregulation that may have a beneficial impact by increasing trading opportunities.
Given concerns about the impact of fossil fuels on global warming, there is a widespread desire to limit carbon emissions wherever possible in many countries. Natural gas is well-placed to take advantage of this as it is considered to be the cleanest burning of the most typical fossil fuels. For example,
the burning of natural gas emits approximately 30% less carbon dioxide than oil and approximately 45% less carbon dioxide than coal. Furthermore, natural gas emits relatively few particulates and relatively low levels of nitrogen oxide compared to coal and oil. Increasing opposition to nuclear energy
around the world, particularly in countries such as Japan and Germany, is expected to further increase the demand for natural gas.
Between 1990 and 2011, natural gas consumption in non-OECD Asia increased almost five-fold, and most forecasting agencies expect this growth to continue, albeit under an assumption of continued economic growth. The IEA forecast that growth in non-OECD Asia will increase at a
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compound annual growth rate of 4.2% between 2011 and 2035, which is more than twice the global average.
At the end of 2013, natural gas reserves totaled 186 trillion cbm. This represents a reserve to production ratio of 55 years, some 3% higher than oil. Natural gas reserves, like crude oil reserves, are unevenly distributed and an imbalance exists between the location of reserves and both current and
expected demand. The largest reserves are located in the Middle East (43%) and the territories of the former Soviet Union (29%), followed by the lesser developed countries in Asia and sub-Saharan Africa, at significant distances from the major locations of demand in North America and Europe, which
generally have the lowest reserves.
In the past, the production and consumption of natural gas was relatively geographically aligned, limiting the need for long-distance trading. However, in 2013, 31% of natural gas was traded between countries, up from 16% in 1990. As natural gas has become commoditized, a progressively larger
amount is being traded globally, either via pipelines or increasingly as LNG.
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In recent years, there has been an increase in the production of unconventional natural gas, including tight gas, shale gas and coalbed methane. In particular, there has been a significant increase in United States shale gas reserves, with improvements in technology helping United States domestic
natural gas reserves to increase by 86% between the end of 2000 and the end of 2013. The advent of considerable shale gas production in the United States has led to a decline in United States LNG imports, which made up only 0.8% of global LNG imports in 2013 (including re-exports), and, looking
ahead, the United States has the potential to become a major exporter of LNG. In January 2014, the Energy Information Administration, or EIA, estimated that overall global resources of known technically recoverable shale gas resources totaled 207 trillion cbm (7,299 trillion cubic feet). These
resources are located in a diverse range of geographic locations. 91% of these reserves are located outside of the United States; China, Argentina and Algeria all have larger estimated resources than the United States. However, although these resources are technically recoverable, there are significant
obstacles to this shale gas becoming economically recoverable at present. These include both geological factors, as well as a range of other issues, such as the difficult terrain, the limited availability of water, the fact that many of these areas are already densely populated, uncertainty regarding property
rights and other legal considerations, public concerns regarding extraction activities and that the necessary infrastructure to extract the gas is not in place.
Liquefied Natural Gas
Overview
There are two methods of transporting natural gas if not consumed in the producing region: pipelines, which accounted for 69% of the natural gas traded cross-border in 2013, and LNG shipping, in which natural gas is liquefied and transported in specialized seaborne carriers. LNG shipping has been
increasing in importance and accounted for 31% of all natural gas trade in 2013. Although this is down marginally on the amount traded as LNG in 2012, it is up from 26% in 2000 and 24% in 1990. Overall, between 1990 and 2013, gas traded as LNG increased by a compound annual growth rate of
6.8% compared to 5.0% per annum for gas transported by pipeline over the same period.
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The challenge of moving gas as LNG to points of demand is that traditionally it has been highly capital intensive, technologically sophisticated and expensive. The first shipment of LNG was made in 1959 from Lake Charles in the United States to Canvey Island in the UK. LNG trade was
subsequently developed in the 1960s with shipments from Arzew in Algeria to the UK, Spain, Italy and France, and in the 1970s with the expansion of the trade to Japan. Relatively few LNG carriers were ordered during the 1980s, while the 1990s saw limited activity in terms of infrastructure and trade
development, with relatively few projects coming online during this period. By contrast, over the course of the last decade, a number of new projects in a range of countries, including some with no prior history of LNG production such as Trinidad and Tobago and Equatorial Guinea, have started
producing LNG for export.
The LNG supply chain involves a number of different stages:
Liquefaction
: Following the initial production of gas, natural gas is cooled to a temperature of -162
°
C (-260
°
F), which transforms it into a liquid. This reduces its volume to approximately 1/600
th
of its volume in a gaseous state and allows economical storage and transportation.
Shipping
: LNG is transported overseas from the liquefaction facility to the receiving terminal in specially designed LNG carriers.
Terminalling and Regasification
: LNG is stored in specially designed facilities until regasified. LNG is returned to its gaseous state at a regasification facility, which can be located either onshore or aboard specialized LNG carriers.
Distribution
: Upon return to its gaseous state, the natural gas is transported to consumers through pipelines.
Source: Clarkson Research, July 2014.
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Although the costs associated with the LNG supply chain have declined over the past two decades, it can be less expensive to transport natural gas via pipeline than LNG carriers. However, due to the growing distances between remote sources of supply and the location of demand, capital costs
associated with constructing pipelines, which become prohibitively expensive over long distances, security issues relating to the existence of unattended energy pipelines and the potential for geopolitical factors disrupting the use of pipelines that run between countries, LNG carriers are expected to remain
the predominant means of transportation for a significant portion of global natural gas demand.
Furthermore, LNG carriers offer greater flexibility in the transportation of natural gas than pipelines and enable a swifter response to market developments, including new sources of demand and supply or significant changes in the price of LNG in certain markets. The fixed infrastructure nature of
pipelines does not allow for this flexibility.
LNG Supply
With the increased interest in natural gas, there has been an associated increase in investment in LNG infrastructure that will support an increase in the volume of trade over the next few years. As the demand for natural gas continues to expand, the pace of the build-out of infrastructure to export
and import LNG as well as the geographic location of such infrastructure will have a direct impact on the demand for LNG shipping.
There were 18 countries (with 91 liquefaction trains) with LNG liquefaction infrastructure at the start of July 2014, compared to 10 exporting countries at the end of 2004. The total production capability of these existing units is estimated at approximately 293 million tonnes per annum of LNG, while
the average utilization rate of this global capacity is estimated to have reached approximately 80% in 2013. Idle liquefaction capacity can be a result of either underutilization, short interruptions of liquefaction trains due to maintenance activities or gas supply shortfalls.
Qatar continues to be the largest exporter of LNG, with Qatari exports having reached 78 million tonnes in 2013, which constituted one-third of global exports. Malaysia, Indonesia, Nigeria and Australia represented a second tier of exporters in 2013, having exported an aggregate total of 82 million
tonnes of LNG. One notable development in the first half of 2014 was the start-up of Exxons new LNG liquefaction facility in Papua New Guinea. PNG LNG, which has two trains with a nameplate capacity of 6.9 million tonnes per annum, moved its first cargo to Japan in May 2014. Elsewhere, the
liquefaction facility at Skikda, Algeria, opened its fourth train, with the capacity to liquefy 4.5 million tonnes per annum of natural gas. However, this increase in capacity was partially offset by capacity elsewhere being taken offline during this period. The Angola LNG project, consisting of one train with
nameplate capacity of 5.3 million tonnes per annum, which opened in 2013, was closed in April 2014 following a major leak at the end of March. Chevron and Sonangol, the main operators of the project, estimate that the facility will not reopen until the middle of 2015.
There are 16 new LNG liquefaction projects with a total estimated annual capacity of 108 million tonnes of LNG under construction as at the start of July 2014. A sizeable tranche of this capacity is based in Australia. Twelve of these projects are scheduled to be completed by 2016 or earlier, and
will add a further 77.7 million tonnes per annum of capacity over this period, an increase of 27% on current liquefaction capacity. There are 27 additional projects with an estimated annual capacity of 222.5 million tonnes of LNG that have received FID, or are at the FEED stage, with start-up dates
ranging from 2014 to the start of 2020. Four of these projects are targeting start dates prior to the end of 2016. If these four projects are completed on schedule, it is estimated that they will result in a further 16.1 million tonnes per annum of additional export capacity (following full ramp-up). Combining
the projects under construction and at FID or FEED stages implies an increase of 32% in liquefaction capacity by the end of 2016 and a requirement for approximately 90 additional LNG carriers. Projects with start-up dates beyond 2016 are also expected to generate significant further requirements for
LNG carriers. Four projects currently under construction and 23 projects at FID or FEED stages are due to start-up between 2017 and the start of 2020. Although subject to delays, postponements and cancellations, these 27 projects would add a further 81% on current liquefaction capacity (following full
ramp-up) and a requirement for approximately 235
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additional LNG carriers if they proceed on schedule. This ship requirement is calculated based on various assumptions, including the completion of liquefaction projects on time and utilization at current global averages.
LNG Demand
At the start of April 2014, the import side of the LNG business consisted of 107 import facilities at locations in 30 countries. Asian nations accounted for three-quarters of global LNG imports in 2013, with Japan, South Korea, India, China and Taiwan being the top five LNG import
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destinations during this period. The largest importer of LNG is Japan, which imported approximately 88 million tonnes of LNG in 2013 (excluding re-exports), equivalent to 37% of the total global imports in 2013. Annual Japanese import levels in 2013 remained largely unchanged from those in 2012,
reflecting the relatively limited growth in power generation, with what little growth being supplied by a slight increase in coal imports. However, the underlying demand for LNG in power stations remains significant, owing to the continued absence of nuclear capacity following the earthquake and tsunami
in 2011.
As the preceding graph illustrates, while Japan remains the largest importer of LNG, activity in other areas has expanded. In 2011, new re-gasification terminals were opened in China, Thailand, the Netherlands, the United States, Mexico and Argentina. In 2012, the first Indonesian import facility,
Nusantara Regas, began operations, while additional terminals started up in China and Japan. Furthermore, in 2013, Malaysia, Singapore and Israel began importing LNG, and additional regasification terminals began operation in Japan, China, India, Italy and Brazil. This trend is expected to continue in
the near term, with import terminals under construction in countries without a prior history of importing LNG, such as Poland and Ukraine. Other countries planning to receive their first cargoes, either from new plants, FSRUs or land-based sources include: Croatia, Egypt, Finland, Ireland, Lithuania and
Sweden in Europe and the Mediterranean; Bahrain, Jordan, the Philippines, Sri Lanka and Vietnam in the East and Colombia and Uruguay in the western hemisphere. If all of the import proposals are realized, the number of importing nations could potentially reach approximately 50 by the end of 2016.
A notable trend in recent years has been the growth in the volume of re-exports being traded globally. Import terminals, particularly in the U.S. Gulf of Mexico, Belgium and Spain have installed loading facilities, which give them the ability to move LNG out of storage so that it can be re-exported
when the market prices make it profitable. Furthermore, as demonstrated by new import facilities having been established in Malaysia and Indonesia, certain key existing gas exporters have been establishing an LNG import infrastructure in order to try to meet growing domestic demand for natural gas
without having to curb LNG exports. There has also been a growth in the popularity of floating storage and regasification units (FSRUs), given the large expense of providing land-based import facilities. Three FSRUs have been built since the start of 2012 and a further three are scheduled to enter
service by the end of 2014.
Increased demand is expected from Japan in the short term. Following the events at the Fukushima nuclear power plant in March 2011, the vast majority of the countrys nuclear reactors were taken off-line and in September 2013, the last functioning nuclear reactor was shut down. Since 2011, the
replacement demand from electricity generators has resulted in a rapid year-on-year growth in LNG imports (12.7% in 2011 and 11.4% in 2012). Although Japanese LNG import levels remained largely static in 2013, the Japanese Institute of Energy Economics released a report in February 2014 that
suggested there could be an increase, albeit marginal, in LNG imports in the
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short term to meet additional demand, if all other conditions remain unchanged. However, the longer-term outlook remains uncertain. Although it is widely accepted that LNG will continue to play an important role in Japans energy mix, particularly in meeting peak demand, there are potential factors
that could limit any substantial growth in the long term. The most prominent of these is the ruling Liberal Democratic Partys enthusiasm for restarting nuclear reactors; in April 2014, the government announced plans to restart some nuclear capacity. It is also anticipated that a greater emphasis will be
placed on energy efficiency and renewable energy sources moving forward. Moreover, the fact that the price of LNG in Japan has traditionally been indexed to the oil import price on long-term contracts may limit growth. However, it is important to note that Japanese importers are attempting to
mitigate this factor by diversifying their LNG sources to capitalize on cheaper prices elsewhere, primarily North America. In July 2013, Osaka Gas Co and Chubu Electric Power Co announced twenty year contracts with Freeport LNG in the U.S.
Demand for LNG is likely to continue to increase elsewhere in Asia, with particular scope for increased imports in both China and India for use in power generation, domestic heating and other industrial uses. Chinese imports of LNG, boosted by rising energy use and its desire to diversify its energy
mix, have increased rapidly since 2006 when Chinas first regasification plant opened. Chinese imports increased from 0.7 million tonnes of LNG in 2006 to 18.6 million tonnes of LNG in 2013 (excluding re-exports). As of July 2014, China had 11 LNG receiving terminals in operation with a total capacity
of 36.6 million tonnes per annum. Prospects for further growth in Chinas LNG import demand appear to be largely positive: six new regasification plants and the expansion of an existing facility with a total import capacity of 16.6 million tonnes are under construction, with approximately 5.6 million
tonnes scheduled to come online by the end of 2014, and seven additional plants have been proposed. Elsewhere, Indian imports of LNG marginally declined by 1.7% in 2013 to 13.1 million tonnes, largely as a result of a weaker rupee and an increase in hydro generation. However, the outlook for Indian
seaborne LNG demand moving forward remains positive. At the start of July 2014, there were four LNG regasification terminals operating in India, with a total capacity of 22.4 million tonnes. India also has one regasification terminal currently under construction, with the Andhra Pradesh FSRU
scheduled to start operation in 2015. A further eleven new terminals and one terminal expansion are currently proposed or have been approved, many of which have estimated start-up dates of 2016 or earlier and would increase demand for seaborne LNG.
A significant recent driver of LNG demand has been high regional price differentials caused by varying supply of natural gas, differing price formation mechanisms and regulations, regional gas infrastructures and demand dynamics. General economic activity is also a driver of LNG demand.
Significant pricing differentials in varying regions of the world, as well as the relatively low cost of LNG transport have created arbitrage opportunities for LNG producers and traders, leading to additional demand for LNG sea transport. In 2011, gas prices in Japan were almost three times the levels of
prices in the United States. This price differential increased in 2012, with the Japanese price averaging almost four times the levels of those in the United States. Over the course of 2013, this multiple averaged over four times, but fell to just over two times in 2013. With shipping costs significantly below
these differentials, this has encouraged trading to take advantage of arbitrage opportunities.
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LNG: Trade and Shipping
The LNG trade can be considered as two main trading blocs, one covering the Asia/Pacific and the other the Atlantic (including the Mediterranean). Historically, there was little movement between the two blocs, although over the last three years there has been an increase in activity from the new
Atlantic exporters (Norway, Equatorial Guinea and Trinidad) to the Pacific. The Middle East sits between these two blocs, but the balance of its trade to the East and the West has changed little in recent years. Demand for LNG shipping has increased in recent years as natural gas demand has
continued to exceed production in mature gas producing regions, and as the cost of liquefaction and regasification has declined due to improved technology, efficiency gains and more competition. Moreover, high natural gas and LNG price differentials across varying regions have contributed to the
proliferation of LNG trade. World seaborne LNG trade has grown strongly over the past two decades, with a compound annual growth rate of 7.1% between 1990 and 2011.
In 2008 and 2009, global economic conditions reduced demand for LNG and the rate of growth in the world seaborne trade of LNG stalled, partly due to limited volumes being made available for trading. Subsequently, there was a 21.3% increase in the volume of world seaborne LNG trade in
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2010 and an 11.3% increase in 2011 as LNG demand increased and new and existing facilities were able to commence production. However, the overall volume of world seaborne LNG trade declined by 1.6% in 2012, as a result of the postponement of further liquefaction capacity and several terminals
undergoing periods of downtime. Total world seaborne trade in LNG remained at a similar level in 2013, increasing by just 0.5% (including re-exports). This is a result of limited liquefaction capacity growth over the course of the year, coupled with import declines in both the United States and Europe
only being marginally offset by growth in non-OECD Asia. An overall improvement in world seaborne trade in LNG compared to 2013 is expected in full year 2014.
There has also been a general increase in the complexity and distance of trading patterns. As shown in the graph below, the number of LNG trade routes between countries has increased from 45 in 2003 to 93 in 2008 and 168 in 2013. In the period between 1997 and 2011, there was also a
considerable increase in the average distance of LNG trade routes, increasing from 2,338 nautical miles to 3,755 nautical miles, a 61% increase over the period. These increases in distance and complexity of trading routes have also increased the relative requirement for LNG shipping capacity.
LNG Shipping
Types of LNG Carriers
LNG carriers transport LNG internationally between liquefaction facilities and import terminals. These double-hulled ships include a sophisticated containment system that holds and insulates the LNG so it maintains its liquid form. There are two main types of containment system in use on LNG
carriers. The Moss system, developed by Kvaerner in the 1970s, uses free standing insulated spherical tanks supported at the equator by a continuous cylindrical skirt, i.e., the tank and the hull are two separate entities. The Membrane technique uses insulation built directly into the hull of the ship, with a
membrane covering inside the tanks to maintain integrity, i.e., the ships double hull directly takes the pressure of the cargo. The membrane technique is the most used system. As of July 1, 2014, this system had been supplied to 275 ships in service (69% of the current fleet in terms of numbers), or 270
ships (72% of the current fleet) if vessels below 35,000 cbm are excluded. The system is also the preferred choice for 75% of the ships on the current global order book, or 82% if vessels below 35,000 cbm are excluded.
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Ship Technology
The traditional propulsion unit for an LNG carrier has been the steam turbine and this remains the most widely used technology in the current fleet. As at July 1, 2014, the global LNG carrier fleet included 259 ships (65% of the fleet by number) with this technology, with a further 14 on order (11%
of the orderbook by number). Traditionally, this technology was the only practical way of utilizing the boil-off gas characteristic of LNG transport. Boil-off gas represents approximately 0.15% of cargo per day. In recent years however, the high value of LNG has given rise to arguments over the merits of
burning valuable cargo versus the cost of investment in improved insulation and/or alternative engines.
In 2002, Gaz de France became the first owner to commit to gas-fired diesel electric engines, ordering from Chantiers de lAtlantique in St. Nazaire, France (now owned by STX Europe) a 74,000 cbm ship delivered in 2006. This engine type features the following advantages: (i) higher efficiency,
when compared to steam turbine installations, resulting in significant cost savings in todays fuel price environment; (ii) more compact which allows for a bigger cargo space; and (iii) allows greater freedom in the hiring of engineering staff. Dual fuel diesel electric engines are capable of using LNG boil-off
with either marine diesel oil or heavy fuel oil, and are able to reach approximately 45% efficiency, compared to under 30% for steam turbine engines. Although total fuel costs of a ship will depend on the relative cost of bunkers and LNG and trading patterns, these engines can benefit from over 30%
fuel cost savings a day when running on heavy fuel oil. As at July 1, 2014, the global LNG carrier fleet included 77 ships (19% of the fleet by number) with this technology, almost all of which are within the 145,000 to 175,000 cbm size range. In addition, 83 ships (67% of the orderbook by number) with
this technology were on order. Wartsila, the original supplier of diesel electric engines, has now been joined by MAN Diesel & Turbo SE with similar offerings.
Slow-speed diesel engines have been promoted for larger ships and were specified for the approximately 210,000 to 217,000 cbm Q-Flex and the approximately 260,000 cbm Q-Max orders for the Qatar projects. The slow-speed engines feature twin slow-speed diesel engines with twin screws and a
re-liquefaction plant used to return boil-off gas to the cargo. As of July 1, 2014, 31 Q-Flexes and 14 Q-Maxes have been delivered with this technology, comprising 11% of the current
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fleet in terms of numbers. However, no LNG carriers above 200,000 cbm with slow-speed diesel engines have been ordered since 2007.
Global LNG Carrier Fleet and Orderbook
The effective supply of LNG carrier capacity is primarily determined by three main factors: (i) the size of the existing fleet; (ii) the rate of deliveries of newbuildings; and (iii) scrapping. At the start of 1996, the LNG carrier fleet stood at 90 ships (9.4 million cbm) before increasing to 174 ships (20.4
million cbm) by the start of 2005 and 361 ships (51.7 million cbm) by the start of 2011. However, the fleet has grown more slowly in the last few years as the delivery schedule has been relatively limited. As of July 1, 2014, the LNG carrier fleet totaled 397 ships with an aggregate capacity of 57.3 million
cbm. The average age of the fleet was 10.8 years. Please note that this total includes small LNG tankers of less than 35,000 cbm, which are identified separately in the following table.
Size (cbm)
Fleet
Order Book
Number
000 cbm
% share of
Average Age
No.
000 cbm
% of
210,000 & above
45
10,335
18%
5.4
180-209,999
3
542
150-179,999
90
14,420
25%
3.3
106
17,599
122%
120-149,999
226
31,367
55%
14.2
1
147
0%
90,000-119,999
60,000-89,999
12
911
2%
24.8
35,000-59,999
3
108
Less than 35,000
24
231
0%
9.5
11
273
118%
Total
397
57,263
100%
10.8
124
18,669
33%
Source: Clarkson Research, July 2014
Historically, ships built between the early 1960s and 2000 could be grouped into one of three size ranges. The first category was the small carriers of between 25,000 and 50,000 cbm which were used for short range trades, especially in the Mediterranean. Ships between 60,000 and 90,000 cbm were
termed mid-sized carriers and utilized on medium haul voyages, and ships between 120,000 and
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cbm
(Years)
fleet
138,000 cbm were in the larger sized class. In 2002, the first 140,000 cbm ship was delivered as the LNG supply chain looked to take advantage of economies of scale. However, it was not until the fourth quarter of 2006 that a 150,000 cbm ship entered the fleet. From 2007 to 2010, there were a significant
number of so called Q-Flex (210,000 to 217,000 cbm) and Q-Max (260,000 cbm to 270,000 cbm) ships delivered into the fleet. With the exception of a limited number of small LNG carriers no larger than 36,000 cbm, all of the ships ordered since the first half of 2007 have been between 145,000 cbm
and 185,000 cbm in size. This reflects the current interest in designs that are able to trade flexibly and can move average sized cargo stems.
There has been a notable increase in newbuilding ordering of LNG carriers in recent years. Improved charter market conditions and a shortage of LNG carriers led to 156 newbuilding contracts being placed in the period from the start of 2011 to the start of July 2014, compared to a total of just
eleven between 2008 and 2010. As of July 1, 2014, the LNG carrier order book totaled 124 ships with an aggregate capacity of 18.7 million cbm. At 33% of the fleet (in terms of carrying capacity), the current order book is notably smaller than the record highs recorded in mid-2006 when it was almost
100% of the existing fleet. Nevertheless, it is substantially larger than it was at the start of 2011 (6% of the existing fleet).
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Over the remaining six months of 2014, 4.3 million cbm of new tonnage (7.5% of the current fleet by capacity) is scheduled to be delivered, with a further 5.2 million cbm expected to be delivered in full year 2015. As of July 1, 2014, available berth capacity is relatively limited through to the end of
2015. It is therefore expected that the capacity of the global fleet will grow by approximately 7.9% in 2014 and by 8.9% in 2015. Exact levels will depend on the level of contracting activity in the coming years.
World LNG Carrier Order Book By Year of Delivery
Capacity Range
2014
2015
2016
2017
Total
cbm
No.
000 cbm
No.
000 cbm
No.
000 cbm
No.
000 cbm
No.
000 cbm
210,000+
180,000-209,999
1
182
2
360
3
542
150,000-179,999
26
4,168
30
4,934
29
4,943
21
3,554
106
17,599
120,000-149,999
1
147
1
147
90,000-119,999
60,000-89,999
35,000-59,999
3
108
3
108
Less than 35,000
9
218
2
55
11
273
Total
27
4,316
39
5,152
35
5,288
23
3,914
124
18,669
Source: Clarkson Research, July 2014
Note: The order book as a % of the fleet is in cubic capacity terms.
LNG carriers are typically engineered to a very high standard and when they enter the fleet, they are rigorously maintained. Therefore, their operational life extends well beyond that of other bulk carrier types and most trade beyond the age of 30 to 40 years. Consequently, there has historically been
very little scrapping: between 1996 and the start of July 2014, only 23 have been demolished, of which only ten have been larger than 60,000 cbm. Moving forward, however, commercial considerations may well alter this. A growing proportion of the current fleet (10% in terms of the number of ships as
of July 1, 2014) is now over 25 years old, while the order book contains ships which are larger, more fuel efficient and more suited to charterers requirements than
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Note: The order book is as of July 1, 2014. Going forward, the orderbook is subject to new orders, particularly for delivery in 2016 onwards.
those currently trading. As a result, commercial imperatives may dictate fleet replacement programs sooner rather than later. Although some older ships may be sold into conversion projects (for example, FSRUs), this may result in a large proportion of the overage tonnage being scrapped in the near-
term.
A relatively small number of shipyards worldwide are capable of building LNG carriers. Only 16 yards are currently building LNG carriers or have them on order, all of which are located in the Far East. Of these 16, only 11 are building vessels above 35,000 cbm. South Korean yards have the largest
portion of the order book above 35,000 cbm (74% in terms of the number of ships), and the remainder is accounted for by yards in China and Japan, which have 12% and 14% of the order book, respectively. Nearly all LNG carriers are built at established shipyards, and ships are currently being
delivered broadly as per the order book schedule. LNG carriers are relatively complex to build, with typical lead times in recent years of between 26 and 48 months. As a result, this prevents large numbers of new shipyard entrants. However, additional LNG shipbuilding capacity may be available at the
existing capable yards if demand for other ship types declines.
LNG carrier asset values fluctuate over time. Given that historically most ships are built to fulfill the requirements of a specific project, sales of LNG carriers are infrequent and only 46 sales were reported between the start of 2006 and the start of July 2014 (17 of which were sold in 2011). Of this
total, eight LNG carriers were sold in the first six months of 2014, including six vessels that were bought by GasLog from BG Group. There is substantially more activity in the newbuilding market. In general, shipbuilding prices are governed by the supply of and demand for shipbuilding berths, the cost
of building ships, and exchange rates. Although it is important to note that prices can vary greatly according to the individual specifications of the ship being built, a multitude of other factors affect the benchmark newbuilding price of LNG carriers. These include changes to the size and technological
sophistication of LNG carriers, the cost of steel and competition for yard space from both other LNG owners and other sectors of the shipbuilding market. Recent trends in newbuilding prices are shown in the following graph.
Market Participants and Competition
Competition in the LNG shipping market is principally for employment of ships whose charters are expiring and ships that are under construction. Competition for these charters is based on price, ship availability, size, age, propulsion technology and condition, relationships with LNG carrier
charterers and the LNG safety record, experience and reputation of the operator. Due to the nature of competition and long-term charters, the LNG business provides operators with less volatile, more predictable revenue flows than some other sectors of the shipping industry.
The two main types of LNG fleet operators that provide international LNG transportation services are private and state-controlled energy and utility companies that generally operate captive
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fleets, and independent owners and operators. Given the complex, long-term nature of LNG projects, major energy companies have historically transported LNG through their captive fleets. However, independent fleet owners and operators have in recent times been winning an increasing share of charters
for new or expanded LNG projects as major energy companies continue to divest non-core businesses. It appears that the increasing ownership of the world LNG fleet by independent owners is attributable in part to the desire of some major energy companies to limit their commitment to the
transportation business, which is non-core to their operations, and to the cost of financing of new LNG carriers in addition to the high construction costs of liquefaction and regasification facilities. The share of the fleet owned by independent owners (excluding Japanese and South Korean owners, who
typically have very strong relationships with national utility companies) has increased from 24% in terms of numbers at the start of July 2004 to 39% at the start of July 2014. The current order book is further dominated by independent owners, who account for a total 60% of the vessels on order (in
terms of numbers).
The major owners of LNG carriers are shown in the following charts. The major independent owners, excluding the Japanese and South Korean owners and those who are majority owned by oil and gas majors or nation-states, are also shown in the following charts.
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Please note that a number of the owners detailed in the above charts only have partial equity shares in the ships in their fleet.
Barriers to Entry
Although there have been a number of new entrants over the past 10 years, the LNG shipping sector is characterized by relatively high barriers to entry compared to other shipping sectors. Barriers to entry include:
the high cost of building LNG carriers;
the limited number of qualified shipyards that can build LNG carriers;
the requirements of both charterers and financiers, such as experience in the operation of LNG carriers;
the necessary history of quality operations, including very high safety and performance standards and low downtime;
the required financial strength;
the need for highly qualified personnel; and
the illiquid sale and purchase markets.
Contract Structure
Given the specialized nature of LNG carriers and the substantial investments required for the construction of the ships and the associated export and import terminals, most agreements in the LNG sector (both gas sale agreements and charters) have historically been entered into for a long-term of 20
to 25 years. In recent years, there has been a movement towards shorter shipping contracts, with the conclusion of a number of contracts of between five to ten years in duration, as well as short-term contracts of less than four years. This reflects an increased level of liquidity in the market. However, a
significant proportion of LNG carriers continue to be built for longer-term contracts tied to new LNG projects, although some newbuilding contracts have been placed without a firm charter in place.
The majority of LNG carriers remain under long-term contracts. A spot market in traded LNG has developed that covers short-term charters of one year or less, as well as voyage charters. In 2011
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and 2012, this short-term trade accounted for approximately one-quarter of total seaborne LNG trade volumes, increasing to 27% in 2013. This compares to a 19% share of global trade in 2010 and a 3.4% share in 2000.
The charter rates paid in the charter market are governed by the supply of and demand for LNG carrying capacity. For example, oversupply in the LNG carrier market in 2009 and 2010 led to depressed rates. While the global LNG carrier fleet grew by 17.2% in 2009 as a result of strong
newbuilding deliveries, seaborne LNG trade grew by only 5.7% and short-term charter rates were concluded at below $40,000/day. Conversely, world seaborne trade in LNG grew 21.3% in 2010 and 11.3% in 2011 on the back of higher demand and greater availability of new liquefaction supply, combined
with few deliveries into the fleet and caused short- and medium-term charter rates to improve significantly. Figures in excess of $125,000/day were regularly recorded for modern vessels on short- to medium-term charters during 2012, compared to figures ranging between $75,000/day and $90,000/day for
vessels on longer-term charters. Since these peaks, charter rates have softened as fleet growth has begun to pick up. In the second half of 2013, shorter-term rates were in the region of between $90,000/day and $110,000/day, compared to between $70,000/day and $85,000/day for vessels on longer-term
charters. In the first half of 2014, rates for longer-term charters softened to levels closer to the bottom of the previously stated range. Due to limited market liquidity, shorter-term rates also softened in this period, falling to figures in the region between $60,000/day and $70,000/day.
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Overview
We are a growth-oriented limited partnership focused on owning, operating and acquiring LNG carriers engaged in LNG transportation under long-term charters, which we define as charters of five full years or more. Our initial fleet of three LNG carriers, which have charter terms expiring in 2018
and 2019, were contributed to us by GasLog, which controls us through its ownership of our general partner.
Our initial fleet consists of three LNG carriers, built in 2013, with modern tri-fuel diesel electric propulsion technology that operate under long-term charters with subsidiaries of BG Group. We also have options and other rights under which we may acquire additional LNG carriers from GasLog, as
described below. We believe that such options and rights provide us with significant built-in growth opportunities. We may also acquire vessels from shipyards or other owners. We intend to operate our vessels under long-term charters with predictable cash flows and to grow our position in the LNG
market through further acquisitions of LNG carriers from GasLog and third parties. We believe we can grow our distributions per unit organically by providing reliable customer service to our charterers and leveraging GasLogs relationships, expertise and reputation. We intend to make further
acquisitions of LNG carriers from GasLog, including the Pending Vessel Acquisition, and third parties to grow our fleet. However, we cannot assure you that we will make any particular acquisition or that as a consequence we will successfully grow our per unit distributions. Among other things, our
ability to acquire additional LNG carriers will be dependent upon our ability to raise additional equity and debt financing.
GasLog is, we believe, a leading independent international owner, operator and manager of LNG carriers and provides support to international energy companies as part of their LNG logistics chain. GasLog was founded and is effectively controlled by its chairman, Peter G. Livanos, whose familys
shipping activities commenced more than 100 years ago. On April 4, 2012, GasLog completed its initial public offering, and its common shares began trading on the New York Stock Exchange on March 30, 2012, under the symbol GLOG. At the time of its initial public offering, GasLogs owned fleet
consisted of ten LNG carriers, including eight newbuildings on order. Since its initial public offering, GasLog has increased by approximately 126% the total carrying capacity of vessels in its fleet, which includes vessels on the water and newbuildings on order. This increase includes: two LNG newbuilding
orders announced in February 2013, two LNG newbuilding orders announced in August 2013, two LNG newbuilding orders and two exercised options for newbuilding orders announced in June 2014, all of which are expected to be delivered through the second half of 2017; the acquisition of one 2010
built LNG carrier announced in September 2013; and six secondhand steam-powered ships that were acquired from BG Group in April and June 2014. Each of the four newbuildings announced in 2013 is under a long-term charter, which will commence upon delivery. Since January 1, 2013, GasLog has
taken delivery of five LNG carriers. As of August 1, 2014, GasLog has a fully owned 22 ship fleet, including 12 ships on the water and 10 LNG carriers on order from Samsung and Hyundai, as well as a 51.8% ownership in the Partnership.
Our Fleet
Initial Fleet
Our initial fleet consists of:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
GasLog Shanghai
2013
155,000
BG Group
January 2018
2021-2026
GasLog Santiago
2013
155,000
BG Group
March 2018
2021-2026
GasLog Sydney
2013
155,000
BG Group
May 2019
2022-2027
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
The charters may be extended for up to two extension periods of three or four years, and each charter requires that the charterer provide us with 90 days notice before the charter expiration of
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Capacity
(cbm)
Expiration
Period
(2)
its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the maximum optional period.
Pending Vessel Acquisition
On August 14, 2014, we entered into a Share Purchase Agreement to purchase from GasLog Carriers, a direct subsidiary of GasLog, 100% of the ownership interests in GAS-sixteen Ltd. and GAS-seventeen Ltd., the entities that own the
Methane Rita Andrea
and the
Methane Jane Elizabeth
,
respectively, for an aggregate purchase price of $328.0 million, which will be funded with a combination of new or existing debt (as discussed below) and proceeds raised in this offering. GasLog purchased the
Methane Rita Andrea
and the
Methane Jane Elizabeth
from BG Group in April 2014. In
connection with the transaction, the Partnership will acquire GAS-sixteen Ltd. and GAS-seventeen Ltd. with $2.0 million of positive net working capital existing at the time of closing. GasLog supervised the construction of each ship and has provided technical management for the ships since delivery.
The entities being purchased pursuant to the Pending Vessel Acquisition currently have $217.0 million of outstanding indebtedness in respect of the two vessels to be acquired. In connection with the Pending Vessel Acquisition, such indebtedness is expected to be partially prepaid with a portion of
the proceeds of this offering. In addition, at or shortly following the closing of the Pending Vessel Acquisition, we expect to refinance all our outstanding indebtedness and the indebtedness of the entities being acquired pursuant to the Pending Vessel Acquisition with borrowing under the New Credit
Facility (as defined below). See Recent Developments.
The following table provides information about the ships to be purchased under the Pending Vessel Acquisition:
LNG Carrier
Year Built
Cargo
Charterer
(1)
Charter
Optional
Methane Rita Andrea
2006
145,000
BG Group
April 2020
2021-2026
Methane Jane Elizabeth
2006
145,000
BG Group
October 2019
2021-2026
(1)
Vessels are chartered to a subsidiary of BG Group.
(2)
Charterer may extend either or both of these charters for one extension period of three or five years, and each charter requires that the charterer provide us with advance notice of its exercise of any extension option. The period shown reflects the expiration of the minimum optional period and the
maximum optional period.
The Pending Vessel Acquisition and the purchase price were approved by our board of directors and the conflicts committee of our board of directors. The conflicts committee retained an independent financial advisor to assist it in evaluating the Pending Vessel Acquisition. In determining that the
Pending Vessel Acquisition is fair and reasonable to us, the conflicts committee obtained the views of its financial advisor as to the fairness of the purchase price.
We have agreed to the Pending Vessel Acquisition for the following reasons:
the long-term, fixed-rate charters with BG Group fits our objective of generating stable cash flows;
the Pending Vessel Acquisition will increase the scale and diversity of our operations;
the Pending Vessel Acquisition is expected to increase our financial strength and flexibility by increasing our cash flow; and
the Pending Vessel Acquisition is expected to increase our cash available for distribution to our unitholders.
We estimate that the vessels being acquired will generate $47.7 million of incremental contracted revenue over their initial charter terms and add over $34.5 million per annum to our EBITDA
(1)
. However, we may not realize that level of revenue or EBITDA from the acquisition of these vessels.
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Capacity
(cbm)
Expiration
Period
(2)
If the Pending Vessel Acquisition is consummated, our management intends to recommend to our board of directors an increase in our quarterly cash distribution of between $0.05625 and $0.06250 (between $0.225 and $0.250 per unit on an annualized basis), which would become effective for our
distribution with respect to the quarter ending
, 2014. Combined with the existing minimum quarterly cash distribution of $0.375, this proposed increase to between $0.43125 to $0.43750 per quarter would result in the quarterly distribution exceeding the first incentive distribution right threshold of
$0.43125. Any such increase would be conditioned upon, among other things, the closing of the Pending Vessel Acquisition, the approval of such increase by our board of directors and the absence of any material adverse developments or potentially attractive opportunities that would make such an
increase inadvisable.
(1)
Non-GAAP Financial Measures
EBITDA.
We define EBITDA as earnings before interest income and expense, gain/loss on interest rate swaps, depreciation and amortization and taxes. EBITDA is used as a supplemental financial measure by management and external users of financial statements, such as our lenders, to assess our
operating performance and ability to generate cash for debt service and capital expenditures, as well as our compliance with the financial covenants and restrictions contained in our financing agreements. We believe that EBITDA assists our management and investors by increasing the comparability of
our performance from period to period. This increased comparability is achieved by excluding the potentially disparate effects between periods of interest, gain/loss on interest rate swaps, depreciation and amortization and taxes, which items are affected by various and possibly changing financing
methods, capital structure and historical cost basis and which items may significantly affect results of operations between periods. We believe that including EBITDA as an operating measure benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring
our ongoing operational strength and cash generating ability in assessing whether to continue to hold common units.
EBITDA has limitations as an analytical tool (see Selected Historical Financial and Operating Data) and should not be considered an alternative to profit/(loss), profit/(loss) from operations, cash flow (used in)/from operating activities or any other measure of operating performance or liquidity
presented in accordance with IFRS. EBITDA excludes some, but not all, items that affect profit/(loss) and net cash from operating activities, and these measures may vary among other companies. Therefore, EBITDA may not be comparable to similarly titled measures of other companies.
Estimated EBITDA for the two LNG carriers we are purchasing for the first twelve months of operation is based on the following assumptions:
closing of the Pending Vessel Acquisition in the third quarter of 2014 and timely receipt of charter hire specified in the charter contracts;
utilization of 363 days per year and no drydocking;
vessel operating and supervision costs and charter commissions per current internal estimates; and
general and administrative expenses based on managements current internal estimates.
We consider the above assumptions to be reasonable as of the date of this prospectus, but if these assumptions prove to be incorrect, actual EBITDA for the vessels could differ materially from our estimates. The prospective financial information was not prepared with a view toward public disclosure
or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants. Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial
information contained above, nor have they expressed any opinion or any other form of assurance on such information or its achievability and assume no responsibility for, and disclaim any association with, such prospective financial information.
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We intend to use the proceeds of this offering, and the related capital contribution to us by our general partner, to partially fund the purchase price for the Pending Vessel Acquisition and to prepay or refinance related indebtedness.
We expect the Pending Vessel Acquisition to close following the closing of this offering, subject to the Partnership obtaining the funds necessary to pay the purchase price and the satisfaction of certain other closing conditions. The Pending Vessel Acquisition may not close as anticipated or it may
close with adjusted terms. See Risk FactorsRisks Inherent in Our BusinessThe Pending Vessel Acquisition may not close as anticipated or it may close with adjusted terms. This offering is not conditioned on the closing of the Pending Vessel Acquisition. If the Pending Vessel Acquisition does not close,
we will use the net proceeds from this offering and the related capital contribution to us by our general partner for general partnership purposes.
The Pending Vessel Acquisition will be accounted for as a reorganization of companies under common control. Beginning with the first quarter following the completion of the Pending Vessel Acquisition, the Partnerships historical results will be retroactively restated to reflect the historical results of
the
Methane Rita Andrea
and
Methane Jane Elizabeth
during the periods they were owned by GasLog.
On August 5, 2014, we entered into a commitment letter and a coordination letter with Citibank for a credit facility for up to $450 million to refinance the existing debt facilities for our initial fleet, as well as the debt facilities for the vessels to be acquired pursuant to the Pending Vessel Acquisition.
The refinanced debt is expected to have a tenor of five years and an amortization profile of 20 years, which we believe will increase our financial flexibility. The New Credit Facility will be secured by a first priority mortgage on each of our current vessels and, when delivered, the vessels to be acquired
pursuant to the Pending Vessel Acquisition, a specific assignment of each of the existing charters and a first assignment of earnings and insurances in relation to the vessels. The New Credit Facility will bear interest at LIBOR plus a margin and will be payable in 20 equal quarterly payments of $5.625
million each and a balloon payment of $337.5 million together with the final quarterly payment. We expect that the New Credit Facility will have financial and restrictive covenants that are consistent with our existing debt. The closing of the New Credit Facility is subject to conditions precedent, including
the negotiation and execution of final documentation and final lender approvals. We expect the New Credit Facility to be entered into and funded at or shortly following the closing of the Pending Vessel Acquisition. In addition, at the closing of the Pending Vessel Acquisition, we expect to use a portion
of the proceeds from this offering to prepay amounts related to the
Methane Rita Andrea
and
Methane Jane Elizabeth
currently outstanding under the Facility Agreement between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. as borrowers, Citibank, N.A., London Branch, as mandated
lead arranger, the financial institutions listed in Schedule 1 thereto as lenders, Citibank as bookrunner, Citibank International Plc as agent of the other finance parties and Citibank as security agent and trustee, which such borrowers entered into to finance the purchase of the
Methane Rita Andrea
and the
Methane Jane Elizabeth
(as well as the
Methane Lydon Volney
, which is not being acquired in the Pending Vessel Acquisition). See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.
If the New Credit Facility described above is not entered into and funded at or prior to the closing of the Pending Vessel Acquisition, (1) the Citibank Facility will remain in place and (2) as required by the Citibank Facility, we and GasLog Partners Holdings LLC, our wholly owned subsidiary, will
enter into a guarantee agreement with Citibank pursuant to which we and GasLog Partners Holdings LLC will guarantee the obligations of the borrowers under the Citibank Facility (including GAS-eighteen Ltd., an entity that will not be acquired from GasLog under the Pending Vessel Acquisition). See
Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources. The funding of the New Credit Facility is not a condition to the completion of this offering or the Pending Vessel Acquisition.
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Option Vessels
We have the option to purchase the following 12 LNG carriers from GasLog, including the two vessels to be acquired pursuant to the Pending Vessel Acquisition, within 36 months after each such vessels acceptance by its charterer (or, in the case of the
GasLog Seattle
and the six vessels recently
acquired from BG Group, including the two vessels subject to the Pending Vessel Acquisition, 36 months after the closing of the IPO), in each case at fair market value as determined pursuant to the omnibus agreement.
Our ability to purchase these optional vessels, should we exercise our right to purchase such vessels, is dependent on our ability to obtain financing to fund all or a portion of the acquisition costs of these vessels and may be dependent on the consent of existing lenders to GasLog with respect to
these optional vessels. See Risk FactorsRisks Inherent in Our BusinessWe may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or financing agreement. As of the date of this prospectus, we have not secured any financing in connection with the 12 optional
vessels (other than those to be acquired pursuant to the Pending Vessel Acquisition). In connection with the Pending Vessel Acquisition, we will enter into the New Credit Facility or the Guarantee. See Recent Developments.
LNG Carrier
Year Built
(1)
Cargo
Charterer
(2)
Charter
GasLog Seattle
2013
155,000
Shell
December 2020
Solaris
2014
155,000
Shell
June 2021
Hull No. 2072
Q1 2016
174,000
BG Group
2026
Hull No. 2073
Q2 2016
174,000
BG Group
2026
Hull No. 2102
Q3 2016
174,000
BG Group
2023
Hull No. 2103
Q4 2016
174,000
BG Group
2023
Methane Rita Andrea
(4)
2006
145,000
BG Group
April 2020
Methane Jane Elizabeth
(4)
2006
145,000
BG Group
October 2019
Methane Lydon Volney
2006
145,000
BG Group
October 2020
Methane Shirley Elisabeth
2007
145,000
BG Group
December 2019
Methane Heather Sally
2007
145,000
BG Group
December 2020
Methane Alison Victoria
2007
145,000
BG Group
June 2020
(1)
For newbuildings, expected delivery quarters are presented.
(2)
Vessels are chartered to a subsidiary of BG Group or a subsidiary of Shell, as applicable.
(3)
Indicates the expiration of the initial term. The charterer of the
Methane Rita Andrea
, the
Methane Jane Elizabeth
and the
Methane Lydon Volney
has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. In addition, the
charterer of the
Methane Shirley Elisabeth
, the
Methane Heather Sally
and the
Methane Alison Victoria
has a unilateral option to extend the term of two of the related time charters for a period of either three or five years at its election. For the other vessels in the above table, the charterers have
unilateral options to extend the term of the time charters for periods ranging from 5 to 10 years, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter.
(4)
Vessels to be acquired pursuant to the Pending Vessel Acquisition. See
Pending Vessel Acquisition.
GasLog also has the following 10 additional carriers in its fleet, which it will be required to offer to us for purchase at fair market value as determined pursuant to the omnibus agreement if charters are secured with committed terms of five full years or more:
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Capacity
(cbm)
Expiration
(3)
LNG Carrier
Year Built
(1)
Cargo
Charterer
(2)
Charter
GasLog Savannah
2010
155,000
BG Group
September 2015
(3)
GasLog Singapore
2010
155,000
BG Group
September 2016
(3)
GasLog Skagen
2013
155,000
BG Group
April 2021
(4)
GasLog Chelsea
2010
153,600
Spot Market
N/A
Hull No. 2043
Q4 2014
155,000
N/A
N/A
Hull No. 2044
Q1 2015
155,000
N/A
N/A
Hull No. 2130
Q2 2017
174,000
N/A
N/A
Hull No. 2131
Q3 2018
174,000
N/A
N/A
Hull No. 2800
Q3 2017
174,000
N/A
N/A
Hull No. 2801
Q4 2017
174,000
N/A
N/A
Capacity
(cbm)
Expiration
|
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(1) |
For newbuildings, expected delivery quarters are presented. |
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(2) |
Vessels are chartered to a subsidiary of BG Group or a spot market counterparty, as indicated. |
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(3) |
Indicates the expiration of the initial term. The charterers have unilateral options to extend the term of the time charters for periods ranging from 30 to 90 months, provided that the charterer provides us with advance notice of declaration of any option in accordance with the terms of the applicable charter. |
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(4) |
Time charter provides for full employment for three years and a subsequent five year seasonal charter under which the ship is employed for seven months and available to accept other charters for five months. |
In addition to the LNG carriers described in the preceding paragraphs, we intend to leverage our relationship with GasLog to make accretive acquisitions of LNG carriers with long-term charters from GasLog and third parties to increase our distributions per unit. Pursuant to the omnibus agreement, GasLog will be required to offer to us for purchase any other LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or acquires if charters are secured with committed terms of five full years or more. Except as discussed elsewhere in this prospectus, this right will continue throughout the entire term of the omnibus agreement. In addition to GasLogs committed order book, GasLog currently holds fixed price options from Samsung on two additional 174,000 cbm newbuildings with delivery dates in 2017 and early 2018. If GasLog exercises these options, Samsung has agreed to grant GasLog two additional options. GasLog also holds fixed price options from Hyundai on four additional 174,000 cbm newbuildings with delivery dates in late 2017 and during 2018. In addition, we will have a right of first offer with regard to any proposed sale, transfer or other disposition of any LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation under a charter of five full years or more that GasLog owns, as discussed elsewhere in this prospectus. Our ability to acquire additional LNG carriers from GasLog is subject to obtaining any applicable consents of governmental authorities and other non-affiliated third parties, including the relevant lenders and charterers. Under the omnibus agreement, GasLog will be obligated to use reasonable efforts to obtain any such consents. Our ability to exercise any right to acquire additional LNG carriers will also be subject to our ability to obtain additional equity and debt financing. We cannot assure you that in any particular case the necessary consent will be obtained. See Certain Relationships and Related Party TransactionsOmnibus Agreement.
Our Relationship with GasLog Ltd.
We believe that one of our principal strengths is our relationship with GasLog. We believe our relationship with GasLog gives us access to GasLogs relationships with leading energy companies, shipbuilders, financing sources and suppliers and to its technical, commercial and managerial expertise, which we believe will allow us to compete more effectively when seeking additional customers. As of August 1, 2014, GasLog has a fully owned 22 ship fleet, including 12 ships on the water and 10 LNG carriers on order from Samsung and Hyundai, as well as a 51.8% ownership in
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the Partnership. Since its initial public offering in April 2012, GasLog has increased by approximately 126% the total carrying capacity of vessels in its fleet, which includes vessels on the water and newbuildings on order. In addition, GasLog, through its wholly owned subsidiary GasLog LNG Services,
provides ship management services to the LNG carriers in our initial fleet and, subject to any alternative arrangements with the applicable charterer, additional ships we may acquire from GasLog. GasLog will also provide certain administrative and commercial management services to the Partnership.
GasLog was incorporated in 2003 and is effectively controlled by its chairman, Peter G. Livanos, who beneficially owns approximately 39.0% of GasLogs common shares. Mr. Livanos familys shipping activities commenced more than 100 years ago. On April 4, 2012, GasLog completed its initial
public offering and its common shares began trading on the New York Stock Exchange on March 30, 2012, under the symbol GLOG. GasLog completed a $199 million follow-on public offering and concurrent private placement on January 22, 2014, to fund a portion of the cost of the acquisition of the
three vessels recently purchased from BG Group, and on April 16, 2014, GasLog completed a $110 million follow-on public offering to fund a portion of the cost of the acquisition of the three vessels under contract to be purchased from BG Group.
Upon completion of this offering, GasLog will own our 2.0% general partner interest, all of our incentive distribution rights and a
% limited partner interest in us, which consists of 162,358 common units and all of our subordinated units. Our general partner, by virtue of its general partner
interest, controls the appointment of three of our five directors (subject to its right to transfer the power to elect one director to the common unitholders so that they will thereafter elect a majority of our directors). GasLog intends to utilize us as its primary growth vehicle to pursue the acquisition of
LNG carriers that are expected to generate long-term, stable cash flows.
Business Opportunities
With the global demand for natural gas increasing and LNGs share of the international natural gas trade expanding within the sector, we believe that this is a favorable time to continue to grow the Partnership through the addition of modern vessels. While LNG trade is cyclical and there is no
guarantee that we will be able to take advantage of opportunities to grow, we believe the following attributes of the LNG industry create an attractive environment in which to expand our business:
Natural gas and LNG are strong and growing components of global energy supply.
Natural gas accounted for 24% of the worlds energy consumption in 2013. Over the last two decades, natural gas has been one of the worlds fastest increasing energy sources, growing at approximately twice the
rate of oil consumption over the same period. We believe LNG, which accounted for 31% of overall cross-border trade of natural gas in 2013, will continue to increase its share at least over the next several years. Because of the cost and environmental advantages of natural gas relative to other
energy sources, together with the increased availability of natural gas supply, we believe that demand for natural gas and LNG in particular will continue to grow in the future.
The demand for LNG shipping is expected to grow.
Disparities in the pricing of natural gas between producing regions with natural gas reserves and consuming regions, such as the Far East, have created arbitrage opportunities for LNG producers and traders. These arbitrage opportunities, the
growing distance between the producing regions and end buyers and the cost advantages of LNG shipping as compared to transporting natural gas by pipeline led to the world seaborne trade of natural gas in the form of LNG increasing by 21.3% in 2010 and 11.3% in 2011. Although the seaborne
trade in LNG declined by 1.6% in 2012 and improved marginally by only 0.5% in 2013, we believe that planned capacity increases in liquefaction and regasification terminals will support increasing LNG trade in the future. Including all liquefaction projects that are currently under construction and
at FID or FEED stages, Clarkson Research estimates that liquefaction capacity will increase by approximately 32% by the end of 2016. For more details about these liquefaction projects and the current global order book and other factors affecting demand for LNG shipping, see The LNG
Shipping Industry.
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High barriers to entry should restrict the supply of new LNG carriers.
According to Clarkson Research, the existing order book of LNG carriers represents only 33% of current LNG carrier fleet carrying capacity. Fleet growth was limited in 2012 and 2013 but is expected to accelerate in 2014 and
2015. We believe that significant barriers to entry exist in the LNG shipping sector due to the large capital requirements, the limited availability of financing, the limited availability of qualified ship personnel and the need for a high degree of technical management capabilities. The industry also
serves a demanding customer base that requires the highest quality operating standards. Finally, we believe the limited construction capacity at high-quality shipyards and the long lead-time required for the construction of LNG carriers should also restrict the supply of new LNG carriers in the near-
term.
Stringent customer certification standards favor experienced, high-quality operators.
Energy companies have established increasingly high operational, safety and financial standards that independent owners of LNG carriers generally must meet in order to qualify for employment in their programs.
Through our relationship with GasLog, which has managed LNG carriers for BG Group for over 12 years and had its technical management operations vetted by other major energy companies, we believe that these rigorous and comprehensive certification standards will enhance our ability to
compete for new customers and charters relative to less qualified and less experienced ship operators.
Increasing ownership of the global LNG carrier fleet by independent owners.
According to Clarkson Research, independent owners have increased their share of the global LNG carrier fleet from approximately 24% at the start of July 2004 to approximately 39% at the start of July 2014. Orders by
independent owners represent 60% of the vessels in the current global order book. We believe private and state-owned energy companies will continue to seek high-quality independent owners for their growing LNG shipping requirements in the future, driven in part by large capital requirements
and a recognition of the fact that owning and operating LNG ships are outside of their core areas of expertise.
Competitive Strengths
We believe that our future business prospects are well supported by the following factors:
Significant built-in growth opportunities.
In addition to the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we have the option to purchase from GasLog the 10 additional LNG carriers delivered or expected to be delivered to GasLog between 2013 and 2016 that are or will
be subject to long-term charters. GasLog will also be required to offer to us for purchase at fair market value (as determined pursuant to the omnibus agreement) any other LNG carriers with cargo capacities greater than 75,000 cbm engaged in oceangoing LNG transportation that GasLog owns or
acquires if they are placed under charters of five full years or more, including the four existing LNG carriers currently on short-term or seasonal contracts and six newbuildings on order that have not yet been chartered. We believe these acquisition opportunities, as well as other future acquisition
opportunities from GasLog or third parties, will facilitate the growth of our distributions per unit.
Enhanced growth opportunities through our relationship with GasLog, an established owner, operator and manager of LNG carriers.
We believe our relationship with GasLog will provide us with many benefits that we believe will drive growth in our distributions per unit. We believe charterers
award new business to established participants in the LNG carriers market because of their demonstrated technical, commercial and managerial expertise. GasLog is an experienced operator with an in-house technical manager, GasLog LNG Services, which provides a highly competent technical and
operational platform to GasLogs owned and managed vessels. We believe that GasLog LNG Services 12-year history of providing management services to BG Group has enabled GasLog to develop a track record and reputation for providing highly competent, safe and reliable operations. We
believe this track record and reputation will continue to enable GasLog to attract additional long-term charters for LNG carriers. Further, we believe GasLogs strong relationships with customers, shipyards
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and established financing providers, and its large pool of experienced and qualified global seafarers, enhance its operational and financial efficiency.
Predictable cash flow profile through charter contracts with leading energy companies.
Our initial fleet operates under charters with initial terms that expire in 2018 or 2019, the two vessels to be acquired pursuant to the Pending Vessel Acquisition operate under charters with initial terms that
expire in 2019 and 2020, and the other 10 LNG carriers for which we have options to purchase from GasLog have charter durations ranging from 5.5 to 10 years with BG Group and Shell. The charters on the three vessels in our initial fleet contain hire rate provisions that provide for an automatic
periodic adjustment, which is designed to reflect the actual costs of operating the ship and related expenses, although existing charters on certain of the vessels subject to the purchase options, including the vessels to be acquired pursuant to the Pending Vessel Acquisition, do not have similar
provisions. We believe that such provisions can reduce our potential exposure to foreign exchange rates and operating costs and expenses. By contracting with companies that we consider to be financially strong, such as BG Group and Shell, we believe that we have minimized our counterparty risk.
Our current charters do not provide the charterers with options to purchase our ships during or upon expiration of the charter term.
Newly constructed and high specification LNG carriers.
Following the completion of the Pending Vessel Acquisition, our fleet will continue to be among the youngest of any LNG shipping operator. The 155,000 cbm size of each of our initial fleet vessels and the 145,000 cbm vessels to be acquired
pursuant to the Pending Vessel Acquisition are compatible with most of the existing LNG terminals around the globe. Our initial fleet and six of the 10 additional vessels that we will have the option to purchase from GasLog are, or when delivered will be, high-specification LNG carriers equipped
with modern tri-fuel diesel electric propulsion technology.
Demonstrated access to financing.
On May 12, 2014, we raised $186.0 million of net proceeds through our IPO, of which $35.0 million was retained by the Partnership. In connection with the closing of our IPO, GasLog provided us with a $30.0 million revolving credit facility which we may at any
time utilize for general partnership purposes, including working capital. In addition, we have obtained a commitment from Citibank for the New Credit Facility to refinance the debt facilities related to our fleet, including the vessels to be acquired pursuant to the Pending Vessel Acquisition. We
believe that borrowings available under our existing credit facilities as well as other bank financing facilities and the debt capital markets, and our ability to issue additional partnership units will provide us with financial flexibility to pursue expansion opportunities.
We can provide no assurance, however, that we will be able to utilize our strengths described above. For further discussion of the risks that we face, see Risk Factors.
Business Strategies
Our primary business objective is to grow our business profitably and increase quarterly distributions per unit over time by executing the following strategies:
Pursue strategic and accretive acquisitions of LNG carriers on long-term, fixed-rate charters.
We will seek to leverage our relationship with GasLog to make strategic acquisitions that are accretive to our distributions per unit. Under the omnibus agreement, in addition to the vessels to be acquired
pursuant to the Pending Vessel Acquisition, we have the option to purchase 10 additional LNG carriers, delivered or expected to be delivered to GasLog between 2013 and 2016, each of which has been or will be under long-term charter upon its delivery. Additionally, during the term of the
omnibus agreement, we will have the right to purchase from GasLog any newbuilding LNG carrier or existing LNG carrier in the GasLog fleet, in either case with a cargo capacity greater than 75,000 cbm engaged in oceangoing LNG transportation that enters into a long-term charter agreement of
five full years or more.
138
Capitalize on growing global demand for LNG shipping.
Natural gas is one of the fastest growing primary energy sources globally. Moreover, between 1990 and 2013, the volume of LNG traded increased at a rate 36% higher than natural gas pipeline trade and almost three times the increase in
the rate of consumption of natural gas. Although LNG trade declined in 2012 and only improved marginally in 2013, we believe the global demand for LNG shipping will continue to increase, due to currently planned construction projects that, if they proceed on schedule, are expected to increase
LNG supply. As we acquire additional LNG carriers from GasLog over the next few years, our expanded fleet will help position us financially to meet the growing demand for LNG shipping. We believe our relationship with GasLog and its industry reputation and relationships position us well to
further expand our owned fleet to the extent that such additional capacity is accretive to returns.
Manage our fleet and deepen our customer relationships to provide a stable base of cash flows and superior operating performance.
Through our relationship with GasLog, we intend to maintain and grow our cash flows by focusing on strong customer relationships and actively seeking the extension
and renewal of existing charters in addition to new opportunities to serve our customers. GasLog charters its current fleet to BG Group and Shell. GasLog does not, however, have exclusive agreements in place with either BG Group or Shell that require BG Group or Shell to charter additional
current or future unchartered vessels from GasLog. We believe that GasLog will be able to maintain and develop customer relationships beyond its current customer base in order to support its growth programs and capitalize on attractive opportunities. We believe the close relationships that
GasLog has with these companies will provide attractive opportunities to participate in the expected long-term growth of the LNG trade. We will continue to incorporate safety, health, security and environmental stewardship into all aspects of vessel design and operation in order to satisfy our
customers and comply with national and international rules and regulations.
We can provide no assurance, however, that we will be able to implement our business strategies described above. For further discussion of the risks that we face, see Risk Factors.
Recent Developments
GasLog Partners LP
On August 1, 2014, we announced a partial cash distribution for the second quarter of 2014 of $4.13 million, or $0.20604 per unit, pro-rated from the IPO closing date through June 30, 2014, payable on August 14, 2014 to all unitholders of record as of August 11, 2014. This distribution corresponds to
a quarterly distribution of $0.375 per unit, or $1.50 per unit per year.
GasLog Ltd.
In May 2014, subsidiaries of GasLog entered into shipbuilding contracts with Samsung for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the first and second half of 2017, respectively.
In June 2014, subsidiaries of GasLog entered into shipbuilding contracts with Hyundai for the construction of two LNG carriers (174,000 cbm each). The vessels are expected to be delivered in the second half of 2017.
On June 30, 2014, GasLog took delivery of the
Solaris
, a 155,000 cbm LNG carrier constructed by Samsung that commenced her seven year charter party agreement with Shell.
Customers
Our customer, BG Group, accounted for all of our total revenues for the year ended December 31, 2013 and the six months ended June 30, 2014. If we exercise our option to purchase the
GasLog Seattle
and the
Solaris
from GasLog, our customers would include Shell, which is another large, well-
capitalized energy company.
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Ship Time Charters
We provide the services of our ships under time charters. A time charter is a contract for the use of the ship for a specified term at a daily hire rate. Under a time charter, the ship owner provides crewing and other services related to the ships operation, the cost of which is covered by the hire rate,
and the customer is responsible for substantially all of the ship voyage costs (including bunker fuel, port charges and canal fees and LNG boil-off). If we complete the Pending Vessel Acquisition or exercise our option to purchase any of the remaining four vessels recently acquired from BG or Hull Nos.
2072, 2073, 2102 and 2103, such LNG carriers will be chartered to a subsidiary of BG Group. If we exercise our option to purchase the
GasLog Seattle
or the
Solaris
, such LNG carriers will be chartered to a subsidiary of Shell.
Each of our subsidiaries has entered into a master time charter with a subsidiary of BG Group that establishes the general terms under which the three vessels in our initial fleet are chartered to BG Group. The subsidiaries have entered into a separate confirmation memorandum for each ship in
order to supplement the master time charter and specify the charter term, extension options (if any), hire rate and other provisions applicable to each ships charter.
The following discussion describes the material terms of the time charters for our initial fleet as well as the vessels to be acquired pursuant to the Pending Vessel Acquisition.
Initial Term, Extensions and Redelivery
The initial terms of the time charters for the
GasLog Shanghai,
the
GasLog Santiago
and the
GasLog Sydney
began upon delivery of the ships in January 2013, March 2013 and May 2013, respectively, and will terminate in 2018 and 2019, as applicable. BG Group has options to extend the terms of
each of the charters for up to 8 years at specified hire rates. Our time charters provide for redelivery of the ship to us at the expiration of the term, as such term may be extended upon the charterers exercise of its extension options plus or minus 30 days, or upon earlier termination of the charter (as
described below). Under all of our charters, the charterer has the right to extend the term for most periods in which the ship is off-hire, as described below. Our charter contracts do not provide the charterers with options to purchase our ships during or upon expiration of the charter term.
The initial terms of the time charters for the
Methane Rita Andrea
and the
Methane Jane Elizabeth
, or the New Charters, began upon delivery of the ships in April 2014, and will terminate in 2020 and 2019, respectively. BG Group has options to extend the terms of each or both of the charters for
three or five years at specified hire rates, and each charter requires that the charterer provide the owner with advance notice of its exercise of any extension option. The time charters provide for redelivery of the ship to the owner at the expiration of the term, as such term may be extended upon the
charterers exercise of its extension options, or upon earlier termination of the charter (as described below), plus or minus 30 days. The charterer has the right to extend the term for most periods in which the ship is off-hire, as described below. The charterer does not have an option to purchase the ships
during or upon expiration of the charter term.
Hire Rate Provisions
Hire rate refers to the basic payment from the customer for use of the ship. Under all of our existing time charters, the hire rate is payable to us monthly in advance in U.S. dollars and includes two componentsa capital cost component and an operating cost component. The capital cost component
relates to the cost of the ships purchase and is a fixed daily amount that is structured to provide a return on our invested capital. The charters provide for the capital cost component to increase by a specified amount during any option period. The operating cost component is a fixed daily amount that
increases at periodic intervals at a fixed percentage or is calculated based on a periodic budget agreed upon by the parties. Although the daily amount of the operating cost component is fixed (subject to a specified periodic increase or adjustment if a given charter contains such provision), it is intended
to correspond to the costs of operating the ship and related expenses. In our current charters, in the event of a material increase in the actual costs we incur in operating
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the ship, a clause in the charter provides us the right in certain circumstances to seek a review and potential adjustment of the operating cost component. The New Charters provide that the hire rate is payable to the owner monthly in advance in U.S. dollars but do not contain the other provisions
described above.
The hire rates for each of our ships and the vessels to be acquired pursuant to the Pending Vessel Acquisition may be reduced if the ship does not perform to certain of its specifications or if we breach our obligations under the charter.
Off-Hire
When a ship is off-hireor not available for servicea time charterer generally is not required to pay the hire rate, and we remain responsible for all costs, including the cost of any LNG cargo lost as boil-off during such off-hire periods. Our existing time charters and the New Charters provide an
annual allowance period for us to schedule preventative maintenance work on the ship. A ship generally will be deemed off-hire under our existing time charters and the New Charters if there is a specified time outside of the annual allowance period when the ship is not available for the charterers use
due to, among other things, operational deficiencies (including the failure to maintain a certain guaranteed speed), drydocking for repairs, maintenance or inspection, equipment breakdowns, deficiency of personnel or neglect of duty by the ships officers or crew, deviation from course, or delays due to
accidents, quarantines, ship detentions or similar problems.
All ships are drydocked at least once every five years as required by the ships classification society for a special survey. Ships are considered to be off-hire under our existing time charters and the New Charters during such periods.
Ship Management and Maintenance
Under our existing time charters we are, and under the New Charters we will be, responsible for the technical management of our ships and the ships to be acquired pursuant to the Pending Vessel Acquisition, including engagement and provision of qualified crews, employment of armed guards for
transport in certain high-risk areas, maintaining the ship, arranging supply of stores and equipment, cleaning and painting and ensuring compliance with applicable regulations, including licensing and certification requirements, as well as for drydocking expenses. We provide and, in the case of the New
Charters, will provide these management services through technical management agreement with GasLog LNG Services, a wholly owned subsidiary of GasLog. See Certain Relationships and Related Party TransactionsShip Management Agreements.
Termination and Cancellation
Under our existing time charters and the New Charters, each party has certain termination rights which include, among other things, the automatic termination of a charter upon loss of the relevant ship. Either party may elect to terminate a charter upon the occurrence of specified defaults or upon
the outbreak of war or hostilities involving two or more major nations, such as the United States or the Peoples Republic of China, if such war or hostilities materially and adversely affect the trading of the ship for a period of at least 30 days. In addition, charterers have the option to terminate a charter
if the relevant ship is off-hire for any reason other than scheduled drydocking for a period exceeding 90 consecutive days, or for more than 90 days, in any one-year period.
Technical and Operational Management
Pursuant to amended ship management agreements, through GasLog LNG Services we manage, and in the case of the vessels to be acquired pursuant to the Pending Vessel Acquisition, will manage, the day-to-day aspects of ship operations, including crewing, training, insurance, maintenance and
repair, procurement of supplies, regulatory and classification compliance and HSSE management and reporting, for our initial fleet. We utilize third-party sub-contractors and suppliers in carrying out certain of our technical management responsibilities.
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Competition
We operate in markets that are highly competitive and based primarily on supply and demand. Generally, competition for LNG time charters is based primarily on price, ship availability, size, age, technical specifications and condition, LNG shipping experience, quality and efficiency of ship
operations, shipping industry relationships and reputation for customer service, and technical ability and reputation for operation of highly specialized ships. In addition, in the future our ships may operate in the more volatile emerging spot market that covers short-term charters of one year or less.
Although we believe that we are one of the few independent owners that focus primarily on newly-built, technically advanced LNG carriers, other independent shipping companies also own and operate, and in some cases manage, LNG carriers and have new ships under construction. There are other
ship owners and managers who may also attempt to participate in the LNG market in the future. We believe that our strategy of focusing on charter contracts with initial terms of five full years or more differentiates us to some extent from other independent owners.
In addition to independent owners, some of the major oil and gas producers own LNG carriers, and in the recent past they have contracted for the construction of new LNG carriers. National gas and shipping companies also have large fleets of LNG carriers that have expanded and may continue to
expand. Some of these companies may compete with independent owners by using their fleets to carry LNG for third parties.
Classification, Inspection and Maintenance
Every large, commercial seagoing ship must be classed by a classification society. The classification society certifies that the ship is in class, signifying that the ship has been built and subsequently maintained in accordance with the rules of the classification society and complies with applicable
rules and regulations of the ships country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on
application or by official order, acting on behalf of the authorities concerned. The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to
the regulations of the country concerned.
To ensure each ship is maintained in accordance with classification society standards and for maintenance of the class certificate, regular and extraordinary surveys of hull and machinery, including the electrical plant, and any special equipment classed are required to be performed periodically. Surveys
are based on a five-year cycle that consists of annual surveys, intermediate surveys that are typically completed between the second and third years of every five-year cycle, and comprehensive special surveys (also known as class renewal surveys) that are completed at each fifth anniversary of the ships
delivery.
All areas subject to surveys as defined by the classification society are required to be surveyed at least once per five-year class cycle, unless shorter intervals between surveys are otherwise prescribed. All ships are also required to be drydocked at least once during every five-year class cycle for
inspection of their underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a recommendation which must be rectified by the ship owner within prescribed time limits. We intend to drydock our ships at five-year intervals that coincide with the
completion of the ships special survey. We expect that the drydocking schedule for the vessels for which we have options to acquire under the omnibus agreement will, for the foreseeable future, be the same as the schedule for our initial fleet.
Most insurance underwriters make it a condition for insurance coverage that a ship be certified as in class by a classification society that is a member of the International Association of Classification Societies. The vessels in our initial fleet and the vessels to be acquired pursuant to the Pending
Vessel Acquisition are each certified by the American Bureau of Shipping, or ABS. Each ship has been awarded ISM certification and is currently in class.
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The following table lists the dates by which we expect to carry out the initial drydockings and special surveys for our initial fleet:
Ship Name
Drydocking and
GasLog Shanghai
2018
GasLog Santiago
2018
GasLog Sydney
2018
The following table lists the dates by which we expect to carry out the initial drydockings and special surveys for the vessels to be acquired pursuant to the Pending Vessel Acquisition:
Ship Name
Drydocking and
Methane Rita Andrea
2016
Methane Jane Elizabeth
2016
Crewing and Employees
We do not directly employ any on-shore employees or seagoing employees. As of December 31, 2013, GasLog employed (directly and through ship managers) approximately 1,037 seafaring staff who serve on its vessels. GasLog and its affiliates may employ additional seagoing staff to assist us as we
grow. GasLog, through certain of its subsidiaries, provides onshore advisory, commercial, technical and operational support to our operating subsidiaries pursuant to the amended ship management agreements, subject to any alternative arrangements made with the applicable charterer. See Certain
Relationships and Related Party TransactionsShip Management Agreements.
LNG marine transportation is a specialized area requiring technically skilled officers and crew with specialized training. We and GasLog regard attracting and retaining motivated, well-qualified seagoing personnel as a top priority, and GasLog offers its crew competitive compensation packages. In
addition, GasLog provides intensive onboard training for its officers and crews to instill a culture of the highest operational and safety standards. As a result, GasLog has historically enjoyed a high retention rate among its officers and other seafarers. In 2013, GasLogs retention rate was 93.0% for senior
officers, 96.0% for other officers and 96.7% for shore staff.
Although GasLog has historically experienced a high retention rate for our seafarers, the demand for technically skilled officers and crews to serve on LNG carriers has been increasing as the global fleet of LNG carriers continues to grow. This increased demand has and may continue to put
inflationary pressure on crew costs. However, we and GasLog expect that the impact of cost increases would be mitigated to some extent by certain provisions in our time charters, including automatic periodic adjustment provisions and cost review provisions.
Risk of Loss, Insurance and Risk Management
The operation of any ship has inherent risks. These risks include mechanical failure, personal injury, collision, property loss or damage, ship or cargo loss or damage and business interruption due to a number of reasons, including mechanical failure, political circumstances in foreign countries,
hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including explosion, spills and other environmental mishaps, and the liabilities arising from owning and operating ships in international trade.
We maintain hull and machinery insurance on all our ships against marine and war risks in amounts that we believe to be prudent to cover such risks. In addition, we maintain protection and indemnity insurance on all our ships up to the maximum insurable limit available at any given time. The
insurance coverage is described in more detail below. We intend to maintain similar insurance coverage on the vessels to be acquired pursuant to the Pending Vessel Acquisition. While we believe that our insurance coverage will be adequate, not all risks can be insured, and there can be no guarantee
that we will always be able to obtain adequate insurance coverage at reasonable rates or at all, or that any specific claim we may make under our insurance coverage will be paid.
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Special Survey
Special Survey
Hull & Machinery Marine Risks Insurance and Hull & Machinery War Risks Insurance
We maintain hull and machinery marine risks insurance and hull and machinery war risks insurance on our ships, which cover loss of or damage to a ship due to marine perils such as collisions, fire or lightning, and the loss of or damage to a ship due to war perils such as acts of war, terrorism or
piracy. Each of our ships is insured under these policies for a total amount that exceeds what we believe to be its fair market value. We also maintain hull disbursements and increased value insurance policies covering each of our ships, which provide additional coverage in the event of the total or
constructive loss of a ship. Our marine risks insurance policies contain deductible amounts for which we will be responsible, but there are no deductible amounts under our war risks policies or our total loss policies.
Loss of Hire Insurance
We have obtained loss of hire insurance to protect us against loss of income as a result of the ship being off-hire or otherwise suffering a loss of operational time for events falling under the terms of our hull and machinery/war insurance. Under our loss of hire policy, our insurer will pay us the hire
rate agreed in respect of each ship for each day, in excess of a certain number of deductible days, for the time that the ship is out of service as a result of damage, for a maximum of 180 days. The number of deductible days for the ships in our fleet is 14 days per ship.
Additionally, we buy piracy loss of hire and kidnap and ransom insurance when our ships are ordered to sail through the Indian Ocean to insure against potential losses relating to the hijacking of a ship and its crew by pirates.
Protection and Indemnity Insurance
Protection and indemnity insurance is typically provided by a protection and indemnity association, or P&I association, and covers third-party liability, crew liability and other related expenses resulting from injury to or death of crew, passengers and other third parties, loss of or damage to cargo,
third-party claims arising from collisions with other ships (to the extent not recovered by the hull and machinery policies), damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal.
Our protection and indemnity insurance covering our ships is provided by a P&I association that is a member of the International Group of Protection and Indemnity Clubs, or International Group. The thirteen P&I associations that comprise the International Group insure approximately 90% of the
worlds commercial tonnage and have entered into a pooling agreement to reinsure each associations liabilities. Insurance provided by a P&I association is a form of mutual indemnity insurance.
Our protection and indemnity insurance is currently subject to limits of $3 billion per ship per event in respect of liability to passengers and seamen, $2 billion per ship per event in respect of liability to passengers, and $1 billion per ship per event in respect of liability for oil pollution.
As a member of a P&I association, we will be subject to calls payable to the P&I association based on the International Groups claim records as well as the claim records of all other members of the P&I association of which we are a member.
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, financial assurances and certificates with respect to our ships. The kinds of permits, licenses, financial assurances and certificates required will depend upon several factors, including the
waters in which the ship operates, the nationality of the ships crew and the age of the ship. We have obtained all permits, licenses, financial assurances and certificates currently required to operate our ships. Additional laws and regulations, environmental or otherwise, may be adopted which could limit
our ability to do business or increase the cost of our doing business.
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Environmental and Other Regulation
The carriage, handling, storage and regasification of LNG are subject to extensive laws and regulations relating to the protection of the environment, health and safety and other matters. These laws and regulations include international conventions and national, state and local laws and regulations in
the countries where our ships now or in the future will operate, or where our ships are registered. Compliance with these laws and regulations may entail significant expense and may impact the resale value or useful lives of our ships. Our ships may be subject to both scheduled and unscheduled
inspections by a variety of governmental, quasi-governmental and private organizations, including the local port authorities, national authorities, harbor masters or equivalent, classification societies, flag state administrations (countries of registry) and charterers. Our failure to maintain permits, licenses,
certificates or other authorizations required by some of these entities could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our ships or lead to the invalidation or reduction of our insurance coverage.
We believe that our ships are operated in material compliance with applicable environmental laws and regulations and that our ships in operation have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. In fact, the
GasLog Shanghai
, the
GasLog Santiago
and the
GasLog Sydney
received an ENVIRO+ notation from ABS, which denotes compliance with guidelines related to design characteristics, management and support systems, sea discharges and air emissions that are more stringent than existing legal requirements. The
Methane Rita
Andrea
and the
Methane Jane Elizabeth
also have received Green Passport notations from Lloyds Register of Ships. Because environmental laws and regulations are frequently changed and may impose increasingly stricter requirements, however, it is difficult to accurately predict the ultimate cost of
complying with these requirements or the impact of these requirements on the resale value or useful lives of our ships. Moreover, additional legislation or regulation applicable to the operation of our ships that may be implemented in the future, such as in response to a serious marine incident like the
2010 Deepwater Horizon oil spill in the Gulf of Mexico, could negatively affect our profitability.
International Maritime Regulations
The IMO, the United Nations agency for maritime safety and the prevention of pollution by ships, has adopted several international conventions that regulate the international shipping industry, including the International Convention on Civil Liability for Oil Pollution Damage, the International
Convention on Civil Liability for Bunker Oil Pollution Damage, and the MARPOL Convention. The MARPOL Convention establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of
harmful substances in packaged form. The International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO, requires, among other things, that the party with operational control of a ship develop an extensive safety
management system, including the adoption of a policy for safety and environmental protection setting forth instructions and procedures for operating its ships safely and also describing procedures for responding to emergencies. We rely on GasLog LNG Services for developing a safety management
system for our ships that meets these requirements.
Ships that transport gas, including LNG carriers, are also subject to regulation under the International Gas Carrier Code, or IGC Code, published by the IMO. The IGC Code prescribes design and construction standards for ships involved in the transport of gas. Compliance with the IGC Code
must be evidenced by a Certificate of Fitness for the Carriage of Liquefied Gases of Bulk. Each of our ships is in compliance with the IGC Code. Non- compliance with the IGC Code or other applicable IMO regulations may subject a ship owner or a bareboat charterer to increased liability, may lead to
decreases in available insurance coverage for affected ships and may result in the denial of access to, or detention in, some ports.
In September 1997, the IMO adopted Annex VI to MARPOL to address air pollution from ships. Annex VI came into force on May 19, 2005. It sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances, such
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as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. Annex VI has been ratified by some, but not all, IMO member states. In October 2008, the Marine Environment
Protection Committee, or MEPC, of the IMO approved amendments to Annex VI regarding particulate matter, nitrogen oxide and sulfur oxide emissions standards. These amendments became effective in July 2010. These requirements establish a series of progressive standards to further limit the sulfur
content in fuel oil, which are being phased in between 2012 and 2020, and by establishing new tiers of nitrogen oxide emission standards for new marine diesel engines, depending on their date of installation. Additionally, more stringent emission standards could apply in coastal areas designated as
Emission Control Areas, or ECAs. The European Union Directive 2005/EC/33, which became effective on January 1, 2010, parallels Annex VI and requires ships to use reduced sulfur content fuel for their main and auxiliary engines. Our initial fleet complies, and the vessels to be acquired pursuant to
the Pending Vessel Acquisition will comply, with the relevant legislation and have the relevant certificates, including certificates evidencing compliance with Annex VI of the MARPOL Convention.
Although the United States is not a party, many countries have ratified the International Convention on Civil Liability for Oil Pollution Damage, 1969, as amended, or the CLC. Under this convention and depending on whether the country in which the damage results is a party to the 1992
Protocol to the CLC, a ships registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject under certain circumstances to certain defenses and limitations. Ships trading to states that are parties to these conventions must
provide evidence of insurance covering the liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to the CLC. P&I Clubs in the International Group issue the
required Bunkers Convention Blue Cards to provide evidence that there is in place insurance meeting the liability requirements. Where applicable, all of our vessels have received, and the vessels to be acquired pursuant to the Pending Vessel Acquisition will receive, Blue Cards from their P&I Club
and are, or in the case of the vessels to be acquired pursuant to the Pending Vessel Acquisition will be, in possession of a CLC State-issued certificate attesting that the required insurance coverage is in force.
The IMO also has adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel and requires registered
owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime. We maintain insurance in respect of our ships that satisfies these requirements.
Noncompliance with the ISM Code or with other IMO regulations may subject a ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected ships and may result in the denial of access to, or detention in, some ports, including United
States and European Union ports.
United States
Oil Pollution Act and CERCLA
Because our ships could trade with the United States or its territories or possessions and/or operate in U.S. waters, our operations could be impacted by the U.S. Oil Pollution Act of 1990, or OPA, which establishes an extensive regulatory and liability regime for environmental protection and
cleanup of oil spills, and the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which imposes liability for cleanup and natural resource damage from the release of hazardous substances (other than oil). Under OPA, ship owners, operators and bareboat charterers
are responsible parties who are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from oil spills from their ships. OPA currently limits the liability of
responsible parties with respect to ships over 3,000 gross tons to the
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greater of $2,000 per gross ton or $17,088,000 per double hull ship and permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries. Some states have enacted legislation providing for unlimited liability for discharge of pollutants
within their waters. CERCLA applies to owners and operators of ships and contains a similar liability regime. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for ships carrying a hazardous substance as cargo and the greater of $300 per gross ton or $0.5 million for
any other ship.
These limits of liability do not apply under certain circumstances, however, such as where the incident is caused by violation of applicable U.S. federal safety, construction or operating regulations, or by the responsible partys gross negligence or willful misconduct. In addition, a marine incident that
results in significant damage to the environment, such as the Deepwater Horizon oil spill, could result in amendments to these limitations or other regulatory changes in the future. We maintain the maximum pollution liability coverage amount of $1 billion per incident for our ships. We also believe that
we will be in substantial compliance with OPA, CERCLA and all applicable state regulations in the ports where our ships will call.
OPA also requires owners and operators of ships to establish and maintain with the National Pollution Fund Center of the U.S. Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential strict liability under the act. Such financial responsibility can be demonstrated
by providing a guarantee from an appropriate guarantor, who can release the required guarantee to the National Pollution Fund Center against payment of the requested premium. We have purchased such a guarantee in order to provide evidence of financial responsibility and have received the
mandatory certificates of financial responsibility from the U.S. Coast Guard in respect of each of the vessels included in our initial fleet. We intend to obtain such certificates in the future for each of our vessels, including the vessels to be acquired pursuant to the Pending Vessel Acquisition, if required to
have them.
Clean Water Act
The U.S. Clean Water Act of 1972, or CWA, prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also
imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. Furthermore, most U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for
removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.
The United States Environmental Protection Agency, or EPA, has enacted rules requiring ballast water discharges and other discharges incidental to the normal operation of certain ships within United States waters to be authorized under the Ship General Permit for Discharges Incidental to the
Normal Operation of Ships, or the VGP. To be covered by the VGP, owners of certain ships must submit a Notice of Intent, or NOI, at least 30 days before the ship operates in United States waters. Compliance with the VGP could require the installation of equipment on our ships to treat ballast
water before it is discharged or the implementation of other disposal arrangements, and/or otherwise restrict our ships from entering United States waters. In March 2013, the EPA published a new VGP to replace the existing VGP when it expires in December 2013. The new VGP includes numeric
effluent limits for ballast water expressed as the maximum concentration of living organisms in ballast water. The new VGP also imposes a variety of changes for non-ballast water discharges including more stringent Best Management Practices for discharges of oil-to-sea interfaces in an effort to reduce
the toxicity of oil leaked into U.S. waters. We have submitted NOIs for our initial fleet and intend to submit NOIs for our ships in the future, including the vessels to be acquired pursuant to the Pending Vessel Acquisition, where required and do not believe that the costs associated with obtaining and
complying with the VGP will have a material impact on our operations.
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Clean Air Act
The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our ships may be subject to vapor control and recovery
requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas and emission standards for so-called Category 3 marine diesel engines operating in U.S. waters. The marine diesel engine emission standards are currently limited to new
engines beginning with the 2004 model year. On April 30, 2010, the EPA adopted final emission standards for Category 3 marine diesel engines equivalent to those adopted in the amendments to Annex VI to MARPOL, which will apply in two stages, beginning in 2011 and 2016. However, our tri-fuel
diesel electric LNG carriers have the ability to burn natural gas as fuel to power the ship, which can significantly reduce relevant emissions compared with steam-powered ships.
The CAA also requires states to adopt State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from ship loading and unloading operations by requiring the
installation of vapor control equipment. The MEPC has designated as an ECA the area extending 200 miles from the territorial sea baseline adjacent to the Atlantic/Gulf and Pacific coasts and the eight main Hawaiian Islands and the Baltic Sea, North Sea and Caribbean Sea, under the Annex VI
amendments. Fuel used by vessels operating in the ECA cannot exceed 1.0% sulfur, dropping to 0.1% sulfur in 2015. From 2016, NOx after-treatment requirements will also apply. Our vessels can store and burn low-sulfur fuel oil or alternatively burn natural gas which contains no sulfur. Additionally,
burning natural gas will ensure compliance with IMO tier III NOx emission limitations without the need for after-treatment. Charterers must supply compliant fuel for the vessels before ordering vessels to trade in areas where restrictions apply. As a result, we do not expect such restrictions to have a
materially adverse impact on our operations or costs.
Other Environmental Initiatives
U.S. Coast Guard regulations adopted under the U.S. National Invasive Species Act, or NISA, impose mandatory ballast water management practices for all ships equipped with ballast water tanks entering U.S. waters, which could require the installation of equipment on our ships to treat ballast
water before it is discharged or the implementation of other port facility disposal arrangements or procedures, and/or otherwise restrict our ships from entering U.S. waters. In June 2012, the U.S. Coast Guard rule establishing standards for the allowable concentration of living organisms in ballast water
discharged in U.S. waters and requiring the phase-in of Coast Guard approved ballast water management systems, or BWMS, became effective. The Coast Guard will review the practicability of implementing a more stringent ballast water discharge standard and publish the results no later than January
1, 2016. The rule requires installation of Coast Guard approved BWMS by new vessels constructed on or after December 1, 2013 and existing vessels as of their first drydocking after January 1, 2016. Several states have adopted legislation and regulations relating to the permitting and management of
ballast water discharges.
At the international level, the IMO adopted an International Convention for the Control and Management of Ships Ballast Water and Sediments in February 2004, or the BWM Convention. The Conventions implementing regulations call for a phased introduction of mandatory ballast water
exchange requirements, to be replaced in time with mandatory concentration limits. The BWM Convention will not enter into force until twelve months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the worlds merchant
shipping. To date, a sufficient number of countries have not adopted this convention for it to enter into force. However, the IMOs Marine Environment Protection Committee passed a resolution in March 2010 encouraging the ratification of the Convention and calling upon those countries that have
already ratified to encourage the installation of ballast water management systems. While we believe that the vessels in our initial fleet comply with existing requirements, if new ballast water treatment requirements are instituted, the cost of compliance could increase for
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ocean carriers. It is difficult to accurately predict the overall impact of such a requirement on our operations.
Our vessels may also become subject to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996 as amended by the Protocol to the HNS Convention, adopted in April 2010, or HNS Convention, if
it is entered into force. The HNS Convention creates a regime of liability and compensation for damage from hazardous and noxious substances, or HNS, including a two-tier system of compensation composed of compulsory insurance taken out by shipowners and an HNS Fund which comes into play
when the insurance is insufficient to satisfy a claim or does not cover the incident. To date, the HNS Convention has not been ratified by a sufficient number of countries to enter into force.
Greenhouse Gas Regulations
The MEPC of IMO adopted two new sets of mandatory requirements to address greenhouse gas emissions from ships at its July 2011 meeting. The Energy Efficiency Design Index requires a minimum energy efficiency level per capacity mile and is applicable to new vessels, and the Ship Energy
Efficiency Management Plan is applicable to currently operating vessels. The requirements, which entered into force in January 2013, were fully implemented by GasLog as of December 2012. The IMO is also considering the development of a market-based mechanism for greenhouse gas emissions from
ships, but it is impossible to predict the likelihood that such a standard might be adopted or its potential impact on our operations at this time.
The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine ships. In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and
safety and has adopted regulations under the CAA to limit greenhouse gas emissions from certain mobile sources and large stationary sources. Although the mobile source emissions do not apply to greenhouse gas emissions from ships, the EPA is considering a petition from the California Attorney
General and environmental groups to regulate greenhouse gas emissions from ocean-going ships. Any passage of climate control legislation or other regulatory initiatives by the IMO, the European Union, the United States or other countries where we operate, or any treaty adopted at the international
level to succeed the Kyoto Protocol, that restrict emissions of greenhouse gases could require us to make significant financial expenditures that we cannot predict with certainty at this time.
We believe that LNG carriers, which have the inherent ability to burn natural gas to power the ship, and in particular LNG carriers like ours that utilize fuel-efficient diesel electric propulsion, can be considered among the cleanest of large ships in terms of emissions.
Ship Security Regulations
A number of initiatives have been introduced in recent years intended to enhance ship security. On November 25, 2002, the Maritime Transportation Security Act of 2002, or MTSA, was signed into law. To implement certain portions of the MTSA, the U.S. Coast Guard issued regulations in July
2003 requiring the implementation of certain security requirements aboard ships operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. This new chapter
came into effect in July 2004 and imposes various detailed security obligations on ships and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code, or ISPS Code. Among the various requirements are:
on-board installation of automatic information systems to enhance ship-to-ship and ship-to-shore communications;
on-board installation of ship security alert systems;
the development of ship security plans; and
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compliance with flag state security certification requirements.
The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt non-U.S. ships from MTSA ship security measures, provided such ships have on board a valid International Ship Security Certificate that attests to the ships compliance with SOLAS security
requirements and the ISPS Code. We have implemented the various security measures required by the IMO, SOLAS and the ISPS Code and have approved ISPS certificates and plans certified by the applicable flag state on board all our ships.
Properties
Other than our vessels, we do not own any material property.
Legal Proceedings
We have not been involved in any legal proceedings that we believe may have a significant effect on our business, financial position, results of operations or liquidity, and we are not aware of any proceedings that are pending or threatened that may have a material effect on our business, financial
position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally property damage and personal injury claims. We expect that these claims would be covered by insurance, subject to customary deductibles.
However, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Taxation of the Partnership
Marshall Islands
The following discussion represents the opinion of Cozen OConnor, our counsel as to matters of the laws of the Republic of the Marshall Islands. Because we and our subsidiaries do not and will not conduct business or operations in the Republic of the Marshall Islands, neither we nor our
subsidiaries will be subject to income, capital gains, profits or other taxation under current Marshall Islands law, and we do not expect this to change in the future. As a result, distributions we receive from the operating subsidiaries are not expected to be subject to Marshall Islands taxation.
United States
The following discussion represents the opinion of Cravath, Swaine & Moore LLP, our U.S. counsel, regarding the material U.S. federal income tax consequences to us of our activities. It is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations
issued by the U.S. Department of the Treasury, all of which are subject to change, possibly with retroactive effect. In addition, the opinion of our U.S. counsel is not binding on the IRS or any court. This discussion does not address any U.S. state or local taxes. You are encouraged to consult your own
tax advisor regarding the particular U.S. federal, state and local and foreign income and other tax consequences of acquiring, owning and disposing of our common units that may be applicable to you.
In General
We have elected to be treated as a corporation for U.S. federal income tax purposes. As such, except as provided below, we will be subject to U.S. federal income tax on our income to the extent such income is from U.S. sources or is otherwise effectively connected with the conduct of a trade or
business in the United States.
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U.S. Taxation of Our Subsidiaries
Our subsidiaries have elected (or are in the process of electing) to be treated as disregarded entities for U.S. federal income tax purposes. As a result, for purposes of the discussion below, our subsidiaries are treated (or will be treated) as branches rather than as separate corporations.
U.S. Taxation of Shipping Income
We expect that substantially all of our gross income will be attributable to income derived from the transportation of LNG pursuant to the operation of our LNG carriers. Gross income attributable to transportation exclusively between non-U.S. ports is considered to be 100% derived from sources
outside the United States and generally not subject to any U.S. federal income tax. Gross income attributable to transportation that both begins and ends in the United States (U.S. Source Domestic Transportation Income) is considered to be 100% derived from sources within the United States and
generally will be subject to U.S. federal income tax. Although there can be no assurance, we do not expect to engage in transportation that gives rise to U.S. Source Domestic Transportation Income.
Gross income attributable to transportation, including shipping income, that either begins or ends, but that does not both begin and end, in the United States is considered to be 50% derived from sources within the United States (such 50% being U.S. Source International Transportation Income).
Subject to the discussion of effectively connected income below, Section 887 of the Code would impose on us a 4% U.S. income tax in respect of our U.S. Source International Transportation Income (without the allowance for deductions) unless we are exempt from U.S. federal income tax on such
income under the rules contained in Section 883 of the Code. The other 50% of the income described in the first sentence of this paragraph would not be subject to U.S. income tax.
For this purpose, shipping income means income that is derived from:
(i) the use of ships;
(ii) the hiring or leasing of ships for use on a time, operating or bareboat charter basis;
(iii) the participation in a pool, partnership, strategic alliance, joint operating agreement or other joint venture we directly or indirectly own or participate in that generates such income; or
(iv) the performance of services directly related to those uses.
Under Section 883 of the Code and the regulations thereunder, we will be exempt from U.S. federal income tax on our U.S. Source International Transportation Income if:
(i) we are organized in a foreign country (the country of organization) that grants an equivalent exemption to corporations organized in the United States with respect to the types of U.S. Source International Transportation Income that we may earn (an Equivalent Exemption);
(ii) we satisfy the Publicly-Traded Test (as described below) or the 50% Ownership Test (as described below); and
(iii) we meet certain substantiation, reporting and other requirements.
In order for a foreign corporation to meet the Publicly-Traded Test, its equity interests must be primarily traded and regularly traded on an established securities market in the United States or in a foreign jurisdiction that grants an Equivalent Exemption. The Treasury regulations under Section
883 of the Code provide, in pertinent part, that equity of a foreign corporation will be considered to be primarily traded on an established securities market in a country if, with respect to the class or classes of equity relied upon to meet the regularly traded requirement described below, the number
of units of such class of equity that is traded during any taxable year on all established securities markets in that country exceeds the number of equity interests in each such class that is traded during that year on established securities markets in any other single country. We believe that our common
units will be the sole class of our equity that will be traded, and that
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such class will be primarily traded on the New York Stock Exchange, which is an established securities market for these purposes.
The Publicly-Traded Test also requires equity interests in a foreign corporation to be regularly traded on an established securities market. The Treasury regulations under Section 883 of the Code provide that equity interests in a foreign corporation are considered to be regularly traded on an
established securities market if one or more classes of such equity interests that, in the aggregate, represent more than 50% of the combined vote and value of all outstanding equity interests in the foreign corporation satisfy certain listing and trading volume requirements. These listing and trading volume
requirements will be satisfied with respect to a class of equity interests if (i) such equity interests are traded on the market, other than in minimal quantities, on at least 60 days during the taxable year (or 1/6 of the days in a short taxable year) and (ii) the aggregate number of equity interests in such
class traded on such market during the taxable year is at least 10% of the average number of equity interests outstanding in that class during such year (as appropriately adjusted in the case of a short taxable year), provided, that if a class of equity interests is traded on an established securities market in
the United States and is regularly quoted by dealers making a market in such equity interests then tests (i) and (ii) will be deemed satisfied.
Notwithstanding the foregoing, a class of equity interests may fail the regularly traded test if, for more than half the number of days during the taxable year, persons who each own, either actually or constructively under certain attribution rules, 5% or more of the vote and value of the outstanding
shares of the class of equity interests, or 5% Unitholders, own in the aggregate 50% or more of the vote and value of the class of equity interests (which is referred to as the Closely Held Block Exception). The Closely Held Block Exception does not apply, however, if the foreign corporation can
establish that a sufficient proportion of such 5% Unitholders are Qualified Shareholders (as defined below) so as to preclude the non-qualified 5% Unitholders from owning 50% or more of the total value of the class of equity interests for more than half the number of days during the taxable year. If
50% or more of the vote and value of a class of equity interests is owned, in the aggregate, by 5% Unitholders, then a sufficient number of 5% Unitholders must verify that they are Qualified Shareholders by providing certain information to the foreign corporation, including information about their
countries of residence for tax purposes and their actual and/or constructive ownership of such equity interests.
As an alternative to satisfying the Publicly-Traded Test, a foreign corporation may qualify for an exemption under Section 883 of the Code by satisfying the 50% Ownership Test. A corporation generally will satisfy the 50% Ownership Test if more than 50% of the value of its outstanding equity
interests is owned, or treated as owned after applying certain attribution rules, for at least half the number of days in the taxable year by individual residents of jurisdictions that grant an Equivalent Exemption, foreign corporations organized in jurisdictions that grant an Equivalent Exemption and that
meet the Publicly-Traded Test, or certain other qualified persons described in the Treasury regulations under Section 883 (which are referred to collectively as Qualified Shareholders).
The Marshall Islands, the jurisdiction in which we are organized, grants an Equivalent Exemption with respect to the type of U.S. Source International Transportation Income we expect to earn. Therefore, we will be eligible for the exemption under Section 883 of the Code if we satisfy either the
Publicly-Traded Test or the 50% Ownership Test and we satisfy certain substantiation, reporting or other requirements.
For the calendar year 2014, we will not be eligible to satisfy the Publicly-Traded Test because our common unitholders will have the right to elect only a minority of directors and therefore will not have more than 50% of the voting power of our equity. However, until the consummation of this
offering, GasLog has owned more than 50% of the value of all of our equity, consisting of common units, subordinated units, a general partner interest, and incentive distribution rights. Moreover, GasLogs equity has had the power to elect a majority of our directors, and GasLog has held that equity for
more than half the days in our 2014 tax year. Therefore, if GasLog qualifies under Section 883 of the Code for 2014 and provides appropriate certifications to us, we will qualify for Section 883 of the Code under the 50% Ownership Test for the 2014 tax year. It has not yet
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been determined whether GasLog will qualify under Section 883 of the Code and, even if it does so qualify, whether GasLog will provide appropriate certifications to us to such effect. As a result, we can provide no assurance concerning our qualification under Section 883 of the Code for 2014.
We expect that after this offering is consummated, GasLog will no longer hold more than 50% of the value of our equity. As a result, for taxable years after 2014, we will not qualify for the 50% Ownership Test by virtue of GasLogs ownership of our equity, even if GasLog itself qualifies under
Section 883. Moreover, as in the case of 2014, we will not qualify under the Publicly-Traded Test so long as our common unitholders have the right to elect only a minority of our directors.
As discussed below in the Section Board of Directors, our general partner, which is a wholly owned subsidiary of GasLog, by virtue of its general partner interest, has an option (the GasLog option), exercisable at its discretion, to cause our common unitholders to permanently have the right to
elect a majority of our directors. If that option is exercised, our common units would then be considered to have more than 50% of the voting power of all our equity. Our common units would then be considered to be regularly traded on an established securities market if they represented more than
50% of the value of all our equity and the listing and trading conditions described above are satisfied. Based upon our expected cash flow and distributions on our outstanding equity units, we expect that the common units will represent more than 50% of the value of our equity, and we expect that we
will also satisfy the listing and trading requirements. However, we cannot assure you this will be the case. If these conditions are satisfied, and except as provided below, we would satisfy the Publicly-Traded Test unless the Closely Held Block exception to that test was applicable. If GasLog at that time
satisfies the Publicly Traded Test, it would be a Qualified Shareholder of ours, to the extent it continued to own our common units, in determining whether the Closely Held Block Exception to the Publicly Traded Test applied.
In addition, our partnership agreement provides that any person or group (including GasLog) that beneficially owns more than 4.9% of any class of our units then outstanding generally will be treated as owning only 4.9% of such units for purposes of voting for directors. We cannot assure you that
this limitation will be effective to eliminate the possibility that we will have any 5% Unitholders for purposes of the Closely Held Block Exception.
However, assuming this limitation is effective, we anticipate that, in the event that GasLog exercises the GasLog option, we will be able to satisfy the Publicly-Traded Test if our common units represent more than half the value of our equity.
However, we cannot assure you that we will be able to satisfy the Publicly-Traded Test in taxable years 2015 or later. There is no assurance that GasLog will exercise the GasLog option, which is necessary for us to satisfy the Publicly-Traded Test. Moreover, we cannot assure you that GasLogs
exercise of the GasLog option will be sufficient for us to satisfy the Publicly-Traded Test. In particular, we may not be able to satisfy the Publicly-Traded Test in the taxable year during which GasLog exercises the GasLog option, because it is not clear if the Publicly-Traded Test must be satisfied on
each day during the taxable year and whether the exercise of the option would be considered effective immediately or only at the time of the unitholder meeting following exercise of the option. In addition, if an increase in the value of our incentive distribution rights causes our common units to fail the
50% value test, we will fail to satisfy the Publicly-Traded Test even if the option is exercised. Moreover, because we are in legal form a partnership, it is possible that the IRS would assert that our common units do not meet the regularly traded test. Furthermore, our board of directors could determine
that it is in our best interests to take an action that would result in our not being able to satisfy the Publicly-Traded Test in the future. Should any of the requirements described above fail to be satisfied, we may not be able to satisfy the Publicly-Traded Test.
If we are not entitled to the exemption under Section 883 for any taxable year, then we would be subject to the 4% U.S. federal income tax under Section 887 on our U.S. Source International Transportation Income (subject to the discussion of effectively connected income below) for those years.
However, for 2013, GasLog did not have any U.S. Source International Transportation Income, and we do not currently expect to incur any material U.S. federal income tax liability on such income.
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In addition, our U.S. Source International Transportation Income that is considered to be effectively connected with the conduct of a U.S. trade or business is subject to the U.S. corporate income tax currently imposed at rates of up to 35% (net of applicable deductions). In addition, we may be
subject to the 30% U.S. branch profits tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our U.S. trade or business.
Our U.S. Source International Transportation Income would be considered effectively connected with the conduct of a U.S. trade or business only if:
(i) we had, or were considered to have, a fixed place of business in the United States involved in the earning of U.S. source gross transportation income; and
(ii) substantially all of our U.S. source gross transportation income was attributable to regularly scheduled transportation, such as the operation of a ship that followed a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the
United States.
We believe that we will not meet these conditions because we will not have, or permit circumstances that would result in having, such a fixed place of business in the United States or any ship sailing to or from the United States on a regularly scheduled basis.
Taxation of Gain on Sale of Shipping Assets
Regardless of whether we qualify for the exemption under Section 883 of the Code, we will not be subject to U.S. income taxation with respect to gain realized on a sale of a ship, provided the sale is considered to occur outside of the United States (as determined under U.S. tax principles). In
general, a sale of a ship will be considered to occur outside of the United States for this purpose if title to the ship (and risk of loss with respect to the ship) passes to the buyer outside of the United States. We expect that any sale of a ship will be so structured that it will be considered to occur outside
of the United States.
Other Jurisdictions and Additional Information
For additional information regarding the taxation of our subsidiaries, see Note 18 to our audited combined and consolidated financial statements included elsewhere in this prospectus.
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Management of GasLog Partners LP
In accordance with our partnership agreement, our general partner has delegated to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis, and such delegation will be binding on any successor general partner of the partnership. Our
general partner, GasLog Partners GP LLC, is wholly owned by GasLog. Our executive officers, all of whom are employed by GasLog or its applicable affiliate, manage our day-to-day activities consistent with the policies and procedures adopted by our board of directors.
Our board of directors consists of five members, Curtis V. Anastasio, Daniel Bradshaw, Pamela Gibson, Donald J. Kintzer and Peter G. Livanos, appointed by our general partner. Beginning with our first annual meeting of unitholders, which will be held in 2015, our board of directors will consist of
five members, three of whom will be appointed by our general partner in its sole discretion and two of whom will be elected by our common unitholders. We expect that following our first annual meeting in 2015, each of the elected directors and one of the appointed directors will meet the independence
standards established by the New York Stock Exchange, and that, at a minimum, each of the elected directors will also qualify as independent of GasLog under our partnership agreement so as to be eligible for membership on our conflicts committee. Directors appointed by our general partner will serve
as directors for terms determined by our general partner. Directors elected by our common unitholders will be divided into classes serving staggered three-year terms. Two of the directors initially appointed by our general partner will serve until our annual meeting in 2015, at which time two directors will
be elected by our common unitholders. One of the directors elected by our common unitholders at the 2015 annual meeting will be designated as the Class I elected director and will serve until our annual meeting of unitholders in 2016, and another of the directors elected at the 2015 annual meeting will
be designated as the Class II elected director and will serve until our annual meeting of unitholders in 2017. Prior to the exercise by our general partner of its right to transfer the power to elect a majority of our directors to the common unitholders, Class III will not have a director. Therefore, no director
will be up for election by the common unitholders in the year that Class III is up for election, which is expected to first occur in 2018. At each subsequent annual meeting of unitholders, directors will be elected to succeed the class of director whose term has expired by a plurality of the votes of the
common unitholders. Directors elected by our common unitholders will be nominated by the board of directors or by any limited partner or group of limited partners that holds at least 10% of the outstanding common units.
If our general partner exercises its right to transfer the power to elect a majority of our directors to the common unitholders, an additional director will thereafter be elected by our common unitholders. That director would be added to the class that does not at such time have a director. Our general
partner may exercise this right in order to permit us to claim, or continue to claim, an exemption from U.S. federal income tax under Section 883 of the Code. See BusinessTaxation of the Partnership. The majority of our directors are non-United States citizens or residents.
Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, if at any time, any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not
be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person for election to our board of directors), determining the presence of a quorum or for other similar purposes under
our partnership agreement, unless otherwise required by law. Effectively, this means that the voting rights of any such common unitholders in excess of 4.9% will be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to
vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors. This limitation will
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support our claim of an exemption from U.S. federal income tax under Section 883 of the Code in the event our general partner transfers the power to elect one director to the common unitholders.
Because we qualify as a foreign private issuer under SEC rules, we are permitted to follow the corporate governance practices of the Marshall Islands (the jurisdiction in which we are organized) in lieu of certain of the New York Stock Exchange corporate governance requirements that would
otherwise be applicable to us. The New York Stock Exchange rules do not require a listed company that is a foreign private issuer to have a board of directors that is comprised of a majority of independent directors. Under Marshall Islands law, we are not required to have a board of directors
comprised of a majority of directors meeting the independence standards described in the New York Stock Exchange rules. In addition, New York Stock Exchange rules do not require limited partnerships like us to have boards of directors comprised of a majority of independent directors. Accordingly,
our board of directors is not required to be comprised of a majority of independent directors.
We have an audit committee that, among other things, reviews our external financial reporting, engages our external auditors and oversees our internal audit activities and procedures and the adequacy of our internal accounting controls. Our audit committee is comprised of Daniel Bradshaw, Pamela
Gibson and Donald J. Kintzer, with Donald J. Kintzer serving as the chair of the audit committee. Our board of directors has determined that each of Daniel Bradshaw, Pamela Gibson and Donald J. Kintzer satisfies the independence standards established by the New York Stock Exchange, and that
Donald J. Kintzer qualifies as an audit committee expert for purposes of SEC rules and regulations.
We also have a conflicts committee that is available at the board of directors discretion to review specific matters that the board of directors believes may involve conflicts of interest. The conflicts committee will determine if the resolution of the conflict of interest is fair and reasonable to us. The
members of the conflicts committee must meet the independence standards established by the New York Stock Exchange and the SEC to serve on an audit committee of a board of directors, and may not be any of the following: (a) officers or employees of our general partner, (b) officers, directors or
employees of any affiliate of our general partner (other than the Partnership and its subsidiaries) or (c) holders of any ownership interest in the general partner, its affiliates or the Partnership and its subsidiaries (other than (x) common units or (y) awards granted pursuant to any long-term incentive plan,
equity compensation plan or similar plan of the Partnership or its subsidiaries). Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners and not a breach by our directors, our general partner or its affiliates of any duties
any of them may owe us or our unitholders. Our conflicts committee is comprised of Daniel Bradshaw, Pamela Gibson and Donald J. Kintzer, with Daniel Bradshaw serving as chair of the conflicts committee. For additional information about the conflicts committee, see Conflicts of Interest and
Fiduciary DutiesConflicts of Interest.
New York Stock Exchange rules do not require foreign private issuers or limited partnerships like us to establish a compensation committee or a nominating/corporate governance committee. Similarly, under Marshall Islands law, we are not required to have a compensation committee or a
nominating/corporate governance committee. Accordingly, we do not have a compensation committee or a nominating/corporate governance committee.
Employees of affiliates of GasLog provide services to us under the administrative services agreement. See Certain Relationships and Related Party TransactionsAdministrative Services Agreement.
Our officers and the other individuals providing services to us or our subsidiaries may face a conflict regarding the allocation of their time between our business and the other business interests of GasLog or its affiliates. Our officers and such other individuals providing services to us or our
subsidiaries intend to devote as much time to the management of our business and affairs as is necessary for the proper conduct of our business and affairs.
Whenever our general partner makes a determination or takes or declines to take an action in its individual capacity rather than in its capacity as our general partner, it is entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation
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whatsoever to us or any limited partner, and our general partner is not required to act in good faith or pursuant to any other standard imposed by our partnership agreement or under the Marshall Islands Act or any other law. Specifically, our general partner will be considered to be acting in its
individual capacity if it exercises its call right, pre-emptive rights, registration rights or right to make a determination to receive common units in a resetting of the target distribution levels related to its incentive distribution rights, consents or withholds consent to any merger or consolidation of the
partnership, appoints any directors or votes for the appointment of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership
agreement) or refrains from transferring its units, general partner interest or the incentive distribution rights it owns or votes upon the dissolution of the partnership. Actions of our general partner, which are made in its individual capacity, will be made by GasLog as sole member of our general partner.
Directors and Executive Officers
The following table provides information about our directors and executive officers. With the exception of Andrew J. Orekar, we rely solely on the executive officers of GasLog or its applicable affiliate who perform executive officer services for our benefit pursuant to the administrative services
agreement and who are responsible for our day-to-day management subject to the direction of our board of directors. The business address for each of our directors and executive officers is Gildo Pastor Center, 7 Rue du Gabian, MC 98000, Monaco.
Name
Age
Position
Curtis V. Anastasio
57
Chairman of the Board of Directors
Daniel Bradshaw
67
Director
Pamela Gibson
61
Director
Donald J. Kintzer
67
Director
Peter G. Livanos
55
Director
Andrew J. Orekar
37
Chief Executive Officer
Simon Crowe
46
Chief Financial Officer
Graham Westgarth
59
Chief Operating Officer
Curtis V. Anastasio
has been the Chairman of our board of directors since our inception. From the time he led the initial public offering in April of 2001 to his retirement on December 31, 2013, Mr. Anastasio was the president and chief executive officer of NuStar Energy L. P., a publicly traded
master limited partnership based in San Antonio, Texas. Mr. Anastasio was also president and chief executive officer of NuStar GP Holdings, LLC, a position he held since the companys IPO in 2006. NuStar GP owns general and limited partner interests and the incentive distribution rights in NuStar
Energy and manages its business affairs. In addition, Mr. Anastasio is chairman of the board of trustees of the United Way of San Antonio and Bexar County and serves on the boards of the Federal Reserve Bank of Dallas, the San Antonio Economic Development Foundation, San Antonio Medical
Foundation, Southwest Research Institute and the Greater San Antonio Chamber of Commerce. He is chair emeritus of the National Association of Publicly Traded Partnerships (Washington, DC), and is trustee emeritus of the San Antonio Symphony, the McNay Art Museum, the Texas Biomedical
Research Institute and CHRISTUS Santa Rosa Childrens Hospital Foundation. Mr. Anastasio received a Juris Doctorate degree from Harvard Law School in 1981 and a Bachelor of Arts degree, Magna cum Laude, from Cornell University in 1978.
Daniel Bradshaw
has been a director since the closing of our IPO. Since 1978, Mr. Bradshaw has worked at the law firm of Johnson Stokes & Master, now Mayer Brown JSM, in Hong Kong, from 1983 to 2003 as a partner and since 2003 as a senior consultant. From 2003 until 2008 Mr. Bradshaw was
a member of the Hong Kong Maritime Industry Council. Mr. Bradshaw was vice-chairman of the Hong Kong Shipowners Association from 1993 to 2001 and a member of the Hong Kong Port and Maritime Board from 1998 to 2003. In addition, Mr. Bradshaw is an independent non executive director of
Pacific Basin Shipping Company Limited, an independent non executive director of IRC Limited, an affiliate of Petropavlovsk PLC, a non executive director of Euronav
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NV, and a director of Greenship Offshore Manager Ptd. Ltd, a company in the Bourbon group owning and demise chartering supply vessels. Mr. Bradshaw received a Master of Laws degree from the Victoria University of Wellington in 1971.
Pamela Gibson
has been a director since the closing of our IPO. Since 1984, Ms. Gibson has worked at the law firm of Shearman & Sterling LLP, from 1990 as a partner and since 2005 as of counsel, advising non-U.S. global companies on capital markets transactions, governance, disclosure and
compliance. Ms. Gibson was the managing partner of both the Toronto (1990 to 1995) and London (1995 to 2002) offices and the head of the European and Asian Capital Markets Group (2002 to 2004) at Shearman & Sterling LLP. Ms. Gibson received a Bachelor of Arts degree, with distinction, from
York University in 1974, a Bachelor of Laws degree from Osgoode Hall Law School in 1977 and a Master of Laws degree from New York University in 1984. From 1978 to 1979, Ms. Gibson served as a law clerk to the Honorable Justice Howland, Chief Justice of the Ontario Court of Appeal.
Donald J. Kintzer
has been a director since the closing of our IPO. Since 2008, Mr. Kintzer has been a business advisor and executive mentor (including an association with Korora Partners Inc.). He is a retired partner with PricewaterhouseCoopers LLP, or PwC, having retired in 2008 after an
association of over 31 years. He was admitted to the partnership in 1988 and served in various roles and locations during his career. From 2005 to 2008, he was the leader (managing partner) of PwCs West Region (US) Advisory practice and a member of PwCs national (US) leadership team. Mr.
Kintzer is a member of the board of directors of California Bank of Commerce and a member of the board of governors of Lawrence Livermore National Security, LLC and Los Alamos National Security, LLC. He is a certified public accountant (inactive) and a member of the American Institute of
Certified Public Accountants and the California Society of CPAs. Mr. Kintzer received an A.B. from Lafayette College and an M.B.A. from Pennsylvania State University. Prior to graduate school, Mr. Kintzer served as an officer in the United States Air Force.
Peter G. Livanos
has been a director since the closing of our IPO. Mr. Livanos is the Chairman of GasLog and a member of GasLogs board of directors. Mr. Livanos founded our affiliate GasLog LNG Services in 2001. He has served as the Chairman since GasLog was incorporated in July 2003 and
he held the role of Chief Executive Officer from January 2012 until January 2013. Mr. Livanos is the chairman and sole shareholder of Ceres Shipping, an international shipping group. He also serves as chairman of several of Ceres Shippings subsidiaries, including DryLog Ltd., a company engaged in dry
bulk shipping investments. In 1989 Mr. Livanos formed Seachem Tankers Ltd., which in 2000 combined with Odfjell ASA (later renamed Odfjell SE). He served on the board of directors of Odfjell SE until 2008. Mr. Livanos serves on the board of directors of Euronav NV, an independent owner and
operator of oil tankers. Mr. Livanos is a graduate of Columbia University. He is the first cousin of Philip Radziwill, GasLogs Vice Chairman and a member of GasLogs board of directors.
Andrew J. Orekar
has served as our Chief Executive Officer since the closing of our IPO. During his 15-year career at Goldman, Sachs & Co., Mr. Orekar served as Managing Director and Global Head of Chemicals and Agriculture Investment Banking, where he advised multinational companies on
strategy and portfolio composition, mergers and acquisitions, corporate finance and capital markets transactions. Mr. Orekar joined Goldman Sachs in 1998 and held positions of increasing responsibility prior to becoming a Managing Director in 2009. Mr. Orekar received B.S. (Wharton School, Finance)
and B.A. (English) degrees from the University of Pennsylvania in 1998.
Simon Crowe
has served as our Chief Financial Officer since our inception. He has also served as chief financial officer of GasLog since April 2013. From 2009 until 2012, Mr. Crowe was chief financial officer of Subsea 7, an engineering, construction and services contractor to the offshore energy
industry. Subsea 7 is a global business, listed on the Norwegian Stock Exchange that employs 12,000 people and operates in over 15 countries. Prior to 2009, Mr. Crowe worked for Transocean Ltd., the worlds largest offshore drilling contractor, most recently as vice president, strategy and planning, and
prior to that as Finance Director for Transocean Ltd.s Europe and Africa operations. Mr. Crowe is a member of the Chartered Institute of Management Accountants. Mr. Crowe holds a degree in physics from the University of Liverpool.
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Graham Westgarth
has served as our Chief Operating Officer since our inception. He was appointed chief executive vice president, operations and strategy, of GasLog in January 2013 and promoted to chief operating officer in June 2013. From 1999 through 2012, Mr. Westgarth was a member of the
Senior Leadership team of Teekay Shipping, most recently serving as executive vice president of innovation, technology and projects of Teekay Shipping, which included commercial and operational responsibility for a number of floating storage and offloading vessels. From 2001 to 2010, Mr. Westgarth
served as president of Teekay Marine Services with responsibility for 5,000 sea and shore staff and the technical management of 200 vessels. During this period he also served as chief executive officer of Teekay Petrojarl following its acquisition by Teekay Corporation. From 1987 to 1999, Mr. Westgarth
was employed by Maersk Company Limited, the last 5 years of which he served as General Manager of the Maersk UK flag fleet. Mr. Westgarth is the current chairman of INTERTANKO, an industry organization, which represents 80% of the worlds independent tanker owners and operators. He is an
ex-Master Mariner and graduate of the Columbia University Senior Executive Development Program.
Reimbursement of Expenses of Our General Partner
Our general partner does not receive compensation from us for any services it provides on our behalf, although it is entitled to reimbursement for expenses incurred on our behalf. In addition, our operating subsidiaries reimburse GasLog LNG Services for expenses incurred pursuant to the amended
ship management agreements that our operating subsidiaries are party to with GasLog LNG Services. See Certain Relationships and Related Party TransactionsShip Management Agreements.
Executive Compensation
In 2013, we did not pay any compensation to our directors or our officers nor accrue any obligations with respect to management incentive or retirement benefits for our directors and officers. A subsidiary of GasLog has entered into an employment agreement with Curtis V. Anastasio, the Chairman
of our board of directors, and intends to enter into an employment agreement with Andrew J. Orekar, our Chief Executive Officer, which will provide for participation in our management incentive plan and long-term incentive plan. The services of our other executive officers and other employees will be
provided pursuant to the administrative services agreement, under which we will pay an annual fee. For the twelve months ending September 30, 2015, we expect that fee to be $2.9 million for the three vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel
Acquisition. See Certain Relationships and Related Party TransactionsAdministrative Services Agreement. Our officers and employees and officers and employees of our subsidiaries and affiliates of GasLog and our general partner may participate in employee benefit plans and arrangements sponsored
by GasLog, our general partner or their affiliates, including plans that may be established in the future.
Compensation of Directors
Our officers who also serve as our directors will not receive additional compensation for their service as directors but may receive director fees in lieu of other compensation paid by GasLog. Each non-management director receives compensation for attending meetings of our board of directors, as
well as committee meetings. Non-management directors each receive a director fee of $100,000 per year. Members of the audit and conflicts committees each receive a committee fee of between $25,000 and $50,000 per year. Pursuant to the administrative services agreement, we pay directly to GasLog the
director fees for any appointed directors who are also directors of GasLog. In addition, each director is reimbursed for out-of-pocket expenses in connection with attending meetings of the board of directors or committees. Each director will be fully indemnified by us for actions associated with being a
director to the extent permitted under Marshall Islands law.
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SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of common units of GasLog Partners LP before and after the completion of this offering held by beneficial owners of 5.0% or more of the units and all of our directors and executive officers as a group.
Name of Beneficial Owner
Common Units
Common Units to be
Percentage of
Number
Percent
Number
Percent
GasLog Ltd.
(1)
162,358
1.65
%
162,358
%
%
Basic Management Company Inc.
(2)
2,380,952
24.24
%
2,380,952
%
%
All directors, director nominees and executive officers as a group
155,799
1.59
%
155,799
%
%
(1)
GasLog Ltd. is effectively controlled by its chairman, Peter G. Livanos, who is deemed to beneficially own, directly or indirectly, 39.0% of the issued and outstanding common shares of GasLog Ltd. through his ownership of Ceres Shipping. Excludes the 2.0% general partner interest held by our
general partner, a wholly owned subsidiary of GasLog Ltd.
(2)
Based on information contained in the Schedule 13D that was filed with the SEC on May 22, 2014 by Basic Management Company Inc., or Basic Management, and John Stanislas Albert Radziwill. John Stanislas Albert Radziwill beneficially owns 100% of the outstanding equity of Basic
Management. John Stanislas Albert Radziwill beneficially owns 100% of the outstanding equity of Basic Management. John Stanislas Albert Radziwill is the father of GasLogs Vice Chairman, Philip Radziwill, and the uncle of our director Peter G. Livanos, who is also Chairman of GasLog.
(3)
Assumes no exercise of the option to purchase additional common units. If the underwriters exercise their option to purchase additional common units in full, GasLogs percentage of common units to be beneficially owned after the offering will decrease to %, and its percentage of total common and
subordinated units to be beneficially owned will decrease to %.
As of August 1, 2014, we had one common unitholder of record located in the United States, CEDE & CO., a nominee of The Depository Trust Company, which held an aggregate of 9,660,000 common units, representing 98.35% of our outstanding common units and a 48.19% ownership interest in us.
We believe that the shares held by CEDE & CO. include common units beneficially owned by both holders in the United States and non-U.S. beneficial owners.
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OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficially Owned
Before the Offering
Beneficially Owned
After the Offering
(3)
Total Common and
Subordinated Units
to be Beneficially
Owned After
the Offering
(3)
(8 persons)
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Upon the completion of this offering, GasLog owns our general partner and 162,358 common units and subordinated units, representing a
% limited partner interest in us, assuming no exercise of the underwriters option to purchase additional common units, and all of our incentive distribution
rights. In addition, our general partner owns
general partner units representing a 2.0% general partner interest in us. GasLogs ability, as sole member of our general partner, to control the appointment of three of the five members of our board of directors and to approve certain significant actions
we may take, and GasLogs common and subordinated unit ownership and its right to vote the subordinated units as a separate class on certain matters, means that it, together with its affiliates, will have the ability to exercise influence regarding our management.
Distributions and Payments to our General Partner and GasLog
The following table summarizes the distributions and payments made by us to our general partner and its affiliates in connection with our formation, ongoing operation and any liquidation. These distributions and payments were determined by and among affiliated entities and, consequently, were not
the result of arms-length negotiations.
Formation Stage
The consideration received by our general
partner and its affiliates in exchange for the
transfer to us of the initial vessels in our fleet
162,358 common units and 9,822,358
subordinated units issued to GasLog;
400,913 general partner units representing a
2.0% general partner interest in us; and
$65.70 million in cash.
Operational Stage
Distributions of available cash to our general
partner and its affiliates
We will generally make cash distributions of
98.0% of available cash to unitholders
(including GasLog, the owner of our general
partner and the holder of 162,358 common units
and all of our subordinated units) and the
remaining 2.0% to our general partner.
In addition, if distributions exceed the minimum
quarterly distribution and other higher target
levels, GasLog, as the holder of the incentive
distribution rights, will be entitled to increasing
percentages of the distributions, up to 48.0% of
the distributions above the highest target level.
We refer to the rights to the increasing
distributions as incentive distribution rights.
See Our Cash Distribution Policy and
Restrictions on DistributionsIncentive
Distribution Rights for more information
regarding the incentive distribution rights.
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Payments to our general partner and its
affiliates
Our general partner does not receive
compensation from us for any services it
provides on our behalf. Our general partner and
its affiliates are entitled to reimbursement for
all direct and indirect expenses they incur on
our behalf. In addition, our subsidiaries pay fees
to GasLog LNG Services and GasLog for
technical and commercial management services.
In addition, we pay fees to GasLog for expenses
related to its provision of administrative services
to us pursuant to the administrative services
agreement. See Ship Management
Agreements, Administrative Services
Agreement and Commercial Management
Agreements.
Withdrawal or removal of our general partner
If our general partner withdraws or is removed,
its general partner interest will either be sold to
the new general partner for cash or converted
into common units, in each case for an amount
equal to the fair market value of those interests.
See The Partnership AgreementWithdrawal or
Removal of our General Partner.
Liquidation Stage
Liquidation
Upon our liquidation, the partners, including
our general partner, will be entitled to receive
liquidating distributions as described in The
Partnership AgreementLiquidation and
Distribution of Proceeds.
Omnibus Agreement
On May 12, 2014, we entered into an omnibus agreement with GasLog, our general partner and certain of our other subsidiaries. The following discussion describes certain provisions of the omnibus agreement.
Noncompetition
Under the omnibus agreement, GasLog has agreed, and has caused its controlled affiliates (other than us, our general partner and our subsidiaries) to agree, not to acquire, own, operate or charter any LNG carrier with a cargo capacity greater than 75,000 cbm engaged in oceangoing LNG transportation under a charter for five full years or more. For purposes of this section, we refer to these vessels, together with any related charters, as Five-Year Vessels and to all other LNG carriers, together with any related charters, as Non-Five-Year Vessels. In the event that GasLog acquires, operates or puts under charter a Five-Year Vessel, then GasLog will be required, within 30 calendar days after the consummation of the acquisition or the commencement of the operations or charter, to notify us and offer us the opportunity to purchase such Five-Year Vessel at fair market value. The restrictions in this paragraph will not prevent GasLog or any of its controlled affiliates (other than us and our subsidiaries) from:
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acquiring one or more Five-Year Vessels if GasLog promptly offers to sell the vessel to us for the acquisition price plus any administrative costs (including re-flagging and reasonable legal costs) associated with the transfer to us at the time of the acquisition; |
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putting a Non-Five-Year Vessel under charter for five full years or more if GasLog offers to sell the vessel to us for fair market value (x) promptly after the time it becomes a Five-Year Vessel and (y) at each renewal or extension of that charter for five full years or more; |
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(4)
acquiring one or more Five-Year Vessels as part of the acquisition of a controlling interest in a business or package of assets and owning, operating or chartering those vessels; provided, however, that:
(a)
if less than a majority of the value of the business or assets acquired is attributable to Five-Year Vessels, as determined in good faith by GasLogs board of directors, GasLog must offer to sell such vessels to us for their fair market value plus any additional tax or other similar costs that
GasLog incurs in connection with the acquisition and the transfer of such vessels to us separate from the acquired business; and
(b)
if a majority or more of the value of the business or assets acquired is attributable to Five-Year Vessels, as determined in good faith by GasLogs board of directors, GasLog must notify us of the proposed acquisition in advance. Not later than 30 days following receipt of such notice, we will
notify GasLog if we wish to acquire such vessels in cooperation and simultaneously with GasLog acquiring the Non-Five-Year Vessels. If we do not notify GasLog of our intent to pursue the acquisition within 30 days, GasLog may proceed with the acquisition and then offer to sell such
vessels to us as provided in (a) above;
(5)
acquiring a non-controlling equity ownership, voting or profit participation interest in any company, business or pool of assets;
(6)
acquiring, owning, operating or chartering any Five-Year Vessel if we do not fulfill our obligation to purchase such vessel in accordance with the terms of any existing or future agreement;
(7)
acquiring, owning, operating or chartering a Five-Year Vessel subject to the offers to us described in paragraphs (2), (3) and (4) above pending our determination whether to accept such offers and pending the closing of any offers we accept;
(8)
providing ship management services relating to any vessel;
(9)
owning or operating any Five-Year Vessel that GasLog owned on the closing date of the IPO and that was not part of our initial fleet as of such date; or
(10)
acquiring, owning, operating or chartering a Five-Year Vessel if we have previously advised GasLog that we consent to such acquisition, ownership, operation or charter.
If GasLog or any of its controlled affiliates (other than us, our general partner or our subsidiaries) acquires, owns, operates or charters Five-Year Vessels pursuant to any of the exceptions described above, it may not subsequently expand that portion of its business other than pursuant to those
exceptions. However, such Five-Year Vessels could eventually compete with our vessels upon their re-chartering.
In addition, under the omnibus agreement we have agreed, and have caused our subsidiaries to agree, to acquire, own, operate or charter Five-Year Vessels only. The restrictions in this paragraph will not:
(1)
prevent us or any of our subsidiaries from owning, operating or chartering any Non-Five-Year Vessel that was previously a Five-Year Vessel while owned by us or any of our subsidiaries;
(2)
prevent us or any of our subsidiaries from acquiring Non-Five-Year Vessels as part of the acquisition of a controlling interest in a business or package of assets and owning, operating or chartering those vessels; provided, however, that:
(a)
if less than a majority of the value of the business or assets acquired is attributable to Non-Five-Year Vessels, as determined in good faith by us, we must offer to sell such vessels to GasLog for their fair market value plus any additional tax or other similar costs that we incur in connection
with the acquisition and the transfer of such vessels to GasLog separate from the acquired business; and
(b)
if a majority or more of the value of the business or assets acquired is attributable to Non-Five-Year Vessels, as determined in good faith by us, we must notify GasLog of
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(3)
prevent us or any of our subsidiaries from acquiring, owning, operating or chartering any Non-Five-Year Vessels subject to the offer to GasLog described in paragraph (2) above, pending its determination whether to accept such offer and pending the closing of any offer it accepts; or
(4)
prevent us or any of our subsidiaries from acquiring, owning, operating or chartering Non-Five-Year Vessels if GasLog has previously advised us that it consents to such acquisition, ownership, operation or charter.
If we or any of our subsidiaries acquires, owns, operates or charters Non-Five-Year Vessels pursuant to any of the exceptions described above, neither we nor such subsidiary may subsequently expand that portion of our business other than pursuant to those exceptions.
During the 30-day period after GasLogs notice and offer of an opportunity to purchase a Five-Year Vessel, we and GasLog will negotiate in good faith to reach an agreement on the fair market value (and any applicable break-up costs) of the relevant vessel. If we do not reach an agreement within
such 30-day period, a mutually-agreed upon investment banking firm, ship broker or other expert advisor will be engaged to determine the fair market value (and any applicable break-up costs) of the relevant vessel and other outstanding terms, and we will have the option, but not the obligation, to
purchase the relevant vessel on such terms. Our ability to consummate the acquisition of such Five-Year Vessel from GasLog will be subject to obtaining any consents of governmental authorities and other non-affiliated third parties and to all agreements existing with respect to such Five-Year Vessel.
See Risk FactorsRisks Inherent in Our BusinessWe may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or a financing agreement. Under the omnibus agreement, GasLog will indemnify the Partnership against losses arising from the failure to obtain any
consent or governmental permit necessary to own or operate the initial fleet in substantially the same manner that the vessels were owned and operated by GasLog immediately prior to the Partnerships acquisition of such vessels. See Indemnification.
Upon a change of control of us or our general partner, the noncompetition provisions of the omnibus agreement will terminate immediately. Upon a change of control of GasLog, the noncompetition provisions of the omnibus agreement applicable to GasLog will terminate at the time that is the later
of the date of the change of control and the date on which all of our outstanding subordinated units have converted to common units. On the date on which a majority of our directors ceases to consist of directors that were (1) appointed by our general partner prior to our first annual meeting of
unitholders and (2) recommended for election by a majority of our appointed directors, the noncompetition provisions applicable to GasLog shall terminate immediately.
LNG Carrier Purchase Options
Under the omnibus agreement, we have the right to purchase any of the
GasLog Seattle
, the
Solaris
, the six vessels recently acquired from BG Group (including the two vessels to be acquired pursuant to the Pending Vessel Acquisition) and Hull Nos. 2072, 2073, 2102 and 2103 from GasLog within
36 months after GasLog notifies our board of directors of their acceptances by their charterer (or, in the case of the
GasLog Seattle
or the six vessels recently acquired from BG Group, 36 months after the closing of the IPO) at fair market value as determined in accordance with the provisions of the
omnibus agreement. If we and GasLog are unable to agree upon the fair market value of any of these optional vessels, the respective fair market values will be determined by a mutually acceptable investment banking firm, ship broker or other expert advisor, and we will have the right, but not the
obligation, to purchase the vessel at such price. Our ability to consummate the acquisition of such vessels from GasLog will be subject to obtaining any consents of governmental
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the proposed acquisition in advance. Not later than 30 days following receipt of such notice, GasLog must notify us if it wishes to acquire the Non-Five-Year Vessels in cooperation and simultaneously with us acquiring the Five-Year Vessels. If GasLog does not notify us of its intent to
pursue the acquisition within 30 days, we may proceed with the acquisition and then offer to sell such vessels to GasLog as provided in (a) above;
authorities and other non-affiliated third parties and to all agreements existing as of the closing date in respect of such vessels. See Risk FactorsRisks Inherent in Our BusinessWe may have difficulty obtaining consents that are necessary to acquire vessels with an existing charter or a financing
agreement.
On the date on which a majority of our directors ceases to consist of directors that were (1) appointed by our general partner prior to our first annual meeting of unitholders and (2) recommended for election by a majority of our appointed directors, the LNG carrier purchase options shall terminate
immediately.
Rights of First Offer
Under the omnibus agreement, we and our subsidiaries have granted to GasLog a right of first offer on any proposed sale, transfer or other disposition of any Five-Year Vessels or Non-Five-Year Vessels owned by us. Under the omnibus agreement, GasLog has agreed (and has caused its subsidiaries
to agree) to grant a similar right of first offer to us for any Five-Year Vessels they might own. These rights of first offer will not apply to a (1) sale, transfer or other disposition of vessels between any affiliated subsidiaries or pursuant to the terms of any current or future charter or other agreement with
a charter party or (2) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.
Prior to engaging in any negotiation regarding any vessel disposition with respect to a Five-Year Vessel with a unaffiliated third party or any Non-Five-Year Vessel, we or GasLog, as the case may be, will deliver a written notice to the other relevant party setting forth the material terms and
conditions of the proposed transaction. During the 30-day period after the delivery of such notice, we and GasLog, as the case may be, will negotiate in good faith to reach an agreement on the transaction. If we do not reach an agreement within such 30-day period, we or GasLog, as the case may be,
will be able within the next 180 calendar days to sell, transfer, dispose or re-charter the vessel to a third party (or to agree in writing to undertake such transaction with a third party) on terms generally no less favorable to us or GasLog, as the case may be, than those offered pursuant to the written
notice. Our ability to consummate the acquisition of such Five-Year Vessel from GasLog will be subject to obtaining any consents of governmental authorities and other non-affiliated third parties and to all agreements existing in respect of such Five-Year Vessel. See Risk FactorsRisks Inherent in Our
BusinessWe may have difficulty obtaining lenders or charterers consents that are necessary to acquire vessels with an existing charter or a financing agreement.
Upon a change of control of us or our general partner, the right of first offer provisions of the omnibus agreement will terminate immediately. Upon a change of control of GasLog, the right of first offer provisions applicable to GasLog under the omnibus agreement will terminate at the time that is
the later of the date of the change of control and the date on which all of our outstanding subordinated units have converted to common units. On the date on which a majority of our directors ceases to consist of directors that were (1) appointed by our general partner prior to our first annual meeting
of unitholders and (2) recommended for election by a majority of our appointed directors, the provisions related to the rights of first offer granted to us by GasLog shall terminate immediately.
For purposes of the omnibus agreement, a change of control means, with respect to any applicable person, any of the following events: (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the applicable persons assets to
any other person, unless immediately following such sale, lease, exchange or other transfer such assets are owned, directly or indirectly, by the applicable person; (b) the consolidation or merger of the applicable person with or into another person pursuant to a transaction in which the outstanding voting
securities of the applicable person are changed into or exchanged for cash, securities or other property, other than any such transaction where (i) the outstanding voting securities of the applicable person are changed into or exchanged for voting securities of the surviving person or its parent and (ii) the
holders of the voting securities of the applicable person immediately prior to such transaction own, directly or indirectly, not less than a majority of the outstanding voting securities of the surviving person or its parent immediately after such transaction;
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and (c) a person or group (within the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act), other than GasLog or its affiliates with respect to the general partner, being or becoming the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all
of the then outstanding voting securities of the applicable person, except in a merger or consolidation which would not constitute a change of control under clause (b) above.
Indemnification
Under the omnibus agreement, GasLog will indemnify us after the closing of the IPO for a period of five years (and GasLog will indemnify us for a period of at least three years after our purchase of any of the 12 vessels subject to purchase options, if applicable) against certain environmental and
toxic tort liabilities with respect to the initial fleet and the twelve vessels subject to purchase options that are contributed or sold to us to the extent arising prior to the time they were contributed or sold to us. Liabilities resulting from a change in law after the closing of the IPO are excluded from the
environmental indemnity. There is an aggregate cap of $5 million on the amount of indemnity coverage provided by GasLog for environmental and toxic tort liabilities. No claim may be made unless the aggregate dollar amount of all claims exceeds $500,000, in which case GasLog is liable for claims only
to the extent such aggregate amount exceeds $500,000.
GasLog will also indemnify us for liabilities related to:
certain defects in title to the initial fleet and any failure to obtain, prior to the time they were contributed to us, certain consents and permits necessary to conduct our business, which liabilities arise within three years after the closing of the IPO; and
certain tax liabilities attributable to the operation of the assets contributed or sold to us prior to the time they were contributed or sold.
Amendments
The omnibus agreement may not be amended without the prior approval of the conflicts committee of our board of directors if the proposed amendment will, in the reasonable discretion of our board of directors, adversely affect holders of our common units.
Administrative Services Agreement
On May 12, 2014, we entered into an administrative services agreement with GasLog, pursuant to which GasLog provides certain management and administrative services to us. The services provided under the administrative services agreement are required to be provided in a diligent manner, as we
may reasonably direct.
The administrative services agreement will continue indefinitely until terminated by us upon 90 days notice for any reason in the sole discretion of our board of directors. In addition, the administrative services agreement may be terminated by GasLog upon 90 days notice if:
there is a change of control of us or our general partner;
a receiver is appointed for all or substantially all of our property;
an order is made to wind up our partnership;
a final judgment or order that materially and adversely affects our ability to perform the agreement is obtained or entered and not vacated, discharged or stayed; or
we make a general assignment for the benefit of our creditors, file a petition in bankruptcy or liquidation or commence any reorganization proceedings.
Under the administrative services agreement, certain officers of GasLog provide executive officer functions for our benefit. These officers are responsible for our day-to-day management subject to the direction of our board of directors. Our board of directors has the ability to terminate the
arrangement with GasLog regarding the provision of executive officer services to us at any time in its sole discretion.
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The administrative services provided by GasLog include:
bookkeeping, audit and accounting services:
assistance with the maintenance of our corporate books and records, assistance with the preparation of our tax returns and arranging for the provision of audit and accounting services;
legal and insurance services:
arranging for the provision of legal, insurance and other professional services and maintaining our existence and good standing in necessary jurisdictions;
administrative and clerical services:
assistance with office space, arranging meetings for our common unitholders pursuant to the partnership agreement, arranging the provision of IT services, providing all administrative services required for subsequent debt and equity financings and attending to all
other administrative matters necessary to ensure the professional management of our business;
banking and financial services:
providing cash management including assistance with preparation of budgets, overseeing banking services and bank accounts, arranging for the deposit of funds and monitoring and maintaining compliance therewith;
advisory services:
assistance in complying with United States and other relevant securities laws;
client and investor relations:
arranging for the provision of, advisory, clerical and investor relations services to assist and support us in our communications with our common unitholders; and
assistance with the integration of any acquired businesses.
GasLog receives a service fee in U.S. dollars of $0.6 million per vessel per year in connection with providing services under the administrative services agreement. Amounts payable by us under the administrative services agreement must be paid in advance on a monthly basis by the first working day
of each month. For the three vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect that we will pay GasLog approximately $2.9 million in total for the services under the administrative services agreement for the twelve months ending
September 30, 2015.
Under the administrative services agreement, we will indemnify GasLog against all actions which may be brought against them as a result of their performance of the administrative services including, without limitation, all actions brought under the environmental laws of any jurisdiction, and against
and in respect of all costs and expenses they may suffer or incur due to defending or settling such actions; provided, however, that such indemnity excludes any or all losses to the extent that they are caused by or due to the fraud, gross negligence or willful misconduct of GasLog or its officers,
employees and agents.
Ship Management Agreements
Each vessel in our fleet is subject to amended ship management agreements pursuant to which certain crew and technical services are provided by GasLog LNG Services. Under these amended ship management agreements, our operating subsidiaries pay fees to and reimburse the costs and expenses
of the manager as described below. For the three vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect that the aggregate amount of fees and expenses to be paid by our operating subsidiaries under these management agreements for the
twelve months ending September 30, 2015 will be approximately $2.8 million.
Management services.
Each amended ship management agreement requires that GasLog LNG Services and its subcontractors use their best endeavors to perform, among others, the following management services:
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the provision of suitably and adequately qualified crew for the vessel in accordance with the requirements of the owner and the attendance to all matters pertaining to training, labor relations, insurance and amenities of the crew;
the provision of operational and technical management, including arrangement and supervision of drydockings, repairs, alternations and the upkeep of the vessel, arrangement for the victualling and storing of the vessels, appointment of surveyors and technical consultants and development,
implementation and maintenance of a Safety Management System in accordance with the ISM Code;
the provision of applicable documentation of compliance and safety management certificates;
the provision of an accounting system that meets the requirements of the owner, regular accounting services and regular reports and records, and the maintenance of records of costs and expenditures incurred, as well as data necessary or proper for the settlement of accounts between the parties;
the procurement of all stores, spares, equipment, provisions, oils, fuels and any other goods, material or services to be supplied to the vessel;
the handling and settlement of claims relating to the vessel, including any claims involving the charterers;
the navigation of the vessel, handling of all necessary communication, and management of cargo operations of the vessel; and
the arrangement, maintenance and preparation for suitable moorings for vessels for lay-up.
Management fee.
Pursuant to the amended ship management agreements, the vessel-owning subsidiaries, as owners, will pay a management fee of $46,000 per month to GasLog LNG Services, as manager, and will reimburse GasLog LNG Services for all expenses incurred on their behalf. For the three
vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect the amount of these fees and expenses to be approximately $2.8 million for the twelve months ending September 30, 2015. The management fee is subject to an annual adjustment. The
adjustment will be agreed to between the parties in good faith on the basis of general inflation and proof of increases in actual costs incurred by GasLog LNG Services, as manager. Any dispute relating to the annual rate adjustment would be settled by dispute resolution provisions set forth in the
applicable ship management agreement.
Term.
Each ship management agreement continues indefinitely until terminated by either party as described below.
Automatic termination and termination by either party.
Each ship management agreement will be deemed to be terminated if:
the vessel is sold, becomes a total loss, declared as a constructive, compromised or arranged total loss or is requisitioned for hire; or
an order is made or a resolution is passed for the winding up, dissolution, liquidation or bankruptcy of the other party (otherwise than for the purpose of a solvent reconstruction or amalgamation), a receiver or similar officer is appointed or the other party suspends payment, ceases to carry on
business or makes any special arrangement or composition with its creditors.
Termination by the manager.
Under each ship management agreement, the manager may terminate the ship management agreement with immediate effect by written notice if:
any money payable to the manager pursuant to the agreement has not been paid within 30 days of payment having been requested in writing by the manager;
the owner fails to cease employment of the vessel in an unlawful trade or on a voyage, which in the reasonable opinion of the manager, is unduly hazardous, within a reasonable time after receiving notice from the manager;
the relevant ship management agreement or any of the owners rights or obligations are assigned to any person or entity without the managers prior written agreement or approval; or
the owner elects to provide officers and, for any reason within their control, fails to (i) procure officers and ratings complying with the requirements of STCW 95 or (ii) instruct such
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Termination by the owner.
Under each ship management agreement, the owner may terminate the applicable agreement by giving 90 days written notice in the event that the manager, in the reasonable opinion of the owner, fails to manage the vessel in accordance with first class LNG ship
management practice. The owner may also terminate the applicable agreement by giving 90 days notice if the manager fails to meet any material obligation of the ship management agreement or fails to meet any obligation under the ship management agreement that has a material adverse effect upon
the owner, if such default is not capable of being remedied or the manager fails to remedy the default within a reasonable time to the satisfaction of the owner. Notwithstanding the foregoing, the owner may terminate the ship management agreement at any time for any reason by giving the manager not
less than three months written notice.
Additional fees and provisions.
Under each ship management agreement, the manager and its employees, agents and subcontractors will be indemnified by the owner against all actions that may be brought against them or incurred or suffered by them arising out of or in connection with their
performance under such agreement; provided, however, that such indemnity excludes any or all losses that may be caused by or due to the fraud, gross negligence or willful misconduct of the manager or its employees, agents and subcontractors.
Commercial Management Agreements
On May 12, 2014, our operating subsidiaries entered into amended commercial management agreements with GasLog, pursuant to which GasLog provides certain commercial management services to us.
The amended commercial management agreements require that GasLog use their best endeavors to perform, among others, the following management services:
the commercial operations, including providing chartering services in accordance with the vessel owners instructions (including seeking and negotiating employment for the vessels and the execution of charter parties or other contracts relating to the employment of the vessels), arranging payment to
the owners account of all hire and/or freight revenues, calculating hire, freight and other money due from or to the charterer, issuing voyage instructions, appointing agents and surveyors and arranging surveys associated with the commercial operations;
the administration of invoicing and collection of hire payables; and
the assessment of the market on specific issues and provision of such consultancy services as the owners may from time to time require.
For the three vessels in our initial fleet and the two vessels to be acquired pursuant to the Pending Vessel Acquisition, we expect that we will pay approximately $1.8 million under the amended commercial management agreements for the twelve months ending September 30, 2015.
Contribution Agreement
On May 12, 2014, we entered into a contribution agreement with GasLog and certain of its subsidiaries that effected certain formation transactions in connection with our IPO, including the transfer of the ownership interests in our initial fleet, and the use of the net proceeds of the IPO.
Revolving Credit Facility with GasLog
On May 12, 2014, we entered into a $30.0 million revolving credit facility with GasLog to be used for general partnership purposes. The sponsor credit facility is for a term of 36 months, unsecured, and bears interest at a rate of 5% per annum, with no commitment fee for the first year. After the
first year, the interest will increase to a rate of 6% per annum, with an annual 2.4% commitment fee on the undrawn balance. For a more detailed description of this credit facility, please read Managements Discussion and Analysis of Financial Condition and Results of
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officers and ratings to obey all reasonable orders of the managers in connection with the operating of the managers safety management system.
OperationsLiquidity and Capital ResourcesBorrowing ActivitiesRevolving Credit Facility with GasLog.
Indemnification Agreements
We have entered into indemnification agreements with our directors and officers which provide, among other things, that we will indemnify our directors and officers, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines, settlements and fees that they
may be required to pay in actions or proceedings to which they are or may be made a party by reason of such persons position as a director, officer, employee or other agent of the Partnership, subject to, and to the maximum extent permitted by, applicable law.
Other Related Party Transactions
As a result of our relationships with GasLog and its affiliates, we, our general partner and our subsidiaries have entered into or will enter into various agreements that will not be the result of arms length negotiations. We generally refer to these agreements and the transactions that they provide for
as transactions with affiliates or related party transactions.
Our partnership agreement sets forth procedures by which future related party transactions may be approved or resolved by our board of directors. Pursuant to our partnership agreement, our board of directors may, but is not required to, seek the approval of a related party transaction from the
conflicts committee of our board of directors or from the common unitholders (excluding common units owned by our general partner and its affiliates). Neither our general partner nor our board of directors will be in breach of their obligations under the partnership agreement or their duties stated or
implied by law or equity if the transaction is approved by the conflicts committee or the requisite majority of the unitholders. If approval of the conflicts committee is sought, then the conflicts committee will be authorized to consider any and all factors as it determines to be relevant or appropriate under
the circumstances and it will be presumed that, in making its decision, the conflicts committee acted in good faith. In order for a determination or other action to be in good faith for purposes of the partnership agreement, the person or persons making such determination or taking or declining to take
such other action must reasonably believe that the determination or other action is in our best interests.
Our conflicts committee is comprised of three members of our board of directors. The conflicts committee is available at the board of directors discretion to review specific matters that the board of directors believes may involve conflicts of interest. The members of the conflicts committee must and
do meet the independence standards established by the New York Stock Exchange and the SEC to serve on an audit committee of a board of directors, and are not and may not be any of the following: (a) officers or employees of our general partner, (b) officers, directors or employees of any affiliate of
our general partner (other than the Partnership and its subsidiaries) or (c) holders of any ownership interest in the general partner, its affiliates or the Partnership and its subsidiaries (other than (x) common units or (y) awards granted pursuant to any long-term incentive plan of the Partnership or its
subsidiaries).
Transactions with our affiliates that are not approved by the conflicts committee and that do not involve a vote of unitholders must be on terms no less favorable to us than those generally provided to or available from unrelated third parties or be fair and reasonable to us. In determining whether
a transaction or resolution is fair and reasonable, our board of directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us. If our board of directors does not seek approval by the conflicts
committee or the requisite majority of the unitholders and instead determines that the terms of a transaction with an affiliate are no less favorable to us than those generally provided to or available from unrelated third parties or are fair and reasonable to us, it will be presumed that, in making its
decision, our board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. See Conflicts of Interest and Fiduciary Duties.
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CONFLICTS OF INTEREST AND FIDUCIARY DUTIES
Conflicts of Interest
Conflicts of interest exist and may arise in the future as a result of the relationships between our general partner and its affiliates, including GasLog, on the one hand, and us and our unaffiliated limited partners, on the other hand. Our general partner has a fiduciary duty to make any decisions
relating to our management in a manner beneficial to us and our unitholders. Similarly, our board of directors has fiduciary duties to manage us in a manner beneficial to us, our general partner and our limited partners. We expect that certain of our officers and directors will also be officers and directors
of GasLog or its affiliates and will have fiduciary duties to GasLog or its affiliates that may cause them to pursue business strategies that disproportionately benefit GasLog or its affiliates or which otherwise are not in the best interests of us or our unitholders. As a result of these relationships, conflicts
of interest may arise between us and our unaffiliated limited partners on the one hand, and GasLog and its affiliates, including our general partner, on the other hand. The resolution of these conflicts may not be in the best interest of us or our unitholders.
Our partnership affairs are governed by our partnership agreement and the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. We are not aware of any material
difference in unitholder rights between the Marshall Islands Act and the Delaware Revised Uniform Limited Partnership Act. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with the Delaware Revised Uniform Limited Partnership Act and, so long as it
does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law or case law of the courts of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act,
in contrast to Delaware, which has a well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as courts in Delaware. For example, the rights of our unitholders and fiduciary responsibilities
of our general partner and its affiliates under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. Due to the less-developed nature of Marshall Islands law, our public unitholders may have more difficulty in protecting their interests or seeking remedies
in the face of actions by our general partner, its affiliates or our controlling unitholders than would unitholders of a limited partnership organized in the United States.
Our partnership agreement contains provisions that modify and limit the fiduciary duties of our general partner and our directors to the unitholders under Marshall Islands law. Our partnership agreement also restricts the remedies available to unitholders for actions taken by our general partner or
our directors that, without those limitations, might constitute breaches of fiduciary duty.
Our partnership agreement provides that neither our general partner nor our board of directors will be in breach of their obligations under the partnership agreement or their duties stated or implied by law or equity if the resolution of the conflict is:
approved by the conflicts committee, although neither our general partner nor our board of directors are obligated to seek such approval;
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates, although neither our general partner nor our board of directors is obligated to seek such approval;
on terms no less favorable to us than those generally being provided to or available from unrelated third parties, but neither our general partner nor our board of directors is required to obtain confirmation to such effect from an independent third party; or
fair and reasonable to us, taking into account the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous to us.
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Our general partner or our board of directors may, but are not required to, seek the approval of such resolution from the conflicts committee of our board of directors or from the common unitholders. If neither our general partner nor our board of directors seeks approval from the conflicts
committee, and our board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the third and fourth bullet points above, then it will be presumed that, in making its decision, our board of directors, including
the board members affected by the conflict, acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. When our partnership agreement requires
someone to act in good faith, it requires that person to reasonably believe that he is acting in the best interests of the partnership, unless the context otherwise requires. See ManagementManagement of GasLog Partners LP for information about the composition and formation of the conflicts committee
of our board of directors.
Conflicts of interest could arise in the situations described below, among others.
Actions taken by our board of directors may affect the amount of cash available for distribution to unitholders or accelerate the right to convert subordinated units.
The amount of cash that is available for distribution to unitholders is affected by decisions of our board of directors regarding such matters as:
the amount and timing of asset purchases and sales;
cash expenditures;
borrowings;
estimates of maintenance and replacement capital expenditures;
the issuance of additional units; and
the creation, reduction or increase of reserves in any quarter.
In addition, borrowings by us and our affiliates do not constitute a breach of any duty owed by our general partner or our directors to our unitholders, including borrowings that have the purpose or effect of:
enabling our general partner or its affiliates to receive distributions on any subordinated units held by them or the incentive distribution rights; or
hastening the expiration of the subordination period.
For example, in the event we have not generated sufficient cash from our operations to pay the minimum quarterly distribution on our common units and our subordinated units, our partnership agreement permits us to borrow funds, which would enable us to make this distribution on all outstanding
units. See Our Cash Distribution Policy and Restrictions on DistributionsSubordination Period.
Our partnership agreement provides that we and our subsidiaries may borrow funds from our general partner and its affiliates. Our general partner and its affiliates may not borrow funds from us or our subsidiaries.
Neither our partnership agreement nor any other agreement requires GasLog to pursue a business strategy that favors us or utilizes our assets or dictates what markets to pursue or grow. GasLogs directors and executive officers have a fiduciary duty to make these decisions in the best interests of the
shareholders of GasLog, which may be contrary to our interests.
Because we expect that certain of our directors and officers will also be directors and officers of GasLog and its affiliates, such directors and officers have fiduciary duties to GasLog and its affiliates that may cause them to pursue business strategies that disproportionately benefit GasLog, or which
otherwise are not in the best interests of us or our unitholders.
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Our general partner is allowed to take into account the interests of parties other than us, such as GasLog.
Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be held by Marshall Islands fiduciary duty law. For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as
opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligations to give any consideration to any interest of or factors affecting us, our affiliates or any unitholder. Decisions made by our general
partner in its individual capacity will be made by its sole owner, GasLog. Specifically, our general partner will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation of the
partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership
agreement) or refrains from transferring its units or general partner interest or votes upon the dissolution of the partnership.
Our officers face conflicts in the allocation of their time to our business.
With the exception of Andrew J. Orekar, our chief executive officer, all of our officers are employed by GasLog or its applicable affiliate and perform executive officer functions for us pursuant to the administrative services agreement, are not required to work full-time on our affairs and also
perform services for affiliates of our general partner, including GasLog. The affiliates of our general partner, including GasLog, conduct substantial businesses and activities of their own in which we have no economic interest. As a result, there could be material competition for the time and effort of our
officers who also provide services to our general partners affiliates, which could have a material adverse effect on our business, results of operations and financial condition. See Management.
We will reimburse our general partner and its affiliates for expenses.
We will reimburse our general partner and its affiliates for costs incurred, if any, in managing and operating us. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us in good faith. See Certain Relationships and Related Party Transactions
and ManagementReimbursement of Expenses of Our General Partner.
Our general partner intends to limit its liability regarding our obligations.
Our partnership agreement directs that liability of our general partner for the contractual arrangements of the partnership are limited so that the other party has recourse only to our assets and not against our general partner or its assets or any affiliate of our general partner or its assets. Our
partnership agreement provides that any action taken by our general partner or by our directors to limit the liability of our general partner or our directors, is not a breach of the fiduciary duties of our general partner or our directors, even if we could have obtained terms that are more favorable without
the limitation on liability.
Common unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us.
Any agreements between us, on the one hand, and our general partner and its affiliates, on the other, will not grant to the unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in our favor.
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Contracts entered into prior to the IPO between us, on the one hand, and our general partner and its affiliates, on the other, were not the result of arms-length negotiations.
Neither our partnership agreement nor any of the other agreements, contracts and arrangements between us and our general partner and its affiliates entered into prior to the IPO were the result of arms-length negotiations. Our partnership agreement generally provides that any future transaction
with our affiliates, such as an agreement, contract or arrangement between us and our general partner and its affiliates, must be:
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).
GasLog LNG Services, which provides certain technical management services to our subsidiaries, may also enter into additional contractual arrangements with any of its affiliates on our behalf; however, there is no obligation of any affiliate of GasLog LNG Services to enter into any contracts of this
kind.
Common units are subject to our general partners limited call right.
Our general partner may exercise its right to call and purchase common units as provided in the partnership agreement or assign this right to one of its affiliates or to us. Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise this right.
Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right. As a result, a common unitholder may have common units purchased from the unitholder at an undesirable time or price. See The
Partnership AgreementLimited Call Right.
We may choose not to retain separate counsel for ourselves or for the holders of common units.
The attorneys, independent accountants and others who perform services for us have been retained by our board of directors. Attorneys, independent accountants and others who perform services for us are selected by our board of directors or the conflicts committee and may perform services for our
general partner and its affiliates. We may retain separate counsel for ourselves or the holders of common units in the event of a conflict of interest between our general partner and its affiliates, on the one hand, and us or the holders of common units, on the other, depending on the nature of the
conflict. We do not intend to do so in most cases.
Our general partners affiliates, including GasLog, may compete with us.
Our partnership agreement provides that our general partner will be restricted from engaging in any business activities other than acting as our general partner and those activities incidental to its ownership of interests in us. In addition, our partnership agreement provides that our general partner, for
so long as it is general partner of our partnership, will not engage in, by acquisition or otherwise, the businesses described above under the caption Certain Relationships and Related Party TransactionsOmnibus AgreementNoncompetition. Similarly, under the omnibus agreement, GasLog will agree and
will cause its controlled affiliates to agree, for so long as GasLog controls our partnership, not to engage in the businesses described above under the caption Certain Relationships and Related Party TransactionsOmnibus AgreementNoncompetition. Except as provided in our partnership agreement and
the omnibus agreement, affiliates of our general partner are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.
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Fiduciary Duties
Our general partner and its affiliates are accountable to us and our unitholders as fiduciaries. Fiduciary duties owed to unitholders by our general partner and its affiliates are prescribed by law and the partnership agreement. The Marshall Islands Act provides that Marshall Islands limited partnerships
may, in their partnership agreements, expand or restrict the fiduciary duties otherwise owed by our general partner and its affiliates to the limited partners and the partnership. Our directors are subject to the same fiduciary duties as our general partner, as expanded or restricted by the partnership
agreement.
Our subsidiaries have entered into services agreements, and may enter into additional agreements, with GasLog and certain of its subsidiaries, including GasLog LNG Services. In the performance of their obligations under these agreements, GasLog and its subsidiaries are not held to a fiduciary
standard of care but rather to the standards of care specified in the relevant agreement.
Our partnership agreement contains various provisions restricting the fiduciary duties that might otherwise be owed by our general partner or by our directors. We have adopted these provisions to allow our general partner and our directors to take into account the interests of other parties in
addition to our interests when resolving conflicts of interest. We believe this is appropriate and necessary because our officers and directors have fiduciary duties to GasLog, as well as to you. These modifications disadvantage the common unitholders because they restrict the rights and remedies that
would otherwise be available to unitholders for actions that, without those limitations, might constitute breaches of fiduciary duty, as described below. The following is a summary of:
the fiduciary duties imposed on our general partner and our directors by the Marshall Islands Act;
material modifications of these duties contained in our partnership agreement; and
certain rights and remedies of unitholders contained in the Marshall Islands Act.
Marshall Islands law fiduciary
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duty standards
Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement providing otherwise, would generally require a general partner and the
directors of a Marshall Islands limited partnership to act for the partnership in the same manner as a prudent person would act on its own behalf and to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.
The duty of loyalty, in the absence of a provision in a partnership agreement providing otherwise, would generally require that a partner refrain from dealing with the partnership in the conduct or winding up of the partnership business or affairs as or on behalf of a
party having an interest adverse to the partnership, refrain from competing with the partnership in the conduct of the partnership business or affairs before the dissolution of the partnership, and to account to the partnership and hold as trustee for it any property, profit
or benefit derived by the partner in the conduct or winding up of the partnership business or affairs or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity. In addition, although not a fiduciary duty, a
partner shall discharge the duties to the partnership and exercise any rights consistently with the obligation of good faith and fair dealing.
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).
If our board of directors obtains the approval of the conflicts committee or the requisite majority of the unitholders, then our partnership agreement provides that neither our general partner nor our board of directors will be in breach of their obligations under the
partnership agreement or their duties stated or implied by law or equity. In approving a transaction, the conflicts committee will be authorized to consider any and all factors as it determines to be relevant or appropriate under the circumstances and it will be presumed
that, in making its decision, the conflicts committee acted in good faith.
If our board of directors does not seek approval from the conflicts committee, and our board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above,
then it will be presumed that, in making its decision, our board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of
overcoming such presumption. These standards reduce the obligations to which our board of directors would otherwise be held.
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Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates and our directors that might otherwise raise issues as to compliance with fiduciary duties under the laws of the Marshall Islands. For example, our
partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in good faith and will not be subject to any other standard under the laws of the Marshall Islands to the
extent permitted by law. Such standards, such as the duty of care and duty of loyalty, are described in the immediately preceding paragraph under Marshall Islands law fiduciary duty standards. In addition, when our general partner is acting in its individual capacity, as
opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the unitholders whatsoever. These standards reduce the obligations to which our general partner and our board of directors would otherwise be held. Our partnership
agreement generally provides that transactions with our affiliates and resolutions of conflicts of interest not involving a vote of unitholders and that are not approved by the conflicts committee of our board of directors must be:
In addition to the other more specific provisions limiting the obligations of our general partner and our directors, our partnership agreement further provides that our general partner and our officers and directors will not be liable for monetary damages to us or our
limited partners for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that our general partner or our officers or directors engaged in actual fraud or willful
misconduct. In the absence of these specific provisions contained in our partnership agreement, our general partner and our directors would be subject to the fiduciary duty standards set forth under Marshall Islands law fiduciary duty standards.
Rights and remedies of
As to remedies of unitholders, the Marshall Islands Act permits a limited partner to institute legal action on behalf of the partnership to recover damages from a third party where a general partner or a board of directors has refused to institute the action or where an
effort to cause a general partner or a board of directors to do so is not likely to succeed. These actions include actions against a general partner for breach of its fiduciary duties or of the partnership agreement.
unitholders.
The provisions of the Marshall Islands Act resemble the provisions of the limited partnership act of Delaware. For example, like Delaware, the Marshall Islands Act favors the principles of freedom of contract and enforceability of partnership agreements and allows the
partnership agreement to contain terms governing the rights of the unitholders. The rights of our unitholders, including voting and approval rights and the ability of the partnership to issue additional units, are governed by the terms of our partnership agreement. See
The Partnership Agreement.
In becoming one of our limited partners, a common unitholder effectively agrees to be bound by the provisions in the partnership agreement, including the provisions discussed above. The failure of a limited partner or transferee to sign a partnership agreement does not render the partnership agreement unenforceable against that person.
Under the partnership agreement, we must indemnify our general partner and our directors and officers to the fullest extent permitted by law against liabilities, costs and expenses incurred by our general partner or these other persons. We must provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons engaged in actual fraud or willful misconduct. We also must provide this indemnification for criminal proceedings when our general partner or these other persons acted with no reasonable cause to believe that their conduct was unlawful. Thus, our general partner and our directors and officers could be indemnified for their negligent acts if they met the requirements set forth above. To the extent that these provisions purport to include indemnification for liabilities arising under the Securities Act of 1933, as amended (or the Securities Act), in the opinion of the SEC, such indemnification is contrary to public policy and therefore unenforceable. See The Partnership AgreementIndemnification.
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DESCRIPTION OF THE COMMON UNITS
The Units
The common units and the subordinated units represent limited partner interests in us. The holders of units are entitled to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement. No certificates will be issued to the
unitholders in respect of the common units or subordinated units. For a description of the relative rights and privileges of holders of common units and subordinated units in and to partnership distributions, see this section and Our Cash Distribution Policy and Restrictions on Distributions. For a
description of the rights and privileges of limited partners under our partnership agreement, including voting rights, see The Partnership Agreement.
Transfer Agent and Registrar
Duties
American Stock Transfer & Trust, LLC serves as registrar and transfer agent for the common units. We pay all fees charged by the transfer agent for transfers of common units, except the following, which must be paid by unitholders:
surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges;
special charges for services requested by a holder of a common unit; and
other similar fees or charges.
There is no charge to unitholders for disbursements of our cash distributions. We will indemnify the transfer agent, its agents and each of their stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity,
except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Resignation or Removal
The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become effective upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If a successor has not been appointed or has not
accepted its appointment within 30 days after notice of the resignation or removal, our general partner may, at the direction of our board of directors, act as the transfer agent and registrar until a successor is appointed.
Transfer of Common Units
By transfer of common units in accordance with our partnership agreement, each transferee of common units will be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Each transferee:
represents that the transferee has the capacity, power and authority to become bound by our partnership agreement;
automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and
gives the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements we entered into in connection with our formation and the IPO.
A transferee will become a substituted limited partner of our partnership for the transferred common units automatically upon the recording of the transfer on our books and records. Our general partner will cause any transfers to be recorded on our books and records no less frequently than
quarterly.
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We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holders rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing transfer of securities. In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a limited partner in our partnership for the transferred common units.
Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.
See Our Cash Distribution Policy and Restrictions on Distributions for descriptions of the general partner interest and the incentive distribution rights.
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The following is a summary of the material provisions of our partnership agreement. We will provide prospective investors with a copy of our partnership agreement upon request at no charge.
We summarize the following provisions of our partnership agreement elsewhere in this prospectus:
with regard to distributions of available cash, see Our Cash Distribution Policy and Restrictions on Distributions;
with regard to the fiduciary duties of our general partner and our directors, see Conflicts of Interest and Fiduciary Duties; and
with regard to the transfer of common units, see Description of the Common UnitsTransfer of Common Units.
Organization and Duration
We were organized on January 23, 2014 and have perpetual existence.
Purpose
Our purpose under the partnership agreement is to engage in any business activities that may lawfully be engaged in by a limited partnership organized pursuant to the Marshall Islands Act.
Although our board of directors has the ability to cause us or our subsidiaries to engage in activities other than the provision of marine transportation services, it has no current plans to do so and may decline to do so free of any fiduciary duty or obligation whatsoever to us or the limited partners,
including any duty to act in good faith or in the best interests of us or the limited partners. Our general partner has delegated to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis.
Cash Distributions
Our partnership agreement specifies the manner in which we will make cash distributions to holders of our common units and other partnership interests, including to the holders of our incentive distribution rights, as well as to our general partner in respect of its general partner interest. For a
description of these cash distribution provisions, see Our Cash Distribution Policy and Restrictions on Distributions.
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under Limited Liability. For a discussion of our general partners right to contribute capital to maintain its 2.0% general partner interest if we issue additional units, see Issuance of Additional
Interests.
Voting Rights
The following is a summary of the unitholder vote required for the approval of the matters specified below. Matters that require the approval of a unit majority require:
during the subordination period, the approval of a majority of the outstanding common units, excluding those common units held by our general partner and its affiliates, voting as a single class and a majority of the subordinated units voting as a single class; and
after the subordination period, the approval of a majority of the outstanding common units voting as a single class.
In voting their common units and subordinated units our general partner and its affiliates will have no fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners.
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Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, to preserve our ability to claim an exemption from U.S. federal income tax under Section 883 of the Code, if at any time any person or group owns beneficially more than 4.9% of
any class of units then outstanding, any units beneficially owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a
person for election to our board of directors), determining the presence of a quorum or for other similar purposes under our partnership agreement, unless otherwise required by law. Effectively, this means that the voting rights of any such unitholders in excess of 4.9% will be redistributed pro rata
among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with
respect to voting their common units in the election of the elected directors.
We will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Our general partner has appointed each of our five initial directors, three of whom meet the
independence standards of the New York Stock Exchange and also qualify as independent of GasLog under our partnership agreement, so as to be eligible for membership on our conflicts committee. Our general partner has the right to appoint three of our directors. At our 2015 annual meeting, which
will be the first annual meeting we will hold after the IPO, the common unitholders will elect two of our directors. The two directors elected by our common unitholders at our 2015 annual meeting will be divided into classes to be elected by our common unitholders annually on a staggered basis. We
expect that following our first annual meeting in 2015, each of the elected directors and one of the appointed directors will meet the independence standards established by the New York Stock Exchange, and that, at a minimum, each of the elected directors will also qualify as independent of GasLog
under our partnership agreement so as to be eligible for membership on our conflicts committee. If our general partner exercises its right to transfer the power to elect a majority of our directors to the common unitholders, an additional director will thereafter be elected by our common unitholders. That
director would be added to the class that does not at such time have a director. Subordinated units will not be voted in the election of the two directors.
Action
Unitholder Approval Required and Voting Rights
Issuance of additional units
No approval rights; general partner approval required for all issuances not reasonably expected to be accretive within twelve months of issuance or which would otherwise have a material adverse impact on the general partner or its interest in our partnership.
Amendment of the partnership
agreement
Merger of our partnership or
the sale of all or substantially
all of our assets
Dissolution of our partnership
Unit majority and approval of our general partner and our board of directors. See Termination and Dissolution.
Reconstitution of our
partnership upon dissolution
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Certain amendments may be made by our board of directors without the approval of the unitholders. Other amendments generally require the approval of a unit majority. See Amendment of the Partnership Agreement.
Unit majority and approval of our general partner and our board of directors. See Merger, Sale, Conversion or Other Disposition of Assets.
Unit majority. See Termination and Dissolution.
Action
Unitholder Approval Required and Voting Rights
Withdrawal of our general partner
Under most circumstances, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is
required for the withdrawal of our general partner prior to March 31, 2024 in a manner that would cause a dissolution of our partnership. See
Withdrawal or Removal of our General Partner.
Removal of our general partner
Not less than 66
2
/
3
% of the outstanding units, including units held by our general partner and its affiliates, voting together as a single class. See
Withdrawal or Removal of our General Partner.
Transfer of our general partner interest in us
Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or
another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval
of a majority of the common units, excluding common units held by our general partner and its affiliates, is required in other circumstances for a
transfer of the general partner interest to a third party prior to March 31, 2024. See Transfer of General Partner Interest.
Transfer of incentive distribution rights
Except for transfers to an affiliate or another person as part of a merger or consolidation with or into, or sale of all or substantially all of the assets to,
such person, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, voting separately
as a class, is required in most circumstances for a transfer of the incentive distribution rights to a third party prior to March 31, 2019. See Transfer of
Incentive Distribution Rights.
Transfer of ownership interests in our general partner
No approval required at any time. See Transfer of Ownership Interests in General Partner.
Applicable Law; Forum, Venue and Jurisdiction
Our partnership agreement is governed by Marshall Islands law. Our partnership agreement requires that any claims, suits, actions or proceedings:
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arising out of or relating in any way to the partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us); |
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asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners;
asserting a claim arising pursuant to any provision of the Marshall Islands Act; and
asserting a claim governed by the internal affairs doctrine;
shall be exclusively brought in the Court of Chancery of the State of Delaware, unless otherwise provided for by Marshall Islands law, regardless of whether such claims, suits, actions or proceedings arise under laws relating to contract, tort, fraud or otherwise, are based on common law, statutory,
equitable, legal or other grounds, or are derivative or direct claims. By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State
of Delaware, unless otherwise provided for by Marshall Islands law, in connection with any such claims, suits, actions or proceedings; however, a court could rule that such provisions are inapplicable or unenforceable. Any person or entity purchasing or otherwise acquiring any interest in our common
units shall be deemed to have notice of and to have consented to the provisions described above. This forum selection provision may limit our unitholders ability to obtain a judicial forum that they find favorable for disputes with us or our directors, officers or other employees or unitholders.
Limited Liability
Assuming that a limited partner does not participate in the control of our business within the meaning of the Marshall Islands Act and that he otherwise acts in conformity with the provisions of our partnership agreement, his liability under the Marshall Islands Act will be limited, subject to possible
exceptions, to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right, by the limited partners as a group:
to remove or replace our general partner;
to elect two (or, following the general partners exercise of its right to transfer the power to elect a majority of our directors to the common unitholders, three) of our five directors;
to approve some amendments to our partnership agreement; or
to take other action under our partnership agreement;
constituted participation in the control of our business for the purposes of the Marshall Islands Act, then the limited partners could be held personally liable for our obligations under the laws of the Marshall Islands, to the same extent as our general partner. This liability would extend to persons who
transact business with us who reasonably believe that the limited partner is a general partner. Neither our partnership agreement nor the Marshall Islands Act specifically provides for legal recourse against our general partner if a limited partner were to lose limited liability through any fault of our
general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Marshall Islands case law.
Under the Marshall Islands Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Marshall Islands Act provides that the fair value of property subject to liability for which recourse of creditors is
limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the non-recourse liability. The Marshall Islands Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in
violation of the Marshall Islands Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Marshall Islands Act, a purchaser of units who becomes a limited partner of a limited partnership is liable for the
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obligations of the transferor to make contributions to the partnership, except that the transferee is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the partnership agreement.
Maintenance of our limited liability may require compliance with legal requirements in the jurisdictions in which our subsidiaries conduct business, which may include qualifying to do business in those jurisdictions. Limitations on the liability of limited partners for the obligations of a limited
partnership or limited liability company have not been clearly established in many jurisdictions. If, by virtue of our membership interest in an operating subsidiary or otherwise, it was determined that we were conducting business in any jurisdiction without compliance with the applicable limited
partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to remove or replace the general partner, to approve some amendments to the partnership agreement or to take other action under the partnership agreement constituted
participation in the control of our business for purposes of the statutes of any relevant jurisdiction, then the limited partners could be held personally liable for our obligations under the law of that jurisdiction to the same extent as our general partner under the circumstances. We will operate in a
manner that our board of directors considers reasonable and necessary or appropriate to preserve the limited liability of the limited partners.
Issuance of Additional Interests
The partnership agreement authorizes us to issue an unlimited amount of additional partnership interests and rights to buy partnership interests for the consideration and on the terms and conditions determined by our board of directors without the approval of the unitholders. However, our general
partner is required to approve all issuances of additional partnership interests that are not reasonably expected to be accretive within twelve months of issuance or which would otherwise have a material adverse impact on the general partner or its interest in us.
We intend to fund acquisitions through borrowings and the issuance of additional common units or other equity securities and the issuance of debt securities. Holders of any additional common units we issue will be entitled to share equally with the then-existing holders of common units in our
distributions of available cash. In addition, the issuance of additional common units or other equity securities may dilute the value of the interests of the then-existing holders of common units in our net assets.
In accordance with Marshall Islands law and the provisions of our partnership agreement, we may also issue additional partnership interests that, as determined by our board of directors, have special voting rights to which the common units are not entitled.
Upon issuance of additional partnership interests (other than the issuance of common units upon exercise of the underwriters option to purchase additional common units, the issuance of common units in connection with a reset of the incentive distribution target levels or the issuance of partnership
interests upon conversion of outstanding partnership interests), our general partner will have the right, but not the obligation, to make additional capital contributions to the extent necessary to maintain its 2.0% general partner interest in us. Our general partners interest in us will thus be reduced if we
issue additional partnership interests in the future and our general partner does not elect to maintain its 2.0% general partner interest in us. Our general partner and its affiliates will have the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common
units, subordinated units or other equity securities whenever, and on the same terms that, we issue those securities to persons other than our general partner and its affiliates, to the extent necessary to maintain its and its affiliates percentage interest, including its interest represented by common units and
subordinated units, that existed immediately prior to each issuance. Other holders of common units will not have similar pre-emptive rights to acquire additional common units or other partnership interests.
Tax Status
The Partnership has elected to be treated as a corporation for U.S. federal income tax purposes.
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Amendment of the Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by or with the consent of our board of directors. However, our board of directors will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to us or the
limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. In order to adopt a proposed amendment, other than the amendments discussed below, approval of our board of directors is required, as well as written approval of the holders of the number of
units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment. Except as we describe below, an amendment must be approved by a unit majority.
Prohibited Amendments
No amendment may be made that would:
(1)
increase the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or
(2)
increase the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of the general partner, which may be given or withheld at its option.
The provision of our partnership agreement preventing the amendments having the effects described in clauses (1) through (2) above can be amended upon the approval of the holders of at least 90% of the outstanding units voting together as a single class (including units owned by our general
partner and its affiliates). Upon completion of this offering, the owner of our general partner will own
% of our outstanding common and subordinated units, assuming no exercise of the underwriters option to purchase additional common units.
Additionally, except for as discussed in No Unitholder Approval and Merger, Sale, Conversion or Other Disposition of Assets below, any amendment that would have a material adverse effect on the rights or preferences of any class of partnership interests in relation to other classes must be
approved by the holders of a majority of the outstanding partnership interests of the class affected.
No Unitholder Approval
Our board of directors may generally make amendments to our partnership agreement without the approval of any limited partner to reflect:
(1)
a change in our name, the location of our principal place of business, our registered agent or our registered office;
(2)
the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;
(3)
a change that our board of directors determines to be necessary or appropriate for us to qualify or to continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the Marshall Islands Act;
(4)
an amendment that is necessary, upon the advice of our counsel, to prevent us or our officers or directors or our general partner or their or its agents or trustees from in any manner being subjected to the provisions of the U.S. Investment Company Act of 1940, the U.S. Investment Advisors Act
of 1940, or plan asset regulations adopted under the U.S. Employee Retirement Income Security Act of 1974 whether or not substantially similar to plan asset regulations currently applied or proposed;
(5)
an amendment that our board of directors determines to be necessary or appropriate for the authorization of additional partnership interests or rights to acquire partnership interests,
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including any amendment that our board of directors determines is necessary or appropriate in connection with:
the adjustments of the minimum quarterly distribution, first target distribution, second target distribution and third target distribution in connection with the reset of our incentive distribution rights as described under Cash Distribution Policy and Restrictions on DistributionsGasLogs Right to
Reset Incentive Distribution Levels;
the implementation of the provisions relating to GasLogs right to reset the incentive distribution rights in exchange for common units;
any modification of the incentive distribution rights made in connection with the issuance of additional partnership interests or rights to acquire partnership interests, provided that, any such modifications and related issuance of partnership interests have received approval by a majority of the
members of the conflicts committee of our board of directors; or
any amendment expressly permitted in the partnership agreement to be made by our board of directors acting alone;
(6)
an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of the partnership agreement;
(7)
any amendment that our board of directors determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by the partnership agreement;
(8)
a change in our fiscal year or taxable year and related changes;
(9)
certain mergers or conveyances as set forth in our partnership agreement;
(10)
an amendment to cure any ambiguity, defect or inconsistency; or
(11)
any other amendments substantially similar to any of the matters described in (1) through (10) above.
In addition, our board of directors may make amendments to the partnership agreement without the approval of any limited partner or our general partner if our board of directors determines that those amendments:
(1)
do not adversely affect the rights of our limited partners (or any particular class of limited partners) or our general partner in any material respect;
(2)
are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any Marshall Islands authority or statute;
(3)
are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;
(4)
are necessary or appropriate for any action taken by our board of directors relating to splits or combinations of units under the provisions of the partnership agreement; or
(5)
are required to effect the intent expressed in this prospectus or the intent of the provisions of the partnership agreement or are otherwise contemplated by the partnership agreement.
Opinion of Counsel and Unitholder Approval
Our board of directors will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners if one of the amendments described above under Amendment of the Partnership AgreementNo Unitholder Approval should occur. No
other amendments to our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units voting as a single class unless we obtain an opinion of counsel to the effect that the amendment will not affect the limited liability under applicable law of any of
our limited partners.
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In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or privileges of any type or class of outstanding units in relation to other classes of units will require the approval of at least a majority of the type or class of units so affected. Any
amendment that reduces the voting percentage required to take any action must be approved by the affirmative vote of limited partners whose aggregate outstanding units constitute not less than the voting requirement sought to be reduced.
Merger, Sale, Conversion or Other Disposition of Assets
A merger or consolidation of us requires the approval of our board of directors and the prior consent of our general partner. However, to the fullest extent permitted by law, our board of directors and our general partner will have no duty or obligation to consent to any merger or consolidation and
may decline to do so free of any fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. In addition, our partnership agreement generally prohibits our board of directors, without the prior approval
of our general partner and the holders of units representing a unit majority, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of our assets in a single transaction or a series of related transactions, including by way of merger, consolidation or other
combination, or approving on our behalf the sale, exchange or other disposition of all or substantially all of the assets of our subsidiaries taken as a whole. Our board of directors may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets without the
prior approval of the holders of units representing a unit majority. Our general partner and our board of directors may also determine to sell all or substantially all of our assets under a foreclosure or other realization upon those encumbrances without the approval of the holders of units representing a
unit majority.
If conditions specified in our partnership agreement are satisfied, our board of directors, with the consent of our general partner, may convert us or any of our subsidiaries into a new limited liability entity or merge us or any of our subsidiaries into, or convey some or all of our assets to, a newly
formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity. The unitholders are not entitled to dissenters rights of appraisal under our partnership agreement or applicable law in the event of a conversion, merger or
consolidation, sale of substantially all of our assets or any other transaction or event.
Termination and Dissolution
We will continue as a limited partnership until terminated or converted under our partnership agreement. We will dissolve upon:
(1)
the election of our general partner and our board of directors to dissolve us, if approved by the holders of units representing a unit majority;
(2)
at any time there are no limited partners, unless we continue without dissolution in accordance with the Marshall Islands Act;
(3)
the entry of a decree of judicial dissolution of us; or
(4)
the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with the partnership agreement or withdrawal or removal following approval and admission of a
successor.
Upon a dissolution under clause (4), the holders of a unit majority may also elect, within specific time limitations, to continue our business on the same terms and conditions described in the partnership agreement by appointing as general partner an entity approved by the holders of units
representing a unit majority, subject to our receipt of an opinion of counsel to the effect that the action would not result in the loss of limited liability of any limited partner.
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Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all of the powers of our board of directors that are necessary or appropriate, liquidate our assets and apply the proceeds of the liquidation as provided in
Cash Distribution Policy and Restrictions on DistributionsDistributions of Cash Upon Liquidation. The liquidator may defer liquidation or distribution of our assets for a reasonable period or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss
to our partners.
Withdrawal or Removal of our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner prior to March 31, 2024 without obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its
affiliates, and furnishing an opinion of counsel regarding limited liability. On or after March 31, 2024, our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days written notice, and that withdrawal will not constitute a violation of the
partnership agreement. Notwithstanding the above, our general partner may withdraw without unitholder approval upon 90 days written notice to the limited partners if at least 50% of the outstanding common units are held or controlled by one person and its affiliates other than our general partner and
its affiliates. In addition, the partnership agreement permits our general partner in some instances to sell or otherwise transfer all of its general partner interest in us without the approval of the unitholders. See Transfer of General Partner Interest and Transfer of Incentive Distribution Rights.
Upon withdrawal of our general partner under any circumstances, other than as a result of a transfer by our general partner of all or a part of its general partner interest in us, the holders of a majority of the outstanding common units and subordinated units, voting as separate classes, may select a
successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability cannot be obtained, we will be dissolved, wound up and liquidated, unless within a specified period of time after that withdrawal, the holders of a unit majority
agree in writing to continue our business and to appoint a successor general partner. See Termination and Dissolution.
Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66
2
/
3
% of the outstanding common and subordinated units, including units held by our general partner and its affiliates, voting together as a single class, and we receive an opinion of
counsel regarding limited liability. The ownership of more than 33
1
/
3
% of the outstanding units by our general partner and its affiliates or the control of our board of directors by our general partner and its affiliates would provide the practical ability to prevent our general partners removal. Upon
completion of this offering, our general partner and GasLog will own
% of the outstanding common and subordinated units, assuming no exercise of the underwriters option to purchase additional common units. Any removal of our general partner is also subject to the successor general partner
being approved by the vote of the holders of a majority of the outstanding common units and subordinated units, voting as a single class.
Our partnership agreement also provides that if our general partner is removed as our general partner under circumstances where cause does not exist and units held by our general partner and its affiliates are not voted in favor of that removal:
the subordination period will end and all outstanding subordinated units will immediately convert into common units on a one-for-one basis;
any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and
our general partner will have the right to convert its general partner interest and the holder of the incentive distribution rights will have the right to convert such incentive distribution
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In the event of removal of our general partner under circumstances where cause exists or withdrawal of our general partner where that withdrawal violates the partnership agreement, a successor general partner will have the option to purchase the general partner interest owned by the departing
general partner for a cash payment equal to the fair market value of that interest. Under all other circumstances where our general partner withdraws or is removed by the limited partners, the departing general partner will have the option to require the successor general partner to purchase the general
partner interest of the departing general partner for its fair market value. In each case, this fair market value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached, an independent investment banking firm or other
independent expert selected by the departing general partner and the successor general partner will determine the fair market value. Or, if the departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by each of
them will determine the fair market value.
If the option described above is not exercised by either the departing general partner or the successor general partner, the departing general partners general partner interest and the incentive distribution rights of any holder thereof will automatically convert into common units equal to the fair
market value of those interests as determined by an independent investment banking firm or other independent expert selected in the manner described in the preceding paragraph.
In addition, we will be required to reimburse the departing general partner for all amounts due the departing general partner, including, without limitation, any employee-related liabilities, including severance liabilities, incurred for the termination of any employees employed by the departing general
partner or its affiliates for our benefit.
Transfer of General Partner Interest
Except for the transfer by our general partner of all, but not less than all, of its general partner interest in us to:
an affiliate of our general partner (other than an individual); or
another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity,
our general partner may not transfer all or any part of its general partner interest in us to another person prior to March 31, 2024, without the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates. As a
condition of this transfer, the transferee must, among other things, assume the rights and duties of the general partner, agree to be bound by the provisions of the partnership agreement and furnish an opinion of counsel regarding limited liability.
Our general partner and its affiliates may at any time transfer units to one or more persons, without unitholder approval.
Transfer of Ownership Interests in General Partner
At any time, the members of our general partner may sell or transfer all or part of their respective membership interests in our general partner to an affiliate or a third party without the approval of our unitholders.
Transfer of Incentive Distribution Rights
GasLog or its affiliates, or a subsequent holder, may transfer its incentive distribution rights to an affiliate of the holder (other than an individual) or another entity as part of the merger or consolidation of such holder with or into another entity, or sale of all or substantially all of its assets to that
entity, without the prior approval of the unitholders. Prior to March 31, 2019, other transfers
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rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at the time.
of the incentive distribution rights will require the affirmative vote of holders of a majority of the outstanding common units, excluding common units held by GasLog and its affiliates. On or after March 31, 2019, the incentive distribution rights will be freely transferable.
Change of Management Provisions
The partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove GasLog Partners GP LLC as our general partner or otherwise change management. If any person or group acquires beneficial ownership of more than 4.9% of any
class of units then outstanding, that person or group loses voting rights on all of its units in excess of 4.9% of all such units. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with
respect to voting their common units in the election of the elected directors.
The partnership agreement also provides that if our general partner is removed under circumstances where cause does not exist and units held by our general partner and its affiliates are not voted in favor of that removal:
the subordination period will end and all outstanding subordinated units will immediately convert into common units on a one-for-one basis;
any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and
our general partner will have the right to convert its general partner interest into common units or to receive cash in exchange for that interest.
Limited Call Right
If at any time our general partner and its affiliates hold more than 80% of the then-issued and outstanding partnership interests of any class, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or to us, to acquire all, but not less than all, of the
remaining partnership interests of the class held by unaffiliated persons as of a record date to be selected by the general partner, on at least ten but not more than 60 days written notice at a price equal to the greater of (x) the average of the daily closing prices of the partnership interests of such class
over the 20 trading days preceding the date three days before the notice of exercise of the call right is first mailed and (y) the highest price paid by our general partner or any of its affiliates for partnership interests of such class during the 90-day period preceding the date such notice is first mailed. Our
general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon the exercise of this limited call right and has no fiduciary duty in determining whether to exercise this limited call right.
As a result of the general partners right to purchase outstanding partnership interests, a holder of partnership interests may have the holders partnership interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this call right are the same as a sale
by that unitholder of common units in the market. See Material U.S. Federal Income Tax ConsiderationsU.S. Federal Income Taxation of U.S. HoldersSale, Exchange or Other Disposition of Common Units and Material U.S. Federal Income Tax ConsiderationsU.S. Federal Income Taxation of Non-
U.S. HoldersDisposition of Units.
Upon completion of this offering and assuming no exercise of the underwriters option to purchase additional common units, GasLog, the sole member of our general partner, will own
% of our common units. At the end of the subordination period, assuming no additional issuances of
common units, no exercise of the underwriters option to purchase additional common units and conversion of all of our subordinated units into common units, GasLog will own
% of our common units.
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Board of Directors
Under our partnership agreement, our general partner has delegated to our board of directors the authority to oversee and direct our operations, policies and management on an exclusive basis, and such delegation will be binding on any successor general partner of the partnership. Our board of
directors is comprised of five persons appointed by our general partner in its sole discretion. Following our first annual meeting of unitholders, our board of directors will consist of five members, three of whom will be appointed by our general partner, by virtue of its general partner interest, in its sole
discretion (subject to its right to transfer the power to elect a majority of our directors to the common unitholders) and two of whom will be elected by our common unitholders.
Our board of directors nominates individuals to stand for election as elected board members on a staggered basis at an annual meeting of our limited partners. In addition, any limited partner or group of limited partners that holds beneficially 10% or more of the outstanding common units is entitled
to nominate one or more individuals to stand for election as elected board members at the annual meeting by providing written notice to our board of directors not more than 120 days nor less than 90 days prior to the meeting. However, if the date of the annual meeting is not publicly announced by us
at least 100 days prior to the date of the meeting, the notice must be delivered to our board of directors not later than ten days following the public announcement of the meeting date. The notice must set forth:
the name and address of the limited partner or limited partners making the nomination or nominations;
the number of common units beneficially owned by the limited partner or limited partners;
the information regarding the nominee(s) proposed by the limited partner or limited partners as would be required to be included in a proxy statement relating to the solicitation of proxies for the election of directors filed pursuant to the proxy rules of the SEC;
the written consent of the nominee(s) to serve as a member of our board of directors if so elected; and
a certification that the nominee(s) qualify as elected board members.
At our 2015 annual meeting, which will be the first annual meeting we will hold after the IPO, the common unitholders will elect two of our directors. The two directors elected by our common unitholders at our 2015 annual meeting will be divided into classes to be elected by our common
unitholders annually on a staggered basis. If our general partner exercises its right to transfer the power to elect a majority of our directors to the common unitholders, an additional director will thereafter be elected by our common unitholders. That director would be added to the class that does not at
such time have a director. Our general partner may exercise this right in order to permit us to claim, or continue to claim, an exemption from U.S. federal income tax under Section 883 of the Code. See BusinessTaxation of the Partnership. The majority of our directors are non-United States citizens or
residents.
Our general partner may remove an appointed board member with or without cause at any time. Cause generally means a courts finding a person liable for actual fraud or willful misconduct in his or its capacity as a director. Any and all of the board members may be removed at any time for
cause by the affirmative vote of a majority of the other board members. Any and all of the board members appointed by our general partner may be removed for cause at a properly called meeting of the limited partners by a majority vote of the outstanding units, voting as a single class. If any
appointed board member is removed, resigns or is otherwise unable to serve as a board member, our general partner may fill the vacancy. Any and all of the board members elected by the common unitholders may be removed for cause at a properly called meeting of the limited partners by a majority
vote of the outstanding common units. If any elected board member is removed, resigns or is otherwise unable to serve as a board member, the vacancy may be filled by a majority of the other elected board members then serving.
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Meetings; Voting
Except as described below regarding a person or group owning more than 4.9% of any class of units then outstanding, unitholders who are record holders of units on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which
approvals may be solicited.
Starting in 2015, we will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Any action that is required or permitted to be taken by the unitholders may be taken
either at a meeting of the unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the number of units necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by our board of directors or by unitholders
owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of 33
1
/
3
% of the outstanding units of the class or classes for which a meeting has been called, represented in person or by proxy, will
constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater percentage.
Each record holder of a unit may vote according to the holders percentage interest in us, although additional limited partner interests having special voting rights could be issued. See Issuance of Additional Interests. However, if at any time, any person or group owns beneficially more than 4.9%
of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of nominating a person
for election to our board of directors), determining the presence of a quorum or for other similar purposes under our partnership agreement, unless otherwise required by law. Effectively, this means that the voting rights of any such unitholders in excess of 4.9% will be redistributed pro rata among the
other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting
their common units in the election of the elected directors. This limitation will help our ability to claim an exemption from U.S. federal income tax under Section 883 of the Code in the event our general partner, by virtue of its general partner interest, transfers the power to elect a majority of our
directors to the common unitholders. Units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise. Except as the partnership
agreement otherwise provides, subordinated units will vote together with common units as a single class.
Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under the partnership agreement will be delivered to the record holder by us or by the transfer agent.
Status as Limited Partner or Assignee
Except as described above under Limited Liability, the common units will be fully paid, and unitholders will not be required to make additional contributions. By transfer of common units in accordance with our partnership agreement, each transferee of common units will be admitted as a limited
partner with respect to the common units transferred when such transfer and admission is reflected in our books and records.
Indemnification
Under the partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar events:
(1)
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our general partner;
(2)
any departing general partner;
(3)
any person who is or was an affiliate of our general partner or any departing general partner;
(4)
any person who is or was an officer, director, member, fiduciary or trustee of any entity described in (1), (2) or (3) above;
(5)
any person who is or was serving as a director, officer, member, fiduciary or trustee of another person at the request of our board of directors, our general partner or any departing general partner;
(6)
our officers;
(7)
any person designated by our board of directors; and
(8)
the members of our board of directors.
Any indemnification under these provisions will only be out of our assets. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under the partnership
agreement.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse the members of our board of directors for their out-of-pocket costs and expenses incurred in the course of their service to us. Our partnership agreement also requires us to reimburse our general partner for all expenses it incurs or payments it
makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our business. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf, and expenses
allocated to us or our general partner by our board of directors.
Books and Reports
Our general partner is required to keep appropriate books and records of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis. For tax and financial reporting purposes, our fiscal year is the calendar year.
We will furnish or make available to record holders of common units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by our independent registered public accounting firm. Except for our fourth
quarter, we will also furnish or make available summary financial information within 90 days after the close of each quarter.
Right to Inspect Our Books and Records
The partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon reasonable written demand stating the purpose of such demand and at the limited partners own expense, have furnished to the limited partner:
(1)
a current list of the name and last known address of each partner;
(2)
information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner;
(3)
copies of the partnership agreement, the certificate of limited partnership of the partnership and related amendments;
(4)
information regarding the status of our business and financial position; and
(5)
any other information regarding our affairs as is just and reasonable.
Our board of directors may, and intends to, keep confidential from the limited partners trade secrets or other information the disclosure of which our board of directors believes in good faith is
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not in our best interests or that we are required by law or by agreements with third parties to keep confidential.
Registration Rights
Under the partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any common units, subordinated units or other partnership interests proposed to be sold by our general partner or any of its affiliates or their assignees if an exemption
from the registration requirements is not otherwise available or advisable. These registration rights continue for two years following any withdrawal or removal of GasLog Partners GP LLC as our general partner. We are obligated to pay all expenses incidental to the registration, excluding underwriting
discounts and commissions. In connection with these registration rights, we will not be required to pay any damages or penalties related to any delay or failure to file a registration statement or to cause a registration statement to become effective. See Units Eligible for Future Sale.
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UNITS ELIGIBLE FOR FUTURE SALE
After the sale of the common units offered by this prospectus, our general partner and GasLog will hold an aggregate of 162,358 common units and 9,822,358 subordinated units. All of the subordinated units will convert into common units at the end of the subordination period. The sale of these
common and subordinated units could have an adverse impact on the price of the common units or on any trading market that may develop.
The common units sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act. However, any common units held by an affiliate of ours may not be resold publicly except in compliance with the registration requirements of the Securities
Act or under an exemption from the registration requirements of the Securities Act pursuant to Rule 144 or otherwise. Rule 144 permits securities acquired by an affiliate of ours to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:
1% of the total number of the class of securities outstanding; or
the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale.
Sales under Rule 144 are also subject to specific manner of sale provisions, holding period requirements, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale,
and who has beneficially owned common units for at least six months (provided we are in compliance with the current public information requirement) or one year (regardless of whether we are in compliance with the current public information requirement), would be entitled to sell those common units
under Rule 144 without regard to the public information requirements, volume limitations, manner of sale provisions and notice requirements of Rule 144.
Our partnership agreement provides that we may issue an unlimited number of limited partner interests of any type without a vote of the unitholders. Any issuance of additional common units or other equity securities would result in a corresponding decrease in the proportionate ownership interest
in us represented by, and could adversely affect the cash distributions to and market price of, common units then outstanding. See The Partnership AgreementIssuance of Additional Interests.
Under our partnership agreement, our general partner and its affiliates have the right to cause us to register under the Securities Act and applicable state securities laws the offer and sale of any common units that they hold. Subject to the terms and conditions of the partnership agreement, these
registration rights allow our general partner and its affiliates or their assignees holding any common units to require registration of any of these common units and to include any of these common units in a registration by us of other common units, including common units offered by us or by any
unitholder. Our general partner and its affiliates will continue to have these registration rights for two years following its withdrawal or removal as our general partner. In connection with any registration of this kind, we will indemnify each unitholder participating in the registration and its officers,
directors and controlling persons from and against any liabilities under the Securities Act or any applicable state securities laws arising from the registration statement or prospectus. We will bear all costs and expenses incidental to any registration, excluding any underwriting discounts and commissions.
Except as described below, our general partner and its affiliates may sell their common units in private transactions at any time, subject to compliance with applicable laws.
We, our directors and executive officers, our subsidiaries and our general partner and its affiliates, including GasLog, have agreed not to sell any common units for a period of 90 days from the date of this prospectus, subject to certain exceptions and extensions. See Underwriting (Conflicts of
Interest) for a description of these lock-up provisions.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax considerations that may be relevant to prospective unitholders and, unless otherwise noted in the following discussion, is the opinion of Cravath, Swaine & Moore LLP, our U.S. counsel, insofar as it contains legal conclusions with
respect to matters of U.S. federal income tax law. The opinion of our counsel is dependent on the accuracy of factual representations made by us to them, including descriptions of our operations contained herein.
This discussion is based upon provisions of the Code, Treasury Regulations and current administrative rulings and court decisions, all as in effect or existence on the date of this prospectus and all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause
the tax consequences of unit ownership to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to we, our or us are references to GasLog Partners LP.
The following discussion applies only to beneficial owners of common units that own the common units as capital assets within the meaning of Section 1221 of the Code (
i.e.
, generally, for investment purposes) and is not intended to be applicable to all categories of investors, such as unitholders
subject to special tax rules (
e.g.
, financial institutions, insurance companies, broker-dealers, tax-exempt organizations, retirement plans or individual retirement accounts or former citizens or long-term residents of the United States), persons who will hold the units as part of a straddle, hedge, conversion,
constructive sale or other integrated transaction for U.S. federal income tax purposes, or persons that have a functional currency other than the U.S. dollar, each of whom may be subject to tax rules that differ significantly from those summarized below. If a partnership or other entity classified as a
partnership for U.S. federal income tax purposes holds our common units, the tax treatment of its partners generally will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our common units, you are encouraged to consult your own
tax advisor regarding the tax consequences to you of the partnerships ownership of our common units.
No ruling has been or will be requested from the IRS regarding any matter affecting us or prospective unitholders. The opinions and statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court. This discussion does not contain information
regarding any U.S. state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of common units. This discussion does not comment on all aspects of U.S. federal income taxation that may be important to particular unitholders in light of their individual
circumstances, and each prospective unitholder is encouraged to consult its own tax advisor regarding the U.S. federal, state, local and other tax consequences of the ownership or disposition of common units.
Election to be Treated as a Corporation
We have elected to be treated as a corporation for U.S. federal income tax purposes. As a result, U.S. Holders (as defined below) will not be directly subject to U.S. federal income tax on our income, but rather will be subject to U.S. federal income tax on distributions received from us and
dispositions of units as described below.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term U.S. Holder means a beneficial owner of our common units that owns (actually or constructively) less than 10.0% of our equity and that is:
an individual U.S. citizen or resident (as determined for U.S. federal income tax purposes),
a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia,
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an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect to be treated as a U.S. person for
U.S. federal income tax purposes.
Distributions
Subject to the discussion below of the rules applicable to PFICs, any distributions to a U.S. Holder made by us with respect to our common units generally will constitute dividends to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax
principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holders tax basis in its common units and thereafter as capital gain. U.S. Holders that are corporations generally will not be entitled to claim a dividends received
deduction with respect to distributions they receive from us because we are not a U.S. corporation. Dividends received with respect to our common units generally will be treated as foreign source passive category income for purposes of computing allowable foreign tax credits for U.S. federal income
tax purposes.
Dividends received with respect to our common units by a U.S. Holder that is an individual, trust or estate, or a U.S. Individual Holder, generally will be treated as qualified dividend income, which is taxable to such U.S. Individual Holder at preferential tax rates provided that: (i) our common
units are readily tradable on an established securities market in the United States (such as the New York Stock Exchange on which we expect our common units to be traded); (ii) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which
we do not believe we are, have been or will be, as discussed below under PFIC Status and Significant Tax Consequences); (iii) the U.S. Individual Holder has owned the common units for more than 60 days during the 121-day period beginning 60 days before the date on which the common units
become ex-dividend (and has not entered into certain risk limiting transactions with respect to such common units); and (iv) the U.S. Individual Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. There is no assurance that any
dividends paid on our common units will be eligible for these preferential rates in the hands of a U.S. Individual Holder, and any dividends paid on our common units that are not eligible for these preferential rates will be taxed at ordinary income rates to a U.S. Individual Holder.
Special rules may apply to any amounts received in respect of our common units that are treated as extraordinary dividends. In general, an extraordinary dividend is a dividend with respect to a common unit that is equal to or in excess of 10.0% of a unitholders adjusted tax basis (or fair market
value upon the unitholders election) in such common unit. In addition, extraordinary dividends include dividends received within a one-year period that, in the aggregate, equal or exceed 20.0% of a unitholders adjusted tax basis (or fair market value). If we pay an extraordinary dividend on our
common units that is treated as qualified dividend income, then any loss recognized by a U.S. Individual Holder from the sale or exchange of such common units will be treated as long-term capital loss to the extent of the amount of such dividend.
Ratio of Dividend Income to Distributions
The amount of distributions we pay on our common units that is treated as dividend income will depend upon the amount of our current and accumulated earnings and profits. We will compute our earnings and profits for each taxable year in accordance with U.S. federal income tax principles. Based
upon various assumptions and estimates regarding our expected earnings and profits, we estimate that approximately 60% of the total cash distributions received by a purchaser of common units in this offering that holds such common units through December 31, 2017 will constitute dividend income. The
remaining portion of these distributions will be treated first as a nontaxable return of capital to the extent of the purchasers tax basis in its common units and thereafter as
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capital gain. These estimates are based upon the assumption that we will pay the minimum quarterly distribution of $0.375 per unit on our common units during the referenced period and on other assumptions with respect to our earnings, capital expenditures and cash flow for this period. These estimates
and assumptions are subject to, among other things, numerous business, economic, regulatory, competitive and political uncertainties that are beyond our control. Further, these estimates are based on current U.S. federal income tax law and tax reporting positions that we will adopt and with which the
IRS could disagree. Accordingly, we cannot assure you that these estimates will prove to be correct. The actual percentage of total cash distributions that will constitute dividend income could be higher or lower, and any differences could be material or could materially affect the value of the common
units.
Sale, Exchange or Other Disposition of Common Units
Subject to the discussion of PFIC status below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of our units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and
the U.S. Holders adjusted tax basis in such units. The U.S. Holders initial tax basis in its units generally will be the U.S. Holders purchase price for the units and that tax basis will be reduced (but not below zero) by the amount of any distributions on the units that are treated as non-taxable returns of
capital (as discussed above under Distributions and Ratio of Dividend Income to Distributions). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holders holding period is greater than one year at the time of the sale, exchange or other disposition. Certain U.S. Holders
(including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. A U.S. Holders ability to deduct capital losses is subject to limitations. Such capital gain or loss generally will be treated as U.S. source income or loss, as applicable, for U.S.
foreign tax credit purposes.
Medicare Tax on Net Investment Income
Certain U.S. Holders, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax on, among other things, dividends and capital gains from the sale or other disposition of equity interests. For individuals, the additional Medicare tax applies to the lesser of (i) net
investment income or (ii) the excess of modified adjusted gross income over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). Net investment income generally equals the taxpayers gross investment income reduced by deductions that are allocable to such
income. Unitholders are encouraged to consult their tax advisors regarding the implications of the additional Medicare tax resulting from their ownership and disposition of our common units.
PFIC Status and Significant Tax Consequences
Adverse U.S. federal income tax rules apply to a U.S. Holder that owns an equity interest in a non-U.S. corporation that is classified as a PFIC for U.S. federal income tax purposes. In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which the holder
held our units, either:
at least 75.0% of our gross income (including the gross income of our vessel-owning subsidiaries) for such taxable year consists of passive income (
e.g.
, dividends, interest, capital gains from the sale or exchange of investment property and rents derived other than in the active conduct of a rental
business); or
at least 50.0% of the average value of the assets held by us (including the assets of our vessel-owning subsidiaries) during such taxable year produce, or are held for the production of, passive income.
Income earned, or treated as earned (for U.S. federal income tax purposes), by us in connection with the performance of services would not constitute passive income. By contrast, rental income
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generally would constitute passive income unless we were treated as deriving that rental income in the active conduct of a trade or business under the applicable rules.
Based on our current and projected methods of operation, and an opinion of counsel, we do not believe that we are or will be a PFIC for our current or any future taxable year. We have received an opinion of our U.S. counsel, Cravath, Swaine & Moore LLP, in support of this position that concludes
that the income our subsidiaries earn from certain of our present time-chartering activities should not constitute passive income for purposes of determining whether we are a PFIC. In addition, we have represented to our U.S. counsel that we expect that more than 25.0% of our gross income for our
current taxable year and each future year will arise from such time-chartering activities, and more than 50.0% of the average value of our assets for each such year will be held for the production of such nonpassive income. Assuming the composition of our income and assets is consistent with these
expectations, and assuming the accuracy of other representations we have made to our U.S. counsel for purposes of their opinion, our U.S. counsel is of the opinion that we should not be a PFIC for our current taxable year or any future year.
Our counsel has indicated to us that the conclusions described above are not free from doubt. While there is legal authority supporting our conclusions, including IRS pronouncements concerning the characterization of income derived from time charters as services income, the United States Court of
Appeals for the Fifth Circuit (or the Fifth Circuit) held in
Tidewater Inc. v. United States
, 565 F.3d 299 (5th Cir. 2009) that income derived from certain marine time charter agreements should be treated as rental income rather than services income for purposes of a foreign sales corporation provision of
the Code. In that case, the Fifth Circuit did not address the definition of passive income or the PFIC rules; however, the reasoning of the case could have implications as to how the income from a time charter would be classified under such rules. If the reasoning of this case were extended to the PFIC
context, the gross income we derive or are deemed to derive from our time-chartering activities may be treated as rental income, and we would likely be treated as a PFIC. The IRS has announced its nonacquiescence with the courts holding in the
Tidewater
case and, at the same time, announced the
position of the IRS that the marine time charter agreements at issue in that case should be treated as service contracts.
Distinguishing between arrangements treated as generating rental income and those treated as generating services income involves weighing and balancing competing factual considerations, and there is no legal authority under the PFIC rules addressing our specific method of operation. Conclusions in
this area therefore remain matters of interpretation. We are not seeking a ruling from the IRS on the treatment of income generated from our time-chartering operations, and the opinion of our counsel is not binding on the IRS or any court. Thus, while we have received an opinion of counsel in support
of our position, it is possible that the IRS or a court could disagree with this position and the opinion of our counsel. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure unitholders that the nature of
our operations will not change in the future and that we will not become a PFIC in any future taxable year.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a Qualified Electing Fund, which we refer to as a QEF election. As an
alternative to making a QEF election, a U.S. Holder should be able to make a mark-to-market election with respect to our common units, as discussed below. In addition, if a U.S. Holder owns our common units during any taxable year that we are a PFIC, such units owned by such holder will be
treated as PFIC units even if we are not a PFIC in a subsequent year and, if the total value of all PFIC stock that such holder directly or indirectly owns exceeds certain thresholds, such holder must file an annual report with the IRS.
The PFIC rules are complex, and you are encouraged to consult your own tax advisor regarding the PFIC rules, including the annual PFIC reporting requirement.
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Taxation of U.S. Holders Making a Timely QEF Election
If we were to be treated as a PFIC for any taxable year, and a U.S. Holder makes a timely QEF election, such holder hereinafter an Electing Holder, then, for U.S. federal income tax purposes, that holder must report as income for its taxable year its pro rata share of our ordinary earnings and
net capital gain, if any, for our taxable years that end with or within the taxable year for which that holder is reporting, regardless of whether or not the Electing Holder received distributions from us in that year. The Electing Holders adjusted tax basis in the common units will be increased to reflect
taxed but undistributed earnings and profits. Distributions of earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holders adjusted tax basis in common units and will not be taxed again once distributed. An Electing Holder generally will recognize capital
gain or loss on the sale, exchange or other disposition of our common units. A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with its U.S. federal income tax return. If contrary to our expectations, we determine that we are treated as a PFIC for
any taxable year, we will provide each U.S. Holder with the information necessary to make the QEF election described above. Although the QEF election is available with respect to subsidiaries, in the event we acquire or own a subsidiary in the future that is treated as a PFIC, no assurances can be
made that we will be able to provide U.S. Holders with the necessary information to make the QEF election with respect to such subsidiary.
Taxation of U.S. Holders Making a Mark-to-Market Election
If we were to be treated as a PFIC for any taxable year and, as we anticipate, our units were treated as marketable stock, then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a mark-to-market election with respect to our common units, provided the U.S.
Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the U.S. Holders common
units at the end of the taxable year over the holders adjusted tax basis in the common units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holders adjusted tax basis in the common units over the fair market value thereof at the end of the taxable
year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holders tax basis in its common units would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our
common units would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the common units would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. The
mark-to-market election generally will not be available with respect to subsidiaries. Accordingly, in the event we acquire or own a subsidiary in the future that is treated as a PFIC, the mark-to-market election generally will not be available with respect to such subsidiary.
Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
If we were to be treated as a PFIC for any taxable year, a U.S. Holder that does not make either a QEF election or a mark-to-market election for that year, such holder hereinafter a Non-Electing Holder, would be subject to special rules resulting in increased tax liability with respect to (1) any
excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common units in a taxable year in excess of 125.0% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the portion of the Non-
Electing Holders holding period for the common units before the taxable year) and (2) any gain realized on the sale, exchange or other disposition of the units. Under these special rules:
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the excess distribution or gain would be allocated ratably over the Non-Electing Holders aggregate holding period for the common units;
the amount allocated to the current taxable year and any taxable year prior to the taxable year we were first treated as a PFIC with respect to the Non-Electing Holder would be taxed as ordinary income; and
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayers for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such
other taxable year.
These penalties would not apply to a qualified pension, profit sharing or other retirement trust or other tax-exempt organization that did not borrow money or otherwise utilize leverage in connection with its acquisition of our common units. If we were treated as a PFIC for any taxable year and a
Non-Electing Holder who is an individual dies while owning our common units, such holders successor generally would not receive a step-up in tax basis with respect to such units. A Non-Electing Holder may be required to report its ownership of our units by filing IRS Form 8621 with its U.S. federal
income tax return.
U.S. Federal Income Taxation of Non-U.S. Holders
A beneficial owner of our common units (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is referred to as a Non-U.S. Holder. If you are a partner in a partnership (or an entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holding our common units, you are encouraged to consult your own tax advisor regarding the tax consequences to you of the partnerships ownership of our common units.
Distributions
Distributions we pay to a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if the Non-U.S. Holder is not engaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, our distributions will be subject to U.S. federal income tax to
the extent they constitute income effectively connected with the Non-U.S. Holders U.S. trade or business. However, distributions paid to a Non-U.S. Holder that is engaged in a U.S. trade or business may be exempt from taxation under an income tax treaty if the income arising from the distribution is
not attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder.
Disposition of Units
In general, a Non-U.S. Holder is not subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of our common units provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. trade or business will be
subject to U.S. federal income tax in the event the gain from the disposition of units is effectively connected with the conduct of such U.S. trade or business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable to
a U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders may be subject to tax on gain resulting from the disposition of our common units if they are present in the United States for 183 days or more during the taxable year in which those
units are disposed and meet certain other requirements.
Backup Withholding and Information Reporting
In general, payments to a U.S. Individual Holder of distributions or the proceeds of a disposition of common units will be subject to information reporting. These payments to a U.S. Individual Holder also may be subject to backup withholding if the U.S. Individual Holder:
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fails to provide an accurate taxpayer identification number;
is notified by the IRS that it has failed to report all interest or corporate distributions required to be reported on its U.S. federal income tax returns; or
in certain circumstances, fails to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable.
Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against its liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by timely filing a U.S. federal income tax return with the
IRS.
U.S. Holders purchasing more than $100,000 of our common units in this offering generally will be required to file IRS Form 926 reporting such payment. For purposes of determining the total dollar value of common units purchased by a U.S. Holder in this offering, units purchased by certain
related parties (including family members) are included. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with this reporting obligation. Each U.S. Holder is encouraged to consult its own tax advisor as to the possible obligation to file IRS Form 926.
In addition, individual citizens or residents of the United States holding certain foreign financial assets (which generally includes stock and other securities issued by a foreign person unless held in an account maintained by a financial institution) that exceed certain thresholds (the lowest being
holding foreign financial assets with an aggregate value in excess of: (1) $50,000 on the last day of the tax year or (2) $75,000 at any time during the tax year) are required to report information relating to such assets. Significant penalties may apply for failure to satisfy the reporting obligations described
above. Unitholders are encouraged to consult their tax advisors regarding their reporting obligations, if any, that would result from their purchase, ownership or disposition of our units.
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NON-UNITED STATES TAX CONSIDERATIONS
Unless the context otherwise requires, references in this section to we, our or us are references to GasLog Partners LP.
Marshall Islands Tax Consequences
The following discussion is based upon the opinion of Cozen OConnor, our counsel as to matters of the laws of the Republic of the Marshall Islands, and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or engage in business in
the Republic of the Marshall Islands.
Because we and our subsidiaries do not and do not expect to conduct business or operations in the Republic of the Marshall Islands, and because all documentation related to this offering will be executed outside of the Republic of the Marshall Islands, under current Marshall Islands law you will not
be subject to Marshall Islands taxation or withholding on distributions, including upon distribution treated as a return of capital, we make to you as a unitholder. In addition, you will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of
common units, and you will not be required by the Republic of the Marshall Islands to file a tax return relating to your ownership of common units.
EACH PROSPECTIVE UNITHOLDER IS ENCOURAGED TO CONSULT ITS OWN TAX COUNSEL OR OTHER ADVISOR WITH REGARD TO THE LEGAL AND TAX CONSEQUENCES OF UNIT OWNERSHIP UNDER ITS PARTICULAR CIRCUMSTANCES.
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UNDERWRITING (CONFLICTS OF INTEREST)
Citigroup Global Markets Inc. is acting as representative of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that
underwriter, the number of common units set forth opposite the underwriters name.
Underwriter
Number of
Citigroup Global Markets Inc.
Total
The underwriting agreement provides that the obligations of the underwriters to purchase the common units included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the common units (other than those covered
by the underwriters option to purchase additional common units described below) if they purchase any of the common units.
Common units sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus. Any common units sold by the underwriters to securities dealers may be sold at a discount from the public offering price not to exceed $
per
common unit. If all the common units are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representatives have advised us that the underwriters do not intend to make sales to discretionary accounts.
If the underwriters sell more common units than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional common units at the public offering price less the underwriting
discount. To the extent the option is exercised, each underwriter must purchase a number of additional common units approximately proportionate to that underwriters initial purchase commitment. Any common units issued or sold under the option will be issued and sold on the same terms and
conditions as the other common units that are the subject of this offering. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering.
We, our directors and executive officers, our subsidiaries and our general partner and its affiliates, including GasLog, have agreed that, for a period of 90 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup, dispose of or hedge any common units
or any securities convertible into or exchangeable for our common units. Citigroup in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice.
Our common units are listed on the New York Stock Exchange under the symbol GLOP.
The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters over-allotment option.
The following table shows the per common unit and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase up to an additional common
units.
Per
Total
No Exercise
Full Exercise
Public offering price
$
$
$
Underwriting discounts and commissions to be paid by us
$
$
$
Proceeds, before expenses, to us
$
$
$
The underwriting discounts and commissions to be paid by us represent % of the total amount of this offering. We estimate that the expenses of this offering, not including the underwriting
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Common Units
Common Unit
discounts and commissions, will be approximately $
million (exclusive of underwriting discounts and the structuring fee). We will also pay up to $25,000 of reasonable fees and expenses of counsel related to the review by the Financial Industry Regulatory Authority, Inc. of the terms of sale of the
common units offered hereby.
In connection with the offering, the underwriters may purchase and sell common units in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the underwriters option to purchase additional
common units, and stabilizing purchases.
Short sales involve secondary market sales by the underwriters of a greater number of common units than they are required to purchase in the offering.
Covered short sales are sales of common units in an amount up to the number of common units represented by the underwriters option to purchase additional common units.
Naked short sales are sales of common units in an amount in excess of the number of common units represented by the underwriters option to purchase additional common units.
To close a naked short position, the underwriters must purchase common units in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common units in the open market after pricing that
could adversely affect investors who purchase in the offering.
To close a covered short position, the underwriters must purchase common units in the open market or must exercise the option to purchase additional common units. In determining the source of common units to close the covered short position, the underwriters will consider, among other
things, the price of common units available for purchase in the open market as compared to the price at which they may purchase common units through the underwriters option to purchase additional common units.
Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the common units. They may also cause the price of the common units to be higher than
the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue
them at any time.
Conflicts of Interest
We intend to partially prepay indebtedness owed by the entities to be acquired pursuant to the Pending Vessel Acquisition using a portion of the proceeds of this offering to an affiliate of Citigroup Global Markets Inc., who is a lender under the Citibank Facility. See Use of Proceeds. As a result,
Citigroup Global Markets Inc. has a conflict of interest within the meaning of FINRA Rule 5121, or Rule 5121. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Rule 5121 provides that if at least five percent of the net offering proceeds not including
underwriting compensation, are used to reduce or retire the balance of a loan or credit facility extended by any underwriter or its affiliates, a qualified independent underwriter, or QIU, meeting certain standards must participate in the preparation of the registration statement and the prospectus and
exercise the usual standards of due diligence with respect thereto.
has agreed to act as qualified independent underwriter for this offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 of the
Securities Act.
will not receive any additional fees for serving as qualified
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Covering transactions involve purchases of common units either pursuant to the underwriters option to purchase additional common units or in the open market in order to cover short positions.
Stabilizing transactions involve bids to purchase common units so long as the stabilizing bids do not exceed a specified maximum.
independent underwriter in connection with this offering. We have agreed to indemnify against certain liabilities incurred in connection with it acting as a QIU for this offering, including liabilities under the Securities Act.
The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriters and their
respective affiliates have in the past performed commercial banking, investment banking and advisory services for us from time to time for which they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions with and perform services for us in the
ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In addition, an affiliate of Citigroup Global Markets Inc. has committed to provide to us the New Credit Facility.
In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit
default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. In addition, affiliates of certain of
the underwriters are lenders, and in some cases agents or managers for the lenders, under our credit facilities. Certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. A
typical such hedging strategy would include these underwriters or their affiliates hedging such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities. The underwriters and their affiliates may also make
investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
The address of Citigroup Global Markets Inc. is 388 Greenwich Street, New York, New York 10013.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.
Notice to Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation
date), an offer of common units described in this prospectus may not be made to the public in that relevant member state other than:
to any legal entity which is a qualified investor as defined in the Prospectus Directive;
to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the
prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of common units shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.
For purposes of this provision, the expression an offer of securities to the public in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the common units to be offered so as to enable an
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investor to decide to purchase or subscribe for the common units, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including
the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in the relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.
The sellers of the common units have not authorized and do not authorize the making of any offer of common units through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the common units as contemplated in this
prospectus. Accordingly, no purchaser of the common units, other than the underwriters, is authorized to make any further offer of the common units on behalf of the sellers or the underwriters.
Notice to Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005, or the Order, or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a relevant person). This prospectus and its contents are
confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Notice to Prospective Investors in France
Neither this prospectus nor any other offering material relating to the common units described in this prospectus has been submitted to the clearance procedures of the
Autorité des Marchés Financiers
or of the competent authority of another member state of the European Economic Area and
notified to the
Autorité des Marchés Financiers.
The common units have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the common units has been or will be:
released, issued, distributed or caused to be released, issued or distributed to the public in France; or
used in connection with any offer for subscription or sale of the common units to the public in France.
Such offers, sales and distributions will be made in France only:
to qualified investors (
investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint dinvestisseurs), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code
monétaire et financier;
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
in a transaction that, in accordance with article L.411-2-II-1
°
-or-2
°
-or 3
°
of the French
Code monétaire et financier
and article 211-2 of the General Regulations (
Règlement Général
) of the
Autorité des Marchés Financiers
, does not constitute a public offer (
appel public à lépargne
)
.
The common units may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French
Code monétaire et financier.
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Notice to Prospective Investors in Hong Kong
The common units may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no
advertisement, invitation or document relating to the common units may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong
Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to common units which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of
Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The common units offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The common units have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident
of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the common units may not be circulated or
distributed, nor may the common units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore,
or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in
each case subject to compliance with conditions set forth in the SFA.
Where the common units are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
common units, debentures and units of common units and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the common units pursuant to an offer made
under Section 275 of the SFA except:
to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such common units, debentures and units of common units and debentures of that corporation
or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or
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other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;
where no consideration is or will be given for the transfer; or
where the transfer is by operation of law.
Notice to Prospective Investors in Korea
The common units may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Financial Investment
Services and Capital Markets Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. The common units have not been registered with the Financial Services Commission of Korea for public offering in Korea. Furthermore, the common units may not be re-sold to
Korean residents unless the purchaser of the common units complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with their purchase.
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SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are organized under the laws of the Marshall Islands as a limited partnership. Our general partner is organized under the laws of the Marshall Islands as a limited liability company. The Marshall Islands has a less developed body of securities laws as compared to the United States and provides
protections for investors to a significantly lesser extent.
Most of our directors and officers and those of our subsidiaries are residents of countries other than the United States. Substantially all of our and our subsidiaries assets and a substantial portion of the assets of our directors and officers are located outside the United States. As a result, it may be
difficult or impossible for United States investors to effect service of process within the United States upon us, our directors or officers, our general partner or our subsidiaries or to realize against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any state in the United States. However, we have expressly submitted to the jurisdiction of the U.S. federal and New York state courts sitting in the City of New York for the purpose of any suit, action or proceeding arising under the securities laws
of the United States or any state in the United States, and we have appointed The Trust Company of the Marshall Islands, Inc., Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, our registered agent, to accept service of process on our behalf in any such
action.
Cozen OConnor, our counsel as to Marshall Islands law, has advised us that there is uncertainty as to whether the courts of the Marshall Islands would (1) recognize or enforce against us, our general partner or our directors or officers judgments of courts of the United States based on civil liability
provisions of applicable U.S. federal and state securities laws or (2) impose liabilities against us, our general partner or our directors and officers in original actions brought in the Marshall Islands, based on these laws.
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The validity of the common units and certain other legal matters, including tax matters, with respect to the laws of the Republic of the Marshall Islands will be passed upon for us by our counsel as to Marshall Islands law, Cozen OConnor, New York, New York. Certain other legal matters,
including tax matters with respect to U.S. law, will be passed upon for us by Cravath, Swaine & Moore LLP, New York, New York. Certain matters with respect to this offering will be passed upon for the underwriters by Latham & Watkins LLP.
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The combined and consolidated financial statements of GasLog Partners LP appearing in this prospectus have been audited by Deloitte Hadjipavlou, Sofianos & Cambanis S.A., an independent registered public accounting firm, as stated in their report appearing elsewhere herein. Such combined and
consolidated financial statements are included in reliance upon the report of such firm, given upon their authority as experts in auditing and accounting.
The offices of Deloitte Hadjipavlou, Sofianos & Cambanis S.A are located at Fragoklissias 3a & Granikou Street, Maroussi, Athens 151 25, Greece.
The discussion contained under the section of this prospectus entitled The LNG Shipping Industry has been reviewed by Clarkson Research, which has confirmed to us that it accurately describes the international LNG shipping market, as indicated in the consent of Clarkson Research included as
an exhibit to the registration statement on Form F-1 under the Securities Act of which this prospectus is a part.
Change in Certifying Accountant
In May 2014, following the approval of our board of directors, we engaged Deloitte LLP to audit the financial statements of GasLog Partners LP for the fiscal year ending December 31, 2014.
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EXPENSES RELATED TO THIS OFFERING
The following table sets forth the main costs and expenses, other than the underwriting discounts and commissions and structuring fees, in connection with this offering, which we will be required to pay.
U.S. Securities and Exchange Commission registration fee
$
16,100
Financial Industry Regulatory Authority filing fee
19,250
The New York Stock Exchange listing fee
Legal fees and expenses
400,000
Accounting fees and expenses
100,000
Consultancy fees
100,000
Printing and engraving costs
100,000
Transfer agent fees and other
5,000
Miscellaneous
Total
$
All amounts are estimated, except the SEC registration fee, the Financial Industry Regulatory Authority filing fee and the New York Stock Exchange listing fee.
213
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1 regarding the common units. For purposes of this section, the term registration statement means the original registration statement and any and all amendments, including the schedules and exhibits to the original registration
statement and any amendments. This prospectus does not contain all of the information found in the registration statement. For further information regarding us and the common units offered in this prospectus, you may wish to review the full registration statement, including the exhibits attached thereto.
The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of this material can also be obtained upon written request from the Public Reference Section of the
SEC at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or from the SECs website on the Internet at http://www.sec.gov free of charge. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our registration statement can also be inspected and
copied at the offices of the New York Stock Exchange.
We are subject to the information requirements of the Securities Exchange Act of 1934, and, in accordance therewith, we are required to file with the SEC annual reports on Form 20-F within four months of our fiscal year-end, and provide to the SEC other material information on Form 6-K. We
intend to file our annual report on Form 20-F earlier than the SEC currently requires. These reports and other information may be inspected and copied at the public reference facilities maintained by the SEC or obtained from the SECs website as provided above. Our website on the Internet is located
at http://www.gaslogmlp.com, and we expect to make our periodic reports and other information filed with or furnished to the SEC available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the
SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, certain rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal unitholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, including the filing
of quarterly reports or current reports on Form 8-K. However, we intend to furnish or make available to our unitholders annual reports containing our audited consolidated financial statements prepared in accordance with IFRS and make available to our unitholders quarterly reports containing our
unaudited interim financial information for the first three fiscal quarters of each fiscal year. Our annual report will contain a Managements Discussion and Analysis of Financial Condition and Results of Operations section for the relevant periods.
214
Clarkson Research has provided us with statistical and graphical information contained in the sections of this prospectus entitled The LNG Shipping Industry relating to the international LNG shipping market. We believe that the information and data supplied by Clarkson Research is accurate in
all material respects and we have relied upon such information for purposes of this prospectus. Clarkson Research has advised us that this information is drawn from its databases and other sources and that:
certain information provided by Clarkson Research is derived from estimates or subjective judgments;
the published information of other maritime data collection agencies may differ from the information provided by Clarkson Research; and
while Clarkson Research has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures.
215
GASLOG PARTNERS LP
INDEX TO UNAUDITED CONDENSED COMBINED
Page
F-32
F-33
F-34
F-35
F-36
Notes to the unaudited condensed combined and consolidated financial statements
F-37
F-1
INDEX TO COMBINED AND CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
AND CONSOLIDATED INTERIM FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Partners of GasLog Partners LP
We have audited the accompanying combined and consolidated statements of financial position of GasLog Partners LP (hereinafter collectively referred to as the Partnership) (see Note 1 to the combined and consolidated financial statements) as of December 31, 2012 and 2013, and the related
combined and consolidated statements of profit or loss, comprehensive income or loss, changes in equity, and cash flows for the years then ended. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on the financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Partnerships internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined and consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2012 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Deloitte Hadjipavlou Sofianos & Cambanis S.A.
F-2
Majuro, Republic of the Marshall Islands
Athens, Greece
August 11, 2014
GasLog Partners LP
Note
2012
2013
Assets
Non-current assets
Deferred financing costs
9,291,419
Derivative financial instruments
17
799,926
Other non-current assets
6
890,000
1,242,720
Vessels
3
562,530,808
Vessels under construction
3
118,481,930
Total non-current assets
128,663,349
564,573,454
Current assets
Trade and other receivables
5
33,869
153,967
Inventories
730,209
Due from related parties
14
18,151
18,151
Prepayments and other current assets
46,838
390,526
Short-term investments
1,500,000
Cash and cash equivalents
4
2,299
14,403,785
Total current assets
101,157
17,196,638
Total assets
128,764,506
581,770,092
Equity and liabilities
Equity
Owners capital
7
36,000
36,000
Contributed surplus
7
119,409,935
148,099,880
Reserves
(9,593,522
)
(5,161,682
)
(Accumulated deficit)/retained earnings
(3,223,490
)
13,194,752
Total equity
106,628,923
156,168,950
Current liabilities
Trade accounts payable
593,564
704,793
Amounts due to related parties
14
8,792,629
24,674,117
Derivative financial instruments
17
3,132,045
4,233,398
Other payables and accruals
10
1,321,514
9,371,625
Loans current portion
9
22,074,786
Total current liabilities
13,839,752
61,058,719
Non-current liabilities
Derivative financial instruments
17
8,295,831
625,425
Loans non-current portion
9
363,916,998
Total non-current liabilities
8,295,831
364,542,423
Total equity and liabilities
128,764,506
581,770,092
The accompanying notes are an integral part of these combined
F-3
Combined and consolidated statements of financial position
As of December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
and consolidated financial statements.
GasLog Partners LP
Note
2012
2013
Revenues
64,142,588
Vessel operating costs
12
(13,096,716
)
Depreciation
3
(12,237,735
)
General and administrative expenses
11
(30,132
)
(1,524,625
)
(Loss)/profit from operations
(30,132
)
37,283,512
Financial costs
13
(606
)
(12,133,143
)
Financial income
13
110,109
31,686
(Loss)/gain on interest rate swaps
17
(940,432
)
1,036,187
Total other expenses, net
(830,929
)
(11,065,270
)
(Loss)/profit for the year
(861,061
)
26,218,242
The accompanying notes are an integral part of these combined
F-4
Combined and consolidated statements of profit or loss
For the years ended December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
and consolidated financial statements.
GasLog Partners LP
Note
2012
2013
(Loss)/profit for the year
(861,061
)
26,218,242
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges
17
(8,687,198
)
3,776,876
Net change in fair value of cash flow hedges reclassified to profit or loss.
17
654,964
Other comprehensive (loss)/income for the year
(8,687,198
)
4,431,840
Total comprehensive (loss)/income for the year
(9,548,259
)
30,650,082
The accompanying notes are an integral part of these combined
F-5
Combined and consolidated statements of comprehensive income or loss
For the years ended December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
and consolidated financial statements.
GasLog Partners LP
Share
Contributed
Cash flow
(Accumulated
Total
Balance at January 1, 2012
36,000
59,696,500
(906,324
)
(2,362,429
)
56,463,747
Capital contributions
59,713,435
59,713,435
Loss for the year
(861,061
)
(861,061
)
Other comprehensive loss for the year
(8,687,198
)
(8,687,198
)
Total comprehensive loss for the year
(8,687,198
)
(861,061
)
(9,548,259
)
Balance at December 31, 2012
36,000
119,409,935
(9,593,522
)
(3,223,490
)
106,628,923
Capital contributions
28,062,945
28,062,945
Capital contributions contributed services
627,000
627,000
Dividend declared ($272.22 per share)
(9,800,000
)
(9,800,000
)
Profit for the year
26,218,242
26,218,242
Other comprehensive income for the year
4,431,840
4,431,840
Total comprehensive income for the year
4,431,840
26,218,242
30,650,082
Balance at December 31, 2013
36,000
148,099,880
(5,161,682
)
13,194,752
156,168,950
The accompanying notes are an integral part of these combined and consolidated financial statements.
F-6
Combined and consolidated statements of changes in equity
For the years ended December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
capital
surplus
hedging
reserve
deficit)/retained
earnings
GasLog Partners LP
2012
2013
Cash flows from operating activities:
(Loss)/profit for the year
(861,061
)
26,218,242
Adjustments for:
Depreciation
12,237,735
Unrealized loss/(gain) on interest rate swaps
940,432
(2,937,139
)
Financial income
(110,109
)
(31,686
)
Financial costs
12,133,143
Non-cash contributed services
627,000
(30,738
)
48,247,295
Movements in operating assets and liabilities
Increase in trade and other receivables
(33,869
)
(116,782
)
Increase in inventories
(730,209
)
Change in related parties, net
472,268
(13,645,871
)
Increase in prepayments and other current assets
(35,863
)
(343,688
)
Increase in other non-current assets
(890,000
)
(352,720
)
Decrease in other non-current liabilities
(1,520,000
)
Increase in trade accounts payable and other current liabilities
1,928,093
1,062,209
Increase in other payables and accruals
7,261,457
Cash (used in)/provided by operations
(110,109
)
41,381,691
Interest paid
(9,222,665
)
Net cash (used in)/from operating activities
(110,109
)
32,159,026
Cash flows from investing activities:
Payments for vessels under construction
(452,791,594
)
Financial income received
110,109
28,370
Purchase of short-term investments
(11,625,251
)
(1,500,000
)
Maturity of short-term investments
11,625,251
Net cash from /(used in) investing activities
110,109
(454,263,224
)
Cash flows from financing activities:
Bank loan drawdown
411,000,000
Bank loan repayments
(16,104,809
)
Payment of loan issuance costs
(181,101
)
Increase in due to shareholders
13,728,649
Capital contributions received
28,062,945
Net cash from financing activities
436,505,684
Increase in cash and cash equivalents
14,401,486
Cash and cash equivalents, beginning of the year
2,299
2,299
Cash and cash equivalents, end of the year
2,299
14,403,785
Non Cash Investing and Financing Activities
Payment for vessel under construction through capital contribution
56,307,435
Payment for vessel under construction through related parties
4,450,158
4,475,384
Financing costs included in liabilities at the end of the year
423,920
29,385
Financing costs paid through capital contributions
3,406,000
Financing costs paid through related parties
3,668,875
1,523,326
Capital expenditures included in liabilities at the end of the year
1,073,390
93,025
Dividend declared but not paid
9,800,000
Non-cash contributed services
627,000
The accompanying notes are an integral part of these combined and consolidated financial statements.
F-7
Combined and consolidated statements of cash flow
For the years ended December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
GasLog Partners LP
1. Organization and Operations
GasLog Partners LP was formed as a limited partnership under the laws of Marshall Islands on January 23, 2014, being a wholly-owned subsidiary of GasLog Ltd. (GasLog) for the purpose of initially acquiring the interests in three liquefied natural gas (LNG) carriers that were contributed by
GasLog in connection with the initial public offering of its common units (the IPO).
On May 12, 2014, GasLog Partners LP completed its IPO with the sale and issuance of 9,660,000 common units (including 1,260,000 units in relation to the overallotment option exercised in full by the underwriters), resulting in gross proceeds of $202,860,000 and representing a 48.2% limited partner
interest. Concurrently with the IPO, GasLog Partners LP acquired a 100% ownership interest in GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. (the Subsidiaries) from GasLog in exchange for (i) 162,358 common units and 9,822,358 subordinated units issued to GasLog representing a 49.8% limited
partner interest and all of the incentive distribution rights (IDRs) that entitle GasLog to increasing percentages of the cash that GasLog Partners LP distributes in excess of $0.43125 per unit per quarter, (ii) 400,913 general partner units issued to GasLog Partners GP LLC (the general partner), a
wholly-owned subsidiary of GasLog, representing a 2.0% general partner interest and (iii) $65,695,522 of cash consideration paid directly to GasLog from the IPO proceeds.
For the periods prior to the formation of GasLog Partners LP the financial statements represent the combined statements of the Subsidiaries using the historical carrying costs of the assets and the liabilities of the ship-owning companies listed below from their dates of incorporation. All references to
the Partnership prior to the formation of GasLog Partners LP refer to the Subsidiaries and references to the Partnership subsequent to the formation of GasLog Partners LP refer to GasLog Partners LP and its subsidiaries, including the Subsidiaries. For convenience hereinafter the financial statements for
the two years are referred to as the combined and consolidated financial statements.
GasLog was incorporated in Bermuda on July 16, 2003. GasLog and its subsidiaries (GasLog Group) are controlled by Blenheim Holdings Ltd. (Blenheim Holdings), an entity registered in Bermuda. Blenheim Holdings is controlled by Ceres Shipping Ltd. (Ceres Shipping), an entity also
registered in Bermuda. The ultimate controlling party of GasLog Group at December 31, 2013 was Mr. Peter G. Livanos. GasLogs common shares began trading on the New York Stock Exchange (NYSE) on March 30, 2012 under the ticker symbol GLOG.
Following the completion of the IPO, GasLog holds a 51.8% interest of the Partnership and, as a result of its ownership of the general partner, and the fact that the general partner elects the majority of the Partnerships directors in accordance with Partnership agreement, GasLog has the ability to
control the Partnerships affairs and policies
As of December 31, 2012 and 2013, the Subsidiaries were 100% held by GasLog through its wholly-owned subsidiary GasLog Carriers Ltd. (the Parent):
Name
Place of
Date of
Principal activities
Vessel
Cargo Capacity
Delivery date
GAS-three Ltd.
Bermuda
April 27, 2010
Vessel-owning
GasLog Shanghai
155,000
January 28, 2013
GAS-four Ltd.
Bermuda
April 27, 2010
Vessel-owning
GasLog Santiago
155,000
March 25, 2013
GAS-five Ltd.
Bermuda
February 14, 2011
Vessel-owning
GasLog Sydney
155,000
May 30, 2013
F-8
Notes to the combined and consolidated financial statements
For the years ended December 31, 2012 and 2013
(All amounts expressed in U.S. Dollars)
incorporation
incorporation
(cbm)
company
company
company
2. Significant Accounting Policies
Statement of compliance
The combined and consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (the IFRS) as issued by the International Accounting Standards Board (the IASB).
Basis of preparation
The combined and consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments recorded at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for
assets.
The principal accounting policies are set out below.
The combined and consolidated financial statements are expressed in U.S. dollars (USD), which is the functional currency of the Partnership and each of the Subsidiaries because their vessels operate in international shipping markets, in which revenues and expenses are primarily settled in USD and
the Partnerships most significant assets and liabilities are paid for and settled in USD.
On July 30, 2014, the Partnerships board of directors authorized the combined and consolidated financial statements for issuance and filing.
Basis of combination
The accompanying combined and consolidated financial statements include the accounts of the legal entities comprising the Partnership as discussed in Note 1. All significant intra-group transactions and balances are eliminated on combination.
Accounting for revenues and related operating expenses
Revenues comprise revenues from time charters for the charter hire of the Partnerships vessels earned during the period in accordance with existing contracts.
A time charter represents a contract entered into for the use of a vessel for a specific period of time and a specified daily charter hire rate. Time charter revenue is recognized as earned on a straight-line basis over the term of the relevant time charter starting from the vessels delivery to the
charterer, except for the off-hire period, when a charter agreement exists, the vessel is made available and services are provided to the charterer and collection of the related revenue is reasonably assured. Unearned revenue includes: (i) revenue received prior to the balance sheet date relating to services
to be rendered after the balance sheet date and (ii) accrued revenue resulting from straight-line revenue recognition in respect of charter agreements that provide for varying charter rates.
Time charter hires received in advance are classified as liabilities until such time as the criteria for recognizing the revenue as earned are met.
Under a time charter arrangement the vessel operating expenses and brokers commissions are paid by the vessel owner, whereas voyage expenses such as bunkers, port expenses, agents fees, and extra war risk insurance are paid by the charterer.
Vessel operating costs are expensed as incurred, with the exception of commissions, which are recognized on a pro-rata basis over the duration of the period of the time charter.
Financial income and costs
Interest income, interest expense and other borrowing costs are recognized on an accrual basis.
F-9
Deferred financing costs for undrawn facilities
Commitment, arrangement, structuring, legal and agency fees incurred for obtaining new loans or refinancing existing facilities are recorded as deferred loan issuance costs and classified contra to debt while the fees incurred for the undrawn facilities are classified under non-current assets in the
statement of financial position and are classified contra to debt on the drawdown dates.
Deferred financing costs are deferred and amortized to financial costs over the term of the relevant loan, using the effective interest method.
Foreign currencies
Transactions in currencies other than USD are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in other currencies are retranslated into USD at the rates prevailing at that date. All
resulting exchange differences are recognized in the combined and consolidated statement of profit or loss in the period in which they arise.
Vessels under construction
Vessels under construction are presented at cost less identified impairment losses, if any. Cost includes shipyard installment payments and other vessel costs incurred during the construction period that are directly attributable to the acquisition or construction of the vessels, net of any commissions
received from the shipyard.
Vessels
Vessels are stated at cost less accumulated depreciation and any accumulated impairment loss. The initial cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition.
The cost of a LNG vessel is split into two components, a vessel component and a drydocking component. Depreciation for the vessel component is calculated on a straight-line basis, after taking into account the estimated residual values, over the estimated useful life of this major component of
the vessels. Residual value is estimated as 10% of the initial vessel cost and represents the Partnerships estimate of the current selling price assuming the vessel is already of age and condition expected at the end of its useful life.
The LNG vessels are required to undergo a drydocking overhaul every five years to restore their service potential and to meet their classification requirements. The drydocking component is estimated at the time of a new vessels delivery from the shipyard and is measured based on the estimated
cost of the first drydocking based on the Partnerships historical experience with similar types of vessels. For subsequent drydockings actual costs are capitalized when incurred. The drydocking component is depreciated over the period of five years until the next drydocking.
Costs that will be capitalized as part of the future drydockings will include a variety of costs incurred directly attributable to the drydock and costs incurred to meet classification and regulatory requirements, as well as expenses related to the dock preparation and port expenses at the drydock
shipyard, general shipyard expenses, expenses related to hull, external surfaces and decks, expenses related to machinery and engines of the vessel, as well as expenses related to the testing and correction of findings related to safety equipment on board. Drydocking costs do not include vessel operating
expenses such as replacement parts, crew expenses, provisions, lubricants consumption, insurance, management fees or management costs during the drydocking period. Expenses related to regular maintenance and repairs of our vessels are expensed as incurred, even if such maintenance and repair occurs
during the same time period as our drydocking.
F-10
The expected useful lives are as follows:
Vessel
LNG vessel component
35 years
Drydocking component
5 years
The useful lives and the depreciation method are reviewed annually to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from our vessels. The residual value is also reviewed at each financial period-end. If expectations differ from
previous estimates, the changes are accounted for prospectively in earnings in the period of the change and future periods.
Ordinary maintenance and repairs that do not extend the useful life of the asset are expensed as incurred. Major renovation costs and modifications are capitalized and depreciated over the estimated remaining useful life.
When assets are sold, they are derecognized and any gain or loss resulting from their disposals is included in earnings.
Impairment of vessels
All vessels are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of a vessel exceeds its recoverable amount, an impairment loss is recognized in the combined and consolidated
statement of profit or loss. The recoverable amount is the higher of a vessels net selling price and value in use. The net selling price is the amount obtainable from the sale of a vessel in an arms length transaction less the costs of disposal, while value in use is the present value of estimated future
cash flows expected to arise from the continuing use of a vessel and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual vessels. Each vessel is considered to be a single cash-generating unit. The net selling price of the vessels is estimated from market-based
evidence by appraisal that is normally undertaken by professionally qualified brokers.
Provisions
Provisions are recognized when the Partnership has a present obligation (legal or constructive) as a result of a past event, it is probable that the Partnership will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a
provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Inventories
Inventories represent lubricants and provisions on board the vessel and are stated at the lower of cost calculated on a first-in, first-out basis, and net realizable value.
Financial instruments
Financial assets and liabilities are recognized when the Partnership has become a party to the contractual provisions of the instrument. All financial instruments are initially recognized at the fair value of the consideration given.
F-11
Cash and cash equivalents
Cash represents cash on hand and deposits with banks which are repayable on demand. Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less at the time of purchase that are subject to
an insignificant risk of change in value.
Short-term investments represent short-term, highly liquid time deposits placed with financial institutions which are readily convertible into known amounts of cash with original maturities of more than three months but less than 12 months at the time of purchase that are subject to an insignificant
risk of change in value.
The Partnership has both interest rate swap contracts that have been designated as cash flow hedges and interest rate swap contracts that have been classified as held for trading.
Derivative financial instruments, such as interest rate swaps, are used to economically hedge its exposure to interest rate risks. Derivative financial instruments are initially recognized at fair value and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is
recognized in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Derivatives are presented as assets when their valuation is favorable to the
Partnership and as liabilities when unfavorable to the Partnership.
Criteria for classifying a derivative instrument as a hedge include: (1) the hedge transaction is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk; (2) the effectiveness of the hedge can be reliably measured; (3) there is adequate
documentation of the hedging relationships at the inception of the hedge; and (4) for cash flow hedges, the forecasted transaction that is the subject of the hedges must be highly probable.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the combined and consolidated statement of profit or loss.
Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to the combined and consolidated statement of profit or loss in the periods when the hedged item affects the combined and consolidated statement of profit or loss. Hedge accounting is
discontinued when the Partnership revokes the hedging relationship, when the hedging instrument expires or is sold, terminated or exercised, or when it no longer qualifies for hedge accounting.
Any gain or loss accumulated in equity at that time remains in equity and is recognized in the combined and consolidated statement of profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized
immediately in the combined and consolidated statement of profit or loss.
Segment information
The Subsidiaries each own one LNG carrier which will be operated under long term time charters which have similar operating and economic characteristics and as such management have determined that the Partnership operates under a single reportable segment. Furthermore, when the Partnership
charters a vessel to a charterer, the charterer is free to trade the vessel worldwide and, as a result, the disclosure of geographic information is impracticable.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the combined and consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses recognized in the combined and consolidated financial
F-12
Short-term investments
Derivative financial instruments
statements. The Partnerships management evaluates whether estimates should be made on an ongoing basis, utilizing historical experience, consultation with experts and other methods management considers reasonable in the particular circumstances. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future.
Judgments:
In the process of applying the Partnerships accounting policies, management has made the following judgments, apart from those involving estimations, that had the most significant effect on the amounts recognized in the combined and consolidated financial statements.
Vessel construction cost capitalization:
The Partnership recognized installments paid to the shipyard in accordance with the contracts and any directly attributable costs of bringing the vessels to their working condition incurred during the construction periods as vessel costs (Note 3). Directly
attributable costs incurred during the vessel construction periods consisted of commissions, on-site supervision costs, costs for sea trials, certain spare parts and equipment, costs directly incurred for negotiating the construction contracts, lubricants and other vessel delivery expenses. Any vendor discounts
were deducted from the cost of the vessels.
The key sources of estimation uncertainty are as follows:
Vessel lives and residual value:
Vessels are stated at cost, less accumulated depreciation. The estimates and assumptions that have the most significant effect on the vessel carrying amount relate to the estimation of the useful life of an LNG vessel of 35 years and the residual value which is estimated
as 10% of the initial vessel cost.
An increase in the estimated useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge, and an increase in the estimated useful life of a vessel would also extend annual depreciation charge into later periods. A decrease in the useful life of a
vessel or its residual value would have the effect of increasing the annual depreciation charge.
When regulations place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessels useful life is adjusted to end at the date such regulations become effective. The estimated residual value of a vessel may not represent the fair market value at any one time partly
because market prices of scrap rates tend to fluctuate.
Vessel cost:
The Partnership recognizes drydocking costs as a separate component of the vessels carrying amounts and amortizes the drydocking cost on a straight-line basis over the estimated period until the next drydocking. If the vessel is disposed of before the next drydocking, the remaining
balance of the drydock component is written-off and forms part of the gain or loss recognized upon disposal of vessels in the period of disposal. The Partnership expects that its vessels will be required to be drydocked in approximately 60 months after their delivery from the shipyard, and thereafter every
30 or 60 months will be required to undergo special or intermediate surveys and drydocked for major repairs and maintenance that cannot be performed while the vessels are operating. The Partnership amortizes its estimated drydocking expenses for the first special survey over five years, but this
estimate might be revised in the future. Management estimates the drydocking component on acquisition of a vessel, as costs to be incurred during the first drydocking at the drydock yard for a special survey and parts and supplies used in making such repairs that meet the recognition criteria, based on
historical experience with similar types of vessels.
Impairment of Vessels:
The Partnership evaluates the carrying amounts of its vessels to determine whether there is any indication that those vessels have suffered an impairment loss. If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent of the
impairment loss, if any.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted. The projection of cash flows related to vessels is complex and requires management to make various estimates including future freight rates, earnings from the vessels and discount rates. All of these
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items have been historically volatile. In assessing the fair value less cost to sell of the vessel, the Partnership obtains vessel valuations from independent and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be impaired. If an indication of
impairment is identified, the need for recognizing an impairment loss is assessed by comparing the carrying amount of the vessels to the higher of the fair value less cost to sell and the value in use. As of December 31, 2013, there were no indications that the Partnerships vessels are impaired and in
addition the carrying amounts of the Partnerships vessels were lower than the independent broker valuations (after adjusting for estimated selling costs) for all of the owned vessels; therefore there were no indicators that the carrying amounts of the vessels may not be recoverable.
Fair value of derivative financial instruments:
Our risk management policies permit the use of derivative financial instruments to manage interest rate risk. Changes in fair value of derivative financial instruments that are not designated as cash flow hedges for accounting purposes are recognized in
earnings.
A substantial majority of the fair value of our derivative instruments and the change in fair value of our derivative instruments from period to period result from our use of interest rate swap agreements. The fair value of our interest rate swap agreements is the estimated amount that we would
receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current credit worthiness of both us and the swap counterparties. The estimated amount is the present value of estimated future cash flows, being equal to the difference between the
benchmark interest rate and the fixed rate in the interest rate swap agreement, multiplied by the notional principal amount of the interest rate swap agreement at each interest reset date.
The fair value of our interest swap agreements at the end of each period are most significantly affected by the interest rate implied by market-observable data such as LIBOR yield curve. While the fair value of our interest swap agreements are typically more sensitive to changes in short-term rates,
significant changes in the long-term benchmark interest also materially impact our interest swap agreements.
The fair value of our interest swap agreements are also affected by changes in our specific credit risk included in the discount factor. Following the implementation of IFRS 13 Fair Value Measurement in January 1, 2013, the Partnership adjusts its derivative liabilities fair value to reflect its own credit
risk and the counterparties risk. The estimate of the Partnerships credit risk is based on the credit rating of other companies in the LNG industry where publicly available, the rating of the global transportation industry where the shipping industry is included and the feedback that the Partnership
receives from its lenders as part of the margin setting for the new loan agreements. The counterparties credit risk is estimated either by using the credit default swap rates obtained from public information or, if not available, by using the credit rating of the counterparties.
The LIBOR yield curve and our specific credit risk are expected to vary over the life of the interest rate swap agreements. The larger the notional amount of the interest rate swap agreements outstanding and the longer the remaining duration of the interest rate swap agreements, the larger the
impact of any variability in these factors will be on the fair value of our interest rate swaps. We economically hedge the interest rate exposure on a significant amount of our long-term debt and for long durations. As such, we have historically experienced, and we expect to continue to experience,
material variations in the period-to-period fair value of our derivative instruments.
Although we measure the fair value of our derivative instruments utilizing the inputs and assumptions described above, if we were to terminate the agreements at the reporting date, the amount we would pay or receive to terminate the derivative instruments may differ from our estimate of fair
value. If the estimated fair value differs from the actual termination amount, an adjustment to the carrying amount of the applicable derivative asset or liability would be recognized in earnings for the current period. Such adjustments could be material. See Note 17 for the effects on the change in fair
value of our derivative instruments on our combined and consolidated statements of profit or loss.
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Adoption of new and revised IFRS
(a) Standards and interpretations adopted in the current period
The following standards and amendments relevant to the Partnership were effective in the current period:
In May 2011, the IASB issued IFRS 13
Fair Value Measurement
which establishes a single source of guidance for fair value measurements under IFRS standards. IFRS 13 defines fair value, provides guidance on its determination and introduces consistent requirements for disclosures on fair value
measurements. Following the adoption of this standard, the Partnership adjusted its derivative liabilities fair values to reflect its own credit risk. The fair value as determined by the forecasted expected cash flows discounted with the risk-free interest rate was further adjusted to incorporate the
Partnerships own credit risk and the credit risk of the counterparties. The Partnerships own credit risk is estimated by taking into account the credit rating of other companies in the LNG industry where publicly available, the rating of the global transportation industry where the shipping industry
is included and the feedback that the Partnership received from its lenders as part of the margin setting for the new loan agreements. For counterparties credit risk, either the credit default swap rates were obtained from public information or, if not available, the credit rating of the counterparties
was used. The new standard was effective for fiscal years beginning on or after January 1, 2013. As of December 31, 2013, due to the fact that the Partnerships rating was lower than the rating of its counterparties, the adoption of IFRS 13 has resulted in the Partnerships Derivative financial
instruments liabilities being decreased by $124,319, Derivative financial instruments assets being increased by $41,300, Other comprehensive income being decreased by $124,319 and the Gain on interest rate swaps, net for the year ended December 31, 2013, being increased by $41,300.
In May 2011 the IASB issued standards relating to consolidated financial statements, including IFRS 10
Consolidated Financial Statements,
IFRS 11
Joint Arrangements,
IFRS 12
Disclosure of Interests in Other Entities,
and amendments to IAS 27
Consolidated and Separate Financial Statements,
and
IAS 28
Investments in Associates and Joint Ventures.
These standards and amendments, among other things, update the definition of control under IFRS and consolidate the disclosure requirements for interests in other entities and were effective for fiscal years beginning on or after January 1, 2013,
with retrospective application required. These standards and amendments did not have any impact on the Partnerships financial results and position.
In June 2011, the IASB issued amendments to IAS 1
Presentation of Financial Statements,
which provides guidance on the presentation of items contained in other comprehensive income and their classification within other comprehensive income. The amendments to IAS 1 introduce new
terminology for the statement of comprehensive income and income statement. Under the amendments to IAS 1 that are effective for the annual periods beginning on or after July 1, 2012, the income statement was renamed as statement of profit or loss. In addition, the amendments to IAS 1
require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss and (b) items that will be reclassified subsequently to profit or
loss when specific conditions are met. The presentation of items of other comprehensive income has been modified accordingly. Other than the above mentioned presentation changes which were applied retrospectively, the application of the amendments to IAS 1 does not result in any impact on
profit or loss, other comprehensive income and total comprehensive income.
In December 2011, the IASB issued amendments to IFRS 7
Financial Instruments: Disclosures
, which introduces disclosure requirements about rights of offset and related arrangements for financial instruments under an enforceable master netting agreement or similar arrangements, even if they are
not set off under IAS 32
Financial Instruments: Presentation.
The amendments of IFRS 7 that are effective for the fiscal year beginning on January 1, 2013 did not have any impact on the Partnerships combined and consolidated financial statements.
F-15
In May 2012, the IASB issued the Annual Improvements to IFRSs2009-2011 Cycle, which contains amendments to its standards and the related Basis for Conclusions. It includes changes to IFRS 1
First Time Adoption of International Reporting Standards
, IAS 1
Presentation of Financial Statements
,
IAS 16
Property Plant and Equipment
, IAS 32
Financial Instruments: Presentation
and IAS 34
Interim Financial Reporting.
These amendments that are effective for the fiscal year beginning on January 1, 2013 did not have any impact on the Partnerships combined and consolidated financial
statements.
(b) Standards and amendments in issue not yet adopted
At the date of authorization of these combined and consolidated financial statements, the following standards and amendments relevant to the Partnership were in issue but not yet effective:
In October 2010, the IASB reissued IFRS 9
Financial Instruments.
IFRS 9 specifies how an entity should classify and measure financial assets and financial liabilities. The new standard requires all financial assets to be subsequently measured at amortized cost or fair value depending on the business
model of the legal entity in relation to the management of the financial assets and the contractual cash flows of the financial assets. The standard also requires a financial liability to be classified as either at fair value through profit and loss or at amortized cost.
The release of IFRS 9 (2013) on November 19, 2013 contained consequential amendments which removed the mandatory effective date of IFRS 9 leaving the effective date open pending the finalization of the impairment and classification and measurement requirement and permitted an entity to
apply the requirements on the presentation of gains and losses on financial liabilities designated at fair value through profit or loss without applying the other requirements, meaning the portion of the change in fair value related to changes in the entitys own credit risk can be presented in other
comprehensive income rather than within profit or loss. In addition it introduced a new chapter to IFRS 9 on hedge accounting, putting in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial
and non-financial risk exposures. At its November 2013 meeting, the IASB tentatively decided that the mandatory effective date would be no earlier than annual periods beginning on or after January 1, 2017, with retrospective application required. At its February 2014 meeting, the IASB tentatively
selected an effective date of January 1, 2018 for mandatory application of IFRS 9. Management will evaluate the impact of this standard on the Partnerships combined and consolidated financial statements once the mandatory effective date is set. Until such time as a detailed review has been
completed it is not practicable to provide a reasonable estimate of that effect.
In December 2011, the IASB issued amendments to IAS 32
Financial Instruments: Presentation
, which clarifies some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. The standard is effective for fiscal years beginning on or after January
1, 2014, with retrospective application required. Management anticipates that the implementation of this standard will not have a material impact on the combined and consolidated financial statements as it relates to additional disclosures.
In May 2013, the IASB issued amendments to IAS 36
Impairment of Assets
on the impairment of non-financial assets. This amendment removes the requirement of disclosure of the recoverable amount of an asset or cash generated unit when there is no impairment loss and requires disclosure of
how the fair value less costs of disposal has been measured when an impairment loss has been recognized or reversed during the period. The amended standard is effective for annual periods beginning on or after January 1, 2014, with retrospective application required. Management anticipates that
the implementation of this standard will not have a material impact on the Partnerships combined and consolidated financial statements.
In June 2013, the IASB published a limited scope amendment to IAS 39
Financial Instruments: Recognition and Measurement
and the forthcoming chapter on hedge accounting
F-16
in IFRS 9
Financial Instruments.
This amendment provides some relief from the requirement to cease hedge accounting when a derivative is required to be novated to a central counterparty or entity acting in a similar capacity, under certain circumstances. The amended standard is effective for
annual periods beginning on or after January 1, 2014, with retrospective application required. Management anticipates that the implementation of this standard will not have a material impact on the Partnerships combined and consolidated financial statements.
In December 2013, the IASB issued the
Annual Improvements to IFRSs-2010-2012 Cycle
, which includes changes to IFRS 2
Share-based Payment
, IFRS 3
Business Combination
, IFRS 8
Operating Segments
, IFRS 13
Fair Value Measurement
, IAS 16
Property, Plant and Equipment
, IAS 38
Intangible
Assets
and IAS 24
Related Party Disclosures.
These amendments are effective for annual periods beginning on or after July 1, 2014. Management anticipates that these amendments will not have a material impact on the Partnerships combined and consolidated financial statements.
In December 2013, the IASB issued the
Annual Improvements to IFRSs-2011-2013 Cycle
, which includes changes to IFRS 1
First-time Adoption of International Financial Standards
, IFRS 3
Business Combinations
, IFRS 13
Fair Value Measurement
and IAS 40
Investment Property.
These amendments
are effective for annual periods beginning on or after July 1, 2014. Management anticipates that these amendments will not have any impact on the Partnerships combined and consolidated financial statements.
In May 2014, the IASB issued IFRS 15
Revenue from Contracts with Customers
, which applies to all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. IFRS 15 specifies how and when an IFRS reporter will recognize revenue as well as requiring
such entities to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18
Revenue
, IAS 11
Construction Contracts
and a number of revenue-related interpretations. The standard is effective for annual periods beginning on or after January 1,
2017 but early adoption is permitted. Management is currently evaluating the impact, if any, of this standard.
The impact of all other IFRS standards and amendments issued but not yet adopted is not expected to be material.
3. Vessels and Vessels under Construction
The movements in vessels and vessels under construction are reported in the following table:
Vessels
Vessels under
Cost
At January 1, 2013
118,481,930
Additions
456,286,613
Transfer from vessels under construction to vessels
574,768,543
(574,768,543
)
At December 31, 2013
574,768,543
Accumulated depreciation
At January 1, 2013
Depreciation expense
12,237,735
At December 31, 2013
12,237,735
Net book value
At December 31, 2013
562,530,808
At December 31, 2012
118,481,930
Vessels with an aggregate carrying amount of $562,530,808 as of December 31, 2013 (December 31, 2012: $0) have been pledged as collateral under the terms of the Partnerships loan agreements.
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construction
Vessels under construction
In May 2010, GAS-three Ltd. and GAS-four Ltd. entered into shipbuilding contracts for the construction of two LNG carriers (155,000 cubic meters each) with Samsung Heavy Industries Co. Ltd. The first vessel,
GasLog Shanghai
, was delivered on January 28, 2013, and the second vessel,
GasLog
Santiago
, was delivered on March 25, 2013.
In March 2011, GAS-five Ltd. entered into shipbuilding contract with Samsung Heavy Industries Co. Ltd. for the construction of one LNG carrier (155,000 cubic meters). The vessel,
GasLog Sydney
, was delivered on May 30, 2013.
4. Cash and Cash Equivalents
At December 31,
2012
2013
Current accounts
2,299
10,075,785
Time deposits
4,328,000
Total
2,299
14,403,785
With respect to the next installment and interest due for the loan facility of GAS-three Ltd. (Note 9), an amount of $1,977,619 is kept in a retention account as of December 31, 2013.
5. Trade and Other Receivables
An analysis of the trade and other receivable is as follows:
At December 31,
2012
2013
VAT receivable
5,562
50,390
Due from charterer
66,699
Other receivables
28,307
36,878
Total
33,869
153,967
As of December 31, 2012 and December 31, 2013, no material receivable balances were past due or impaired, and therefore no allowance was necessary.
6. Other Non-current Assets
An analysis of other non-current assets is as follows:
At December 31,
2012
2013
Accrued revenue from straight-line revenue
recognition
1,068,417
Guarantee claims
27,429
Other guarantees
146,874
Cash collaterals on swaps
890,000
Total
890,000
1,242,720
Other guarantees represent amounts due from a related party for advances made to our Manager in connection with security to a bank guarantee provided to the Greek government for the Subsidiaries.
7. Owners Capital and Contributed Surplus
Since their inception, the capital of each of the Subsidiaries consists of 12,000 authorized common shares with a par value of $1 per share, all of which have been issued and are outstanding, resulting in a total owners capital of $36,000. Each share is entitled to one vote.
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Contributed surplus represents capital contributed by the owner of each Subsidiary in excess of par value to fund working capital and shipyard installments and capital contributed through contributed services. Capital contributions-contributed services for the year ended December 31, 2013 of $627,000
represent the fair value of commercial management services provided by GasLog to the Partnership for the period from each vessels delivery date to the effective date of the commercial management agreements for which no fees were paid. The fair value of the contributed management services
represent the estimated value of $1,500 per vessel per day for the services received based on an annual fee of $540,000 for each vessel per year (refer to Note 14) as per the commercial management agreements contracted in July and August 2013 by the vessel owning companies, and has been recorded
within General and administrative expenses in the accompanying combined and consolidated statements of profit or loss and as Capital contributions-contributed services in the accompanying combined and consolidated statements of changes in equity.
8. Management of Capital
The Partnerships capital is comprised of ordinary share capital, contributed surplus, reserves and (accumulated deficit)/retained earnings.
The Partnerships objectives when managing capital are to provide an optimal return to shareholders over the short to medium term whilst ensuring the protection of its assets by minimizing risk. The Partnership seeks to achieve its objectives by managing its financial risks. The Partnership does not
have any externally imposed capital requirements.
9. Bank Loans
At December 31,
2012
2013
Amounts due within one year
24,188,723
Less: unamortized deferred loan issuance costs
(2,113,937
)
Loans current portion
22,074,786
Amounts due after one year
370,706,468
Less: unamortized deferred loan issuance costs
(6,789,470
)
Loans non-current portion
363,916,998
Total
385,991,784
(a) DnB Bank ASA and Export-Import Bank of Korea
On March 14, 2012, GAS-three Ltd. and GAS-four Ltd. entered into a loan agreement of up to $272,500,000 with DnB Bank ASA and the Export-Import Bank of Korea, in order to partially finance the acquisition of two LNG vessels. On January 18, 2013 and March 19, 2013, GAS-three Ltd. and
GAS-four Ltd. drew down $272,500,000 in total from the loan facility for the financing of the
GasLog Shanghai
and the
GasLog Santiago.
The balance outstanding of both tranches as of December 31, 2013 was $260,468,720 and is repayable in 45 equal quarterly installments, as well as a balloon payment
of $40,000,000 due together with the final installment in the first quarter of 2025 for each tranche. The loan bears interest at LIBOR plus a margin.
Each of the borrowers is required to have a minimum liquidity of $1,500,000 following the loan drawdown date.
(b) Nordea Bank Finland PLC, ABN Amro Bank N.V. and Citibank International PLC syndicated loan
On October 3, 2011, GAS-five Ltd. and GAS-six Ltd. jointly and severally entered into a loan agreement of up to $277,000,000 with Nordea Bank Finland PlC, ABN Amro Bank N.V. and Citibank International PLC in order to partially finance the acquisition of two LNG vessels. On May 24, 2013,
GAS-five Ltd. drew down $138,500,000 from the loan facility for the financing of the
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GasLog Sydney.
The balance outstanding of the respective tranche as of December 31, 2013 was $134,426,471 and is repayable in 22 equal quarterly installments and by a balloon installment equal to $89,617,647 payable together with the last installment no later than May 2019. The loan bears interest at
LIBOR plus a margin.
Each of the borrowers is required to have a minimum liquidity of $1,500,000 following the loan drawdown date.
(c) Securities covenants and guarantees
The obligations under the aforementioned facilities are secured by a first priority mortgage over the vessels, a pledge of the share capital of the respective vessel owning companies and a first priority assignment of earnings related to the vessels, including charter revenue, management revenue and
any insurance and requisition compensation. Obligations under the facilities are guaranteed by GasLog and GasLog Carriers Ltd. The facilities include customary respective covenants, and among other restrictions the facilities include a fair market value covenant pursuant to which an event of default
could occur under the facilities if the aggregate fair market value of the collateral vessels (without taking into account any charter arrangements) were to fall below 120% of the aggregate outstanding principal balance under the facilities and any negative marked-to-market value arising under any hedging
transaction. In the event that the value of a vessel falls below the threshold, we could be required to provide the lender with additional security or prepay a portion of the outstanding loan balance, which could negatively impact our liquidity.
(d) Corporate guarantor financial covenants
GasLog, as corporate guarantor for the loan facilities listed above, is subject to specified financial covenants on a combined basis. These financial covenants include the following:
(i)
net working capital (excluding the current portion of long-term debt) must be positive;
(ii)
total indebtedness divided by total capitalization must not exceed 75%;
(iii)
beginning on December 31, 2013, the ratio of EBITDA over debt service obligations (including interest and debt repayments) on a trailing 12 months basis must be no less than 110%;
(iv)
beginning on December 31, 2013, the aggregate amount of all unencumbered cash and cash equivalents must exceed the higher of 3% of total indebtedness or $20,000,000 after the first drawdown;
(v)
GasLog is permitted to pay dividends, provided that GasLog Group holds unencumbered cash equal to at least 4% of its total indebtedness, subject no event of default having occurred or occurring as a consequence of the payment of such dividends; and
(vi)
GasLog Groups market value adjusted net worth must at all times exceed $350,000,000.
The credit facilities also impose certain restrictions relating to GasLog, including restrictions that limit its ability to make any substantial change in the nature of its business or to engage in transactions that would constitute a change of control, without repaying all of the GasLog Groups indebtedness
in full, or to allow the GasLog Groups largest shareholders to reduce their shareholding in GasLog below specified thresholds.
Compliance with the financial covenants is required on a semi-annual basis and GasLog Group was in compliance as of December 31, 2013.
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Loan Repayment Schedule
The maturity table below reflects the principal repayments of the loans outstanding as of December 31, 2013 based on the repayment schedule of the respective loan facilities (as described above):
At December 31, 2013
Not later than one year
24,188,723
Later than one year and not later than three years
48,377,446
Later than three years and not later than five years
228,637,846
Later than five years
93,691,176
Total
394,895,191
The weighted average interest rate for both outstanding loan facilities as of December 31, 2013 was 3.90% (2012: n/a).
The carrying amount of the Partnerships bank debt recognized in the combined and consolidated financial statements approximates its fair value.
10. Other Payables and Accruals
An analysis of other payables and accruals is as follows:
At December 31,
2012
2013
Accrued legal and professional fees
3,758
43,925
Unearned revenue
7,071,341
Accrued employee costs
97,394
Accrued financing cost.
423,920
Other payables and accruals
57,836
599,378
Accrued interest
1,397,587
Accrued management fees (Note 14)
162,000
Accrued special bonus
836,000
Total
1,321,514
9,371,625
The unearned revenue of $7,071,341 represents charter hire received in December 2013 relating to January 2014.
11. General and Administrative Expenses
An analysis of general and administrative expenses is as follows:
For the year ended
2012
2013
Travel and accommodation
30,425
1,166
Legal and professional fees
42,321
Vessel naming ceremony expenses
199,846
Commercial management fees (Note 14)
1,243,500
Foreign exchange differences
(12,201
)
37,792
Other expenses
11,908
Total
30,132
1,524,625
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December 31,
12. Vessel Operating Costs
An analysis of vessel operating costs is as follows:
For the year ended
2012
2013
Management fees and other ship management expenses (Note 14)
1,118,738
Crew wages
7,292,871
Technical maintenance expenses
1,462,044
Provisions and stores
908,080
Insurance expenses
811,416
Brokers commissions
786,123
Other operating expenses
717,444
Total
13,096,716
13. Financial Income and Costs
For the year ended
2012
2013
Financial income
Interest income
110,109
31,686
Total financial income
110,109
31,686
Financial costs
Amortization of deferred loan issuance costs
1,697,904
Interest expense on loans
8,993,313
Realized loss on cash flow hedges
1,384,731
Other financial costs
606
57,195
Total financial costs
606
12,133,143
14. Related Party Transactions
The Partnership had the following balances with related parties which have been included in the combined and consolidated statements of financial position:
Amounts due from related parties
At December 31,
2012
2013
Due from GasLog
18,151
18,151
Total
18,151
18,151
Amount due to related parties
As of December 31,
2012
2013
Due to GasLog LNG Services Ltd.
(a)
394,788
3,918,098
Due to GasLog Carriers Ltd.
(b)
8,397,841
20,756,019
Total
8,792,629
24,674,117
(a)
The balance of $3,918,098 represents payments made by the Manager to cover operating expenses of the Partnership of $3,790,231 (2012: $0) as well as amounts owed for management services and construction supervision fees of $127,867 (2012: $394,788). The costs of construction supervision
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December 31,
December 31,
and management services provided during the construction period were capitalized to vessel cost as directly attributable costs to bringing the vessels to the condition necessary for them to be capable of operating in the manner intended by management (refer to the table below that illustrates the
capitalized and expensed costs).
(b)
The balance of $20,756,019 consists of (a) $9,800,000 dividend declared to the Parent in December 2013 that has not yet been paid and (b) $10,956,019 paid by the Parent to provide the Partnership with funding to cover expenses during the construction period (2012: $8,397,841). These costs that were
invoiced by third parties were either capitalized (Note 3) or expensed depending on their nature and timing of the services provided.
The Partnership had the following transactions with GasLog LNG Services and GasLog, related parties:
Details
For the year ended
2012
2013
Costs capitalized to vessel cost
Construction supervision fees
(i)
2,479,988
876,789
Pre-delivery management fees
(ii)
90,000
171,000
Ship Management System (SMS fee)
(iv)
420,000
Costs expensed
Management fees (included in Vessel operating costs)
(iii)
1,118,738
Commercial management fee (included in General and administrative expenses)
(v)
1,243,500
Other vessel operating costs
40,320
(i)
The Manager charged the vessel-owning companies shipbuilding supervision fees pursuant to the shipbuilding supervision contracts that were signed on June 2, 2010 with respect to GAS-three Ltd. and GAS-four Ltd. and on March 31, 2011 with respect to GAS-five Ltd. In accordance with the
shipbuilding supervision contracts, the Manager was appointed as the supervisor of the construction of the vessels under the relevant shipbuilding contracts until the successful delivery of each vessel. Monthly charge rates for the site inspection team varied from $12,500 to $18,500 according to the level
of seniority of the inspectors.
(ii)
GasLog LNG Services charged the vessel owning companies pre-delivery management fees of a monthly charge of $22,500 for approximately four months prior to each vessels delivery date for management services relating to the vessels supervision provided during the same period.
(iii)
On August 16, 2010, GAS-three Ltd. and GAS-four Ltd. and on March 31, 2011, GAS-five Ltd. entered into ship management agreements (Ship Management Agreement) with GasLog LNG Services. These agreements are effective from each vessels delivery until the vessel is sold or becomes a
total loss. In addition, they may also be terminated by the owners by giving the managers at least three months notice and provide for the following:
Management Fees
A fixed monthly charge of $30,000 per vessel is payable by the Partnership to GasLog LNG Services for the provision of management services such as crew, operational and technical management, procurement, accounting, budgeting and reporting, health, safety, security and
environmental protection, insurance arrangements, sale or purchase of vessels, general administration and quality assurance. The aforementioned fee will be adjusted annually on December 31st based on the US Consumer Price Index for All Urban Consumers (CPI-U).
Superintendent Fees
A fee of $1,000 per day is payable to GasLog LNG Services for each day in excess of 25 days per calendar year for which a superintendent performs visits to the vessels.
Share of General Expenses
A monthly lump sum amounting to 11.25% of the Management Fee is payable to GasLog LNG Services during the term of this agreement.
F-23
December 31,
Annual Incentive Bonus
Annual Incentive Bonus may be payable to GasLog LNG Services, at the Partnerships discretion, for remittance to the crew of an amount of up to $72,000 based on Key Performance Indicators predetermined annually.
(iv)
Pursuant to the shipbuilding supervision contracts described above in (i), the vessel owning companies entered into a professional consulting services contract with the Manager. The professional consulting services contract provides that the Manager will be paid a one-off fee of $130,000 in exchange for
the development and installation of a Ship Management System for each vessel. In addition the Manager charged the vessel owning companies for an additional fee of $10,000 per vessel with respect of the preparation and verification of the aforementioned system.
(v)
On July 19, 2013, GAS-five Ltd., and on August 28, 2013, GAS-three Ltd. and GAS-four Ltd., entered into commercial management agreements with GasLog pursuant to which the Subsidiaries will receive commercial management services relating to the operation of the vessels, including and not
limited to negotiation of the vessels possible employment, assessing market conditions on specific issues, keeping proper accounting records and handling and advising on claims or disputes. The annual management fee will be $540,000 for each vessel payable quarterly in advance in lump sum amounts.
The agreements may be terminated by either party at any time giving the other party not less than twelve months written notice. The fair value of the services provided in the year ended December 31, 2013 amounted to $1,243,500 from which $627,000 related to the services provided for the period
from each vessels delivery date to the effective date of the commercial management agreements for which no fees were paid and have been recorded as Contributed capital-contributed services in the accompanying combined and consolidated statement of changes in equity (Notes 7 and 11).
Construction, supervision fees, pre-delivery management fees, and SMS fees are capitalized to the cost of vessel. Fees paid pursuant to the Ship Management Agreements and the Commercial Management Agreements are included in Vessel operating costs and General and administrative expenses,
respectively. Pursuant to a commission agreement with Samsung Heavy Industries Co. Ltd. shipyard, commissions due from the shipyard in relation to the new building orders will be paid by Samsung Heavy Industries Co. Ltd. shipyard to DryLog Investments Ltd., an affiliate of Ceres Shipping. Upon
receipt of the commissions, DryLog Investments Ltd. will forward the payments to the vessel-owning subsidiaries through the Parent, after deducting handling fees for each payment.
15. Commitments and Contingencies
Future gross minimum revenues receivable upon collection of hire under non-cancellable time charter agreements for vessels in operation as of December 31, 2013 are as follows (vessel off-hires and drydocking days that could occur but are not currently known are not taken into consideration; in
addition early delivery of the vessels by the charterers is not accounted for):
Period
December 31, 2013
Not later than one year
83,259,344
Later than one year and not later than three years
168,551,290
Later than three years and not later than five years
122,722,889
More than five years
11,894,721
Total
386,428,244
On May 9, 2011, GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. signed time charter agreements with BG Group, for the employment of their vessels from the date of delivery of the vessels through January 2018, March 2018 and May 2019, respectively, with charter options to extend the
agreements for up to two extension periods of three or four years. The charter party agreements provide for daily hire rates that include two componentsa capital cost component that is fixed for
F-24
the period of the agreement and an operating cost component that has a fixed annual escalation rate.
Various claims, suits and complaints, including those involving government regulations, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, environmental claims, agents and insurers and from claims with suppliers relating to the operations of
the Partnerships vessels. Currently, management is not aware of any such claims or contingent liabilities requiring disclosure in the combined and consolidated financial statements.
16. Financial Risk Management
The Partnerships activities expose it to a variety of financial risks, including market price risk, liquidity risk and credit risk. The Partnerships overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Partnerships
financial performance. The Partnership makes use of derivative financial instruments such as interest rate swaps to mitigate certain risk exposures.
Market risk
Interest rate risk:
Interest rate risk is the risk that interest costs will fluctuate due to changes in market interest rates. The Partnerships financial income and operating cash flows fluctuate based on changes in market interest rates as the Partnership has loans that bear interest at floating rates. The
Partnership uses interest rate swaps to manage its exposure to interest rate movements on bank borrowings. At December 31, 2013, the Partnership has hedged 78.9% of its future variable rate interest exposure relating to its existing loan facilities by swapping the variable rate for a fixed rate (2012:
79.7%).
The fair value of the swaps at December 31, 2013 was estimated as a net loss of $4,058,897 (2012: $11,427,876). The effective portion of changes in the fair value of the interest rate swaps designated as cash flow hedging instruments (Note 17) amounting to $3,776,876 gain (2012: $8,687,198 loss) was
recognized directly in the combined and consolidated statement of changes in equity.
Interest rate sensitivity analysis:
The interest rate swap agreements described below are subject to market risk as they are recorded at fair value in the combined and consolidated statements of financial position at year end. The fair value of net interest rate swaps liabilities increases when interest
rates decrease and decreases when interest rates increase. At December 31, 2013, if interest rates had increased or decreased by 10 basis points with all other variables held constant, the positive/(negative) impact, respectively, on the fair value of the interest rate swaps would have amounted to
approximately $1,140,237 (2012: $1,344,672). This amount would have affected the other comprehensive income by $511,219 (2012: $1,344,672) and the (loss)/gain on interest rate swaps by $629,018 (2012: $0). During the year ended December 31, 2013, if interest rates had increased or decreased by 10
basis points with all other variables held constant, the increase/ (decrease), respectively, in interest expense on the un-hedged portion of the Groups loans would have amounted to approximately $72,570.
Currency Risk:
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Partnerships functional
currency. The Partnership is exposed to foreign exchange risk arising from various currency exposures primarily with respect to general and crew costs denominated in Euros. The Partnership does not hedge movements in exchange rates but management monitors the exchange rate fluctuations on a
continuous basis. As an indication of the extent of our sensitivity to changes in exchange rate, a 10% increase in the average euro/dollar exchange rate would have decreased our profit and cash flows during the year ended December 31, 2013 by $668,304, based upon our expenses during the year (2012:
$0).
F-25
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses.
The Partnership manages its liquidity risk by having secured credit lines and by receiving capital contributions to fund its commitments and by maintaining cash and cash equivalents.
The following tables detail the Partnerships expected cash flows for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Partnership can be required to pay. The table includes both
interest and principal cash flows. Variable future interest payments were determined based on an average LIBOR plus the margins applicable to the Partnerships loans at the end of each year presented.
Weighted-
Less than
1-3 months
3-12 months
1-5 years
5+ years
Total
December 31, 2013
Trade and other accounts payable
200,599
210,554
293,640
704,793
Due to related parties
3,918,098
20,756,019
24,674,117
Other payables and accruals
7,925,030
1,446, 595
9,371,625
Variable interest loans
2.76
%
7,770,520
26,201,643
309,103,747
94,854,134
437,930,044
Total
12,043,727
9,427,669
47,251,302
309,103,747
94,854,134
472,680,579
December 31, 2012
Trade and other accounts payable
519,565
73,999
593,564
Due to related parties
394,788
8,397,841
8,792,629
Other payables and accruals
343,039
142,475
836,000
1,321,514
Total
1,257,392
216,474
9,233,841
10,707,707
The amounts included above for variable interest rate instruments is subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.
The following table details the Partnerships expected cash flows for its derivative financial liabilities. The table has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis. When the amount payable or receivable is not
fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the end of the reporting period. The undiscounted contractual cash flows are based on the contractual maturities of the derivatives.
Less than
1-3 months
3-12 months
1-5 years
5+ years
Total
December 31, 2013
Interest rate swap
279,036
867,283
3,161,047
173,016
4,480,382
Total
279,036
867,283
3,161,047
173,016
4,480,382
December 31, 2012
Interest rate swap
2,791,281
8,878,916
(152,293
)
11,517,904
Total
2,791,281
8,878,916
(152,293
)
11,517,904
The Partnership expects to be able to meet its current obligations resulting from financing and operating its vessels using the liquidity existing at year end and the cash generated by operating activities. The Partnership expects to be able to meet its long-term obligations resulting from financing its
vessels through cash generated from operations.
F-26
average
effective
interest
rate
1 month
1 month
Credit risk
Credit risk is the risk that a counterparty will fail to discharge its obligations and cause a financial loss. The Partnership is exposed to credit risk in the event of non-performance by any of the counterparties. To limit this risk, the Partnership deals exclusively with creditworthy financial institutions
and customers.
At December 31,
2012
2013
Cash
2,299
14,403,785
Short-term investments
1,500,000
Trade and other receivables
33,869
153,967
For the year ended December 31, 2013, all of the Partnerships revenue was earned from one customer, a subsidiary of BG Group Plc. (BG Group) and accounts receivable were not collateralized; however, management believes that the credit risk is partially offset by the creditworthiness of the
Partnerships counterparty and the fact that the hire is being collected in advance. The Partnership did not experience significant credit losses on its accounts receivable portfolio during the year ended December 31, 2013. The carrying amount of financial assets recorded in the combined and consolidated
financial statements represents the Partnerships maximum exposure to credit risk. Management monitors exposure to credit risk, and they believe that there is no substantial credit risk arising from the Partnerships counterparty.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
17. Derivative Financial Instruments
Interest rate swap agreements
The fair value of the derivative assets is as follows:
At December 31,
2012
2013
Financial liabilities carried at fair value through profit or loss (FVTPL)
Interest rate swaps
799,926
Total
799,926
Derivative financial instruments, noncurrent asset
799,926
Total
799,926
The fair value of the derivative liabilities is as follows:
At December 31,
2012
2013
Derivatives designated and effective as hedging instruments carried at fair value
Interest rate swaps
11,427,876
2,816,370
Financial liabilities carried at fair value through profit or loss (FVTPL)
Interest rate swaps
2,042,453
Total
11,427,876
4,858,823
Derivative financial instruments, current liability
3,132,045
4,233,398
Derivative financial instruments, noncurrent liability
8,295,831
625,425
Total
11,427,876
4,858,823
F-27
Under these swap transactions, the bank counterparty effects quarterly floating-rate payments to the Partnership for the notional amount based on the three-month U.S. dollar LIBOR, and the effects quarterly payments to the bank on the notional amount at the respective fixed rates.
The decrease in net derivative liabilities as of December 31, 2013 compared to December 31, 2012 resulted mainly from the decrease in the notional amount of the interest rate swaps and the increase in LIBOR yield curve used to calculate the present value of the estimated future cash flows.
Interest rate swaps designated as cash flow hedging instruments
The principal terms of the interest rate swaps designated as cash flow hedging instruments were as follows:
Subsidiary
Counterparty
Trade
Effective
Termination
Fixed
Notional Amount at
2012
2013
GAS-three Ltd.
(1)
DNB bank ASA
April 2012
Jan 2013
Jan 2018
1.45
%
96,250,000
GAS-four Ltd.
(1)
DNB bank ASA
April 2012
Mar 2013
Mar 2018
1.50
%
96,250,000
GAS-five Ltd.
Nordea Bank Finland
Nov 2011
May 2013
May 2018
2.04
%
60,000,000
58,235,293
GAS-five Ltd.
Nordea Bank Finland
Nov 2011
May 2013
May 2018
1.96
%
75,000,000
72,794,117
327,500,000
131,029,410
(1)
In 2013, hedge accounting for these interest rate swaps was discontinued because the effectiveness criteria were not met as the fair value of the relevant interest rate swaps when compared with the hypothetical swaps was outside the required range of effectiveness (80%-125%). The cumulative loss of
$3,886,488 from the period that the hedges were effective will be recycled to the profit or loss in the same manner as the hedged item will affect profit or loss (i.e., amortized until the maturity of the hedging transaction). The amount that was reclassified to profit or loss for the year ended December
31, 2013 is $654,964.
The fixed interest agreements converted the floating interest rate exposure into a fixed interest rate in order to hedge the Partnerships exposure to fluctuations in prevailing market interest rates. The derivative instruments listed above qualified as cash flow hedging instruments for accounting
purposes as of December 31, 2013 with the exception of the two agreements for which the effectiveness criteria were not met as mentioned above.
No new swap agreements entered into by the Partnership during the year ended December 31, 2013. For the two swap agreements entered into by the Partnership during the year ended December 31, 2012, there was a loss of $931,400 recognized at their inception in the combined and consolidated
statement of profit or loss under (Loss)/gain on interest rate swaps, which included fees and evidence that the respective transaction prices exceeded the valuation based on observable market data.
For the year ended December 31, 2013, the effective portion of changes in the fair value of derivatives designated as cash flow hedging instruments, amounting to a profit of $3,776,876, was recognized in Other comprehensive income (December 31, 2012: $8,687,198 loss). The increase in profit
resulted from the decrease in the notional amount of the interest rate swaps designated as cash flow hedges and the increase in the LIBOR yield curve used to calculate the present value of the estimated future cash flows. The gain of $16,742 relating to the ineffective portion was recognized during the
year ended December 31, 2013, in the combined and consolidated statement of profit or loss under (Loss)/gain on interest rate swaps (December 31, 2012: $9,032 loss).
F-28
Date
Date
Date
Interest
Rate
December 31,
Interest rate swaps held for trading
The principal terms of the interest rate swaps held for trading were as follows:
Subsidiary
Counterparty
Trade
Effective
Termination
Fixed
Notional
Amount at
December 31,
2012
2013
GAS-three Ltd.
DNB bank ASA
April 2012
Jan 2013
Jan 2018
1.45
%
90,234,360
GAS-four Ltd.
DNB bank ASA
April 2012
Mar 2013
Mar 2018
1.50
%
90,234,360
180,468,720
The change in the fair value of these contracts as of December 31, 2013 amounted to a net gain of $3,575,361 (which was recognized against earnings in the period incurred and is included in the combined and consolidated statement of profit or loss under (Loss)/gain on interest rate swaps
(December 31, 2012: $0).
An analysis of (Loss)/gain on interest rate swaps is as follows:
At December 31,
2012
2013
Inception loss for cash flow hedges
(931,400
)
Unrealized gain on interest rate swaps held for trading
3,575,361
Realized loss on interest rate swaps held for trading
(1,900,952
)
Net change in fair value of cash flow hedges reclassified to profit or loss
(654,964
)
Ineffectiveness on cash flow hedges
(9,032
)
16,742
Total
(940,432
)
1,036,187
The realized loss on interest rate swaps for trading represents the realized loss for the two interest rate swaps for which hedge accounting was discontinued in 2013, from the dates that the effectiveness criteria were not met. The loss resulted from the fact that the fixed interest rates specified in the
interest rate swap agreements as payable by the Company were higher than the applicable floating rate (based on the 3-month LIBOR rate) specified in the interest rate swap agreements as payable by the bank counterparty.
Fair value measurements
The fair value of the interest rate swaps at the end of reporting period was determined by discounting the future cash flows using the interest rate yield curves at the end of the reporting period and the credit risk inherent in the contract. The Partnership uses its judgment to make assumptions that
are mainly based on market conditions for the estimation of the counterparty risk and the Partnerships own risk that are considered for the calculation of the fair value of the interest rate swaps. The interest rate swaps meet Level 2 classification, according to the fair value hierarchy as defined by IFRS
7,
Financial Instruments Disclosure.
There were no financial instruments in Levels 1 and 3 and no transfers between Levels 1, 2 or 3 during the periods presented. The definitions of the Levels, provided by IFRS 7
Financial Instruments: Disclosures
, are based on the degree to which the fair value is
observable:
Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
F-29
Date
Date
Date
Interest
Rate
18. Taxation
Under the laws of the country of the vessels registration, the Partnership is not subject to tax on international shipping income. However, it is subject to registration and tonnage taxes, which are included in vessel operating and supervision costs in the combined and consolidated statement of profit
or loss.
Under the United States Internal Revenue Code of 1986, as amended (the Code), the U.S. source gross transportation income of a ship-owning or chartering corporation, such as the Partnership, is subject to a 4% U.S. Federal income tax without allowance for deduction, unless that corporation
qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in
the United States.
For the year ended December 31, 2013, the Partnership has not made any U.S. port calls, and hence did not have U.S. source gross transportation income.
19. Subsequent Events
Upon completion of the IPO on May 12, 2014 (refer to note 1), the Partnership entered into an administrative services agreement (the Administrative Services Agreement) with GasLog, pursuant to which GasLog will provide certain management and administrative services. The services provided
under the Administrative Services Agreement will be provided as the Partnership may direct, and include bookkeeping, audit, legal, insurance, administrative, clerical, banking, financial, advisory, client and investor relations services. The Administrative Services Agreement will continue indefinitely until
terminated by the Partnership upon 90 days notice for any reason in the sole discretion of the Partnerships board of directors. GasLog will receive a service fee of $588,000 per vessel per year in connection with providing services under this agreement.
Upon completion of the IPO on May 12, 2014, each of the vessel owning Subsidiaries is subject to an amended ship management agreement (collectively, the Amended Ship Management Agreements) under which each vessel owning subsidiary will pay a management fee of $46,000 per month to
the Manager and will reimburse the Manager for all expenses incurred on their behalf. The Amended Ship Management Agreements provide also for superintendent fees of $1,000 per day payable to the Manager for each day in excess of 25 days per calendar year for which a superintendent performed
visits to the vessels, an annual incentive bonus of up to $72,000 based on key performance indicators predetermined annually and have clauses for decreased management fees in case of a vessels lay-up. The management fees are subject to an annual adjustment, agreed between the parties in good faith,
on the basis of general inflation and proof of increases in actual costs incurred by the Manager. Each Amended Ship Management Agreement continues indefinitely until terminated by either party.
Upon completion of the IPO on May 12, 2014, the vessel-owning Subsidiaries entered into amended commercial management agreements with GasLog (the Amended Commercial Management Agreements), pursuant to which GasLog will provide certain commercial management services, including
chartering services, consultancy services on market issues and invoicing and collection of hire payables, to the Partnership. The annual commercial management fee under the amended agreements is $360,000 for each vessel payable quarterly in advance in lump sum amounts.
Upon completion of the IPO on May 12, 2014, the Partnership entered into an omnibus agreement with GasLog, our general partner and certain of our other subsidiaries. The omnibus agreement governs among other things (i) when and the extent the Partnership and GasLog may compete against
each other, (ii) the time and the value at which the Partnership may exercise the right to purchase certain offered vessels by GasLog, (iii) certain rights of first offer granted to GasLog to purchase any of its vessels on charter for less than five full years from the Partnership and vice versa and (iv)
GasLogs provisions of certain indemnities to the Partnership.
Upon completion of the IPO on May, 2014, the Partnership entered into a $30,000,000 revolving credit facility with GasLog, to be used for general partnership purposes. The credit facility is for a
F-30
term of 36 months, unsecured and bears interest at a rate of 5.0% per annum, with no commitment fee for the first year. After the first year, the interest will increase to a rate of 6.0% per annum, with an annual 2.4% commitment fee on the undrawn balance. As of June 30, 2014 the total available
amount of the revolving credit facility remained undrawn.
GasLog Partners used the net IPO proceeds of $186,030,150 to (a) prepay $82,633,649 of debt plus accrued interest of $416,108 relating to the GAS-five Ltd. facility, (b) make a payment of $2,284,871 (including $271,199 accrued interest) to settle the marked-to-market loss on termination of one
interest rate swap and reduction of a second interest rate swap in connection with the aforementioned debt prepayment and (c) pay cash consideration of $65,695,522 to Gaslog as part consideration for the Subsidiaries contributed. The balance of $35,000,000 was retained by the Partnership for general
corporate purposes.
On July 30, 2014, the board of directors of GasLog Partners declared a prorated quarterly cash distribution, with respect to the quarter ended June 30, 2014, of $0.20604 per unit. The distribution was prorated for the period beginning on May 12, 2014, which was the closing date of GasLog Partners
IPO, and ending on June 30, 2014, and corresponds to a quarterly distribution of $0.375 per outstanding unit, or $1.50 per outstanding unit on an annualized basis. The prorated cash distribution is payable on August 14, 2014, to all unitholders of record as of August 11, 2014.
On August 11, 2014, the board of directors of GasLog Partners approved, subject to the final purchase price being within a pre-approved amount, a Share Purchase Agreement to purchase from GasLog Carriers, a direct subsidiary of GasLog, 100% of the ownership interests in GAS-sixteen Ltd. and
GAS-seventeen Ltd., the entities that own the
Methane Rita Andrea
and the
Methane Jane Elizabeth
, respectively. GasLog purchased the
Methane Rita Andrea
and the
Methane Jane Elizabeth
from BG Group in April 2014.
F-31
GasLog Partners LP
Note
December 31, 2013
June 30, 2014
Assets
Non-current assets
Derivative financial instruments
8
799,926
Other non-current assets
1,242,720
1,642,659
Vessels
4
562,530,808
554,731,564
Total non-current assets
564,573,454
556,374,223
Current assets
Trade and other receivables
153,967
623,536
Inventories
730,209
627,366
Due from related parties
3
18,151
Prepayments and other current assets
390,526
413,250
Derivative financial instruments
8
151,917
Short-term investments
1,500,000
3,002,327
Cash and cash equivalents
14,403,785
52,569,863
Total current assets
17,196,638
57,388,259
Total assets
581,770,092
613,762,482
Owners/partners equity and liabilities
Owners/partners equity
Owners capital
156,168,950
Common unitholders (9,822,358 units issued and outstanding as at June 30, 2014)
10
189,588,258
Subordinated unitholders (9,822,358 units issued and outstanding as at June 30, 2014)
10
94,872,388
General partner (400,913 units issued and outstanding as at June 30, 2014)
10
3,875,488
Total owners/partners equity
156,168,950
288,336,134
Current liabilities
Trade accounts payable
704,793
859,576
Amounts due to related parties
3
24,674,117
14,757,994
Derivative financial instruments
8
4,233,398
1,827,845
Other payables and accruals
6
9,371,625
10,177,398
Loanscurrent portion
5
22,074,786
17,697,435
Total current liabilities
61,058,719
45,320,248
Non-current liabilities
Derivative financial instruments
8
625,425
1,189,159
Loansnon-current portion
5
363,916,998
278,916,941
Total non-current liabilities
364,542,423
280,106,100
Total owners/partners equity and liabilities
581,770,092
613,762,482
The accompanying notes are an integral part of these unaudited condensed combined
F-32
Unaudited condensed combined and consolidated statements of financial position
As of December 31, 2013 and June 30, 2014
(All amounts expressed in U.S. Dollars, except unit data)
and consolidated financial statements.
GasLog Partners LP
Note
For the three months ended
For the six months ended
June 30,
June 30,
June 30,
June 30,
Revenues
16,339,031
20,973,536
21,734,558
41,716,592
Vessel operating costs
(3,884,754
)
(4,094,089
)
(4,982,522
)
(7,945,552
)
Depreciation
4
(3,115,262
)
(4,005,967
)
(4,128,759
)
(7,967,321
)
General and administrative expenses
7
(415,144
)
(1,114,208
)
(661,514
)
(1,706,951
)
Profit from operations
8,923,871
11,759,272
11,961,763
24,096,768
Financial costs
9
(3,010,168
)
(6,381,990
)
(4,115,947
)
(10,228,993
)
Financial income
7,250
5,142
15,680
9,169
Gain/(loss) on interest rate swaps
8,9
2,482,393
(2,997,523
)
2,746,713
(3,615,838
)
Total other expenses
(520,525
)
(9,374,371
)
(1,353,554
)
(13,835,662
)
Profit for the period
8,403,346
2,384,901
10,608,209
10,261,106
Earnings per unit for the period May 12, 2014 to June 30, 2014, basic and diluted:
11
Common unit
0.21
0.21
Subordinated unit
0.18
0.18
General partner unit
0.19
0.19
The accompanying notes are an integral part of these unaudited condensed combined
F-33
Unaudited condensed combined and consolidated statements of profit or loss
For the three and six months ended June 30, 2013 and 2014
(All amounts expressed in U.S. Dollars except unit data)
2013
2014
2013
2014
and consolidated financial statements.
GasLog Partners LP
Note
For the three months ended
For the six months ended
June 30,
June 30,
June 30,
June 30,
Profit for the period
8,403,346
2,384,901
10,608,209
10,261,106
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Effective portion of changes in fair value of cash flow hedges
8
2,577,288
(469,507
)
3,541,625
(309,593
)
Recycled loss of cash flow hedges reclassified to profit or loss
8
193,781
1,688,392
263,144
1,880,043
Other comprehensive income for the period
2,771,069
1,218,885
3,804,769
1,570,450
Total comprehensive income for the period
11,174,415
3,603,786
14,412,978
11,831,556
The accompanying notes are an integral part of these unaudited condensed combined
F-34
Unaudited condensed combined and consolidated statements of comprehensive income
For the three and six months ended June 30, 2013 and 2014
(All amounts expressed in U.S. Dollars, except unit data)
2013
2014
2013
2014
and consolidated financial statements.
GasLog Partners LP
Limited Partners
General partner
Common unitholders
Subordinated
unitholders
Total
Owners
Total
Units
Units
Units
Balance at January 1, 2013
106,628,923
106,628,923
Capital contributions
28,062,945
28,062,945
Capital contributions-contributed services
421,500
421,500
Profit for the period
10,608,209
10,608,209
Other comprehensive income for the period
3,804,769
3,804,769
Total comprehensive income for the period
14,412,978
14,412,978
Balance at June 30, 2013
149,526,346
149,526,346
Balance at January 1, 2014
156,168,950
156,168,950
Capital contribution
1,000
1,000
Profit from January 1, 2014 to May 11, 2014 (see note 11)
6,438,142
6,438,142
Other comprehensive income from January 1, 2014 to May 11, 2014
1,440,590
1,440,590
Total comprehensive income from January 1, 2014 to May 11, 2014
7,878,732
7,878,732
Net assets contributed by GasLog Ltd. in exchange for General partner, Common, Subordinated units and cash
400,913
3,796,432
162,358
1,534,309
9,822,358
93,022,419
98,353,160
(164,048,682
)
(65,695,522
)
Proceeds from issuance of common units, net of costs (see note 10)
9,660,000
186,030,150
186,030,150
186,030,150
Profit from May 12, 2014 to June 30, 2014 (see note 11)
76,459
2,023,799
1,722,706
3,822,964
3,822,964
Other comprehensive income from May 12, 2014 to June 30, 2014
2,597
127,263
129,860
129,860
Total comprehensive income from May 12, 2014 to June 30, 2014
79,056
2,023,799
1,849,969
3,952,824
3,952,824
Balance at June 30, 2014
400,913
3,875,488
9,822,358
189,588,258
9,822,358
94,872,388
288,336,134
288,336,134
The accompanying notes are an integral part of these unaudited condensed combined
F-35
Unaudited condensed combined and consolidated statements of changes in owners/partners equity
For the six months ended June 30, 2013 and 2014
(All amounts expressed in U.S. Dollars, except unit data)
Partners
equity
capital
and consolidated financial statements.
GasLog Partners LP
For the six months ended
June 30, 2013
June 30, 2014
Cash flows from operating activities:
Profit for the period
10,608,209
10,261,106
Adjustments for:
Depreciation
4,128,759
7,967,321
Financial costs
4,115,949
10,228,992
Financial income
(15,680
)
(9,169
)
Unrealized (gain)/loss on interest rate swaps
(3,501,428
)
2,390,312
Non-cash contributed services
421,500
15,757,309
30,838,562
Movements in working capital
2,023,861
(9,627, 380
)
Cash provided by operations
17,871,170
21,211,182
Interest paid
(2,236,507
)
(8,431,734
)
Net cash from operating activities
15,544,663
12,779,448
Cash flows from investing activities:
Payments for vessels
(452,791,594
)
Financial income received
11,808
11,054
Purchase of short-term investments
1,500,000
Maturity of short-term investments
(3,002,327
)
Net cash used in investing activities
(452,779,786
)
(1,491,273
)
Cash flows from financing activities:
Bank loan drawdown
411,000,000
Bank loan repayments
(4,010,448
)
(93,456,725
)
Cash remittance to GasLog in exchange for contribution of net assets
(65,695,522
)
IPO proceeds, net of expenses
186,030,150
Payment of loan issuance costs
(27,587
)
Increase in amounts due to shareholders
13,728,649
Capital contributions received
28,062,945
Net cash from financing activities
448,753,559
26,877,903
Increase in cash and cash equivalents
11,518,436
38,166,078
Cash and cash equivalents, beginning of the period
2,299
14,403,785
Cash and cash equivalents, end of the period
11,520,735
52,569,863
The accompanying notes are an integral part of these unaudited condensed combined
F-36
Unaudited condensed combined and consolidated statements of cash flows
For the six months ended June 30, 2013 and 2014
(All amounts expressed in U.S. Dollars)
and consolidated financial statements.
GasLog Partners LP
1. Organization and Operations
GasLog Partners LP (the Partnership) was formed as a limited partnership under the laws of the Marshall Islands on January 23, 2014, being a wholly-owned subsidiary of GasLog Ltd. (GasLog) for the purpose of initially acquiring the interests in three liquefied natural gas (LNG) carriers that
were contributed by GasLog in connection with the initial public offering of its common units (the IPO).
On May 12, 2014, the Partnership completed its IPO with the sale and issuance of 9,660,000 common units (including 1,260,000 units in relation to the overallotment option exercised in full by the underwriters), resulting in gross proceeds of $202,860,000 and representing a 48.2% limited partner
interest. Concurrently with the IPO, the Partnership acquired a 100% ownership interest in GAS-three Ltd., GAS-four Ltd. and GAS-five Ltd. from GasLog in exchange for (i) 162,358 common units and 9,822,358 subordinated units issued to GasLog representing a 49.8% limited partner interest and all of
the incentive distribution rights (IDRs) that entitle GasLog to increasing percentages of the cash that the Partnership distributes in excess of $0.43125 per unit per quarter, (ii) 400,913 general partner units issued to GasLog Partners GP LLC (the general partner), a wholly-owned subsidiary of GasLog,
representing a 2.0% general partner interest and (iii) $65,695,522 of cash consideration paid directly to GasLog from the IPO proceeds.
For the periods prior to the formation of GasLog Partners LP the financial statements represent the combined statements of the ship-owning companies listed below (the Subsidiaries) using the historical carrying costs of the assets and the liabilities from their dates of incorporation. All references to
the Partnership prior to the formation of GasLog Partners LP refer to the Subsidiaries and references to the Partnership subsequent to the formation of GasLog Partners LP refer to GasLog Partners LP and its subsidiaries, including the Subsidiaries. For convenience hereinafter the financial statements for
all periods are referred to as the unaudited condensed combined and consolidated financial statements.
As of June 30, 2014, GasLog holds a 51.8% interest of the Partnership and, as a result of its ownership of the general partner, and the fact that the general partner elects the majority of the Partnerships directors in accordance with Partnership agreement, GasLog has the ability to control the
Partnerships affairs and policies
The Partnerships principal business is the acquisition and operation of vessels in the LNG market, providing transportation services of LNG on a worldwide basis under long-term charters. GasLog LNG Services Ltd (GasLog LNG Services or the Manager), a related party and a wholly-owned
subsidiary of GasLog, incorporated under the laws of the Bermuda, provides technical services to the Partnership.
As of June 30, 2014, the companies listed below were 100% held by the Partnership:
Name
Place of
Date of
Principal activities
Vessel
Cargo Capacity
Delivery Date
GAS-three Ltd.
Bermuda
April 27, 2010
Vessel-owning
GasLog Shanghai
155,000
January 28, 2013
GAS-four Ltd.
Bermuda
April 27, 2010
Vessel-owning
GasLog Santiago
155,000
March 25, 2013
GAS-five Ltd.
Bermuda
February 14, 2011
Vessel-owning
GasLog Sydney
155,000
May 30, 2013
GasLog Partners Holdings LLC
Marshall Islands
April 2014
Holding company
F-37
Notes to the unaudited condensed combined and consolidated financial statements
For the six months ended June 30, 2013 and 2014
(All amounts expressed in U.S. Dollars, except share data)
incorporation
incorporation
(cbm)
company
company
company
2. Basis of Presentation
These unaudited condensed combined and consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34
Interim Financial Reporting
as issued by the International Accounting Standards Board (IASB). Certain information and footnote
disclosures required by International Financial Reporting Standards (IFRS) for a complete set of annual financial statements have been omitted, and therefore, these unaudited condensed combined and consolidated financial statements should be read in conjunction with the Partnerships annual
combined and consolidated financial statements for the year ended December 31, 2013, included in the Partnerships Registration Statement on Form F-1 for the IPO which was declared effective by the United States Securities Exchange Commission on May 6, 2014 (the Registration Statement).
The accompanying unaudited condensed combined and consolidated financial statements include the accounts of the Partnership and the Subsidiaries assuming that they are consolidated for all periods presented, as they were under the common control of GasLog. All significant intra-group
transactions and balances are eliminated on consolidation.
The unaudited condensed combined and consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments recorded at fair value at the end of each reporting period. The same accounting policies and methods of computation have been
followed in these condensed combined and consolidated financial statements as were applied in the preparation of the Partnerships combined and consolidated financial statements for the year ended December 31, 2013, as included in the Registration Statement. On July 30, 2014, the Partnerships board
of directors authorized the unaudited condensed combined and consolidated financial statements for issuance.
The critical accounting judgments and key sources of estimation uncertainty were disclosed in the Partnerships annual combined and consolidated financial statements for the year ended December 31, 2013. In addition to those matters, in the three months ended June 30, 2014 management had to
exercise judgment in determining the appropriate classification of the various partnership interests as presented below.
The unaudited condensed combined and consolidated financial statements are expressed in U.S. dollars (USD), which is the functional currency of the Partnership and each of its subsidiaries because their vessels operate in international shipping markets, in which revenues and expenses are
primarily settled in USD and the Partnerships most significant assets and liabilities are paid for and settled in USD.
Classification of the Partnership interests
The interests in the Partnership comprise common units, subordinated units, a general partner interest and incentive distribution rights. Under the terms of the partnership agreement, the Partnership is required to distribute 100% of available cash (as defined in our partnership agreement) with respect
to each quarter within 45 days of the end of the quarter to the partners. Available cash can be summarized as cash and cash equivalents less an amount equal to cash reserves established by the board of directors to (i) provide for the proper conduct of the business of the Partnership group (including
reserves for future capital expenditures and for anticipated future credit needs of the Partnership group) subsequent to such quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any Partnership group
member is a party or by which it is bound or its assets are subject and/or (iii) provide funds for certain distributions relating to future periods.
In reaching a judgment as to whether the interests in the Partnership should be classified as liabilities or equity interests, the Partnership has considered the wide discretion of the board of directors to determine whether any portion of the amount of cash available to the Partnership constitutes
available cash and that it is possible that there could be no available cash. In the event that there is no available cash, as determined by the board of directors, the Partnership does not have a contractual obligation to make a distribution. Accordingly, management has concluded that
F-38
the Partnership interests do not represent a contractual obligation on the Partnership to deliver cash and therefore should be classified as equity within the financial statements.
Adoption of new and revised IFRS
(a) Standards and amendments in issue not yet adopted
At the date of authorization of these unaudited condensed combined and consolidated financial statements, the following standards and amendments relevant to the Partnership were in issue but not yet effective:
In October 2010, the IASB reissued IFRS 9
Financial Instruments.
IFRS 9 specifies how an entity should classify and measure financial assets and financial liabilities. The new standard requires all financial assets to be subsequently measured at amortized cost or fair value depending on the business
model of the legal entity in relation to the management of the financial assets and the contractual cash flows of the financial assets. The standard also requires a financial liability to be classified as either at fair value through profit or loss or at amortized cost. The release of IFRS 9 (2013) on November
19, 2013 contained consequential amendments which removed the mandatory effective date of IFRS 9 leaving the effective date open pending the finalization of the impairment and classification and measurement requirement and permitted an entity to apply the requirements on the presentation of gains
and losses on financial liabilities designated at fair value through profit or loss without applying the other requirements, meaning the portion of the change in fair value related to changes in the entitys own credit risk can be presented in other comprehensive income rather than within profit or loss. In
addition it introduced a new chapter to IFRS 9 on hedge accounting, putting in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures. At its November 2013 meeting,
the IASB tentatively decided that the mandatory effective date will be no earlier than annual periods beginning on or after January 1, 2017, with retrospective application required. At its February 2014 meeting, the IASB tentatively decided to set January 1, 2018 as the effective date for the mandatory
application of the standard. Management will evaluate the impact of this standard on the Partnerships financial statements once the mandatory effective date is set. Until such time as a detailed review has been completed it is not practicable to provide a reasonable estimate of that effect.
In December 2013, the IASB issued the
Annual Improvements to IFRSs-2010-2012 Cycle
, which includes changes to IFRS 2
Share-based Payment
, IFRS 3
Business Combination
, IFRS 8
Operating Segments
, IFRS 13
Fair Value Measurement
, IAS 16
Property, Plant and Equipment
, IAS 38
Intangible
Assets
and IAS 24
Related Party Disclosures.
These amendments are effective for annual periods beginning on or after July 1, 2014. Management anticipates that these amendments will not have a material impact on the Partnerships financial statements.
In December 2013, the IASB issued the
Annual Improvements to IFRSs-2011-2013 Cycle
, which includes changes to IFRS 1
First-time Adoption of International Financial Standards
, IFRS 3
Business Combinations
, IFRS 13
Fair Value Measurement
and IAS 40
Investment Property.
These amendments
are effective for annual periods beginning on or after July 1, 2014. Management anticipates that these amendments will not have any impact on the Partnerships financial statements.
In May 2014, the IASB issued IFRS 15
Revenue from Contracts with Customers
, which applies to all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. IFRS 15 specifies how and when an IFRS reporter will recognize revenue as well as requiring
such entities to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18
Revenue
, IAS 11
Construction Contracts
and a number of revenue-related interpretations. The standard is effective for annual periods beginning on or after January 1, 2017 but
early adoption is permitted. Management is currently evaluating the impact of this standard.
The impact of all other IFRS standards and amendments issued but not yet adopted is not expected to be material.
F-39
3. Related party transactions
Administrative Services Agreement
Upon completion of the IPO on May 12, 2014, the Partnership entered into an administrative services agreement (the Administrative Services Agreement) with GasLog, pursuant to which GasLog will provide certain management and administrative services. The services provided under the
Administrative Services Agreement will be provided as the Partnership may direct, and include bookkeeping, audit, legal, insurance, administrative, clerical, banking, financial, advisory, client and investor relations services. The Administrative Services Agreement will continue indefinitely until terminated
by the Partnership upon 90 days notice for any reason in the sole discretion of the Partnerships board of directors. GasLog will receive a service fee of $588,000 per vessel per year in connection with providing services under this agreement. Total administrative fees since the IPO amounted to $235,200
(Note 7).
Ship Management Agreements
On August 16, 2010, GAS-three Ltd. and GAS-four Ltd. and on March 31, 2011, GAS-five Ltd. entered into ship management agreements (Ship Management Agreements) with GasLog LNG Services that were amended upon completion of the IPO. The Ship Management Agreement provided for
the following:
Management Fees A fixed monthly charge of $30,000 per vessel was payable by the Partnership to the Manager for the provision of management services such as crew, operational and technical management, procurement, accounting, budgeting and reporting, health, safety, security and
environmental protection, insurance arrangements, sale or purchase of vessels, general administration and quality assurance.
Superintendent Fees A fee of $1,000 per day was payable to the Manager for each day in excess of 25 days per calendar year for which a superintendent performed visits to the vessels.
Share of General Expenses A monthly lump sum amounting to 11.25% of the Management Fee was payable to the Manager during the term of this agreement.
Annual Incentive Bonus Annual Incentive Bonus might be payable to the Manager, at the Partnerships discretion, for remittance to the crew of an amount of up to $72,000 based on Key Performance Indicators predetermined annually.
Upon completion of the IPO on May 12, 2014, each of the vessel owning subsidiaries is subject to an amended ship management agreement (collectively, the Amended Ship Management Agreements) under which the vessel owning subsidiaries will pay a management fee of $46,000 per month to
the Manager and will reimburse the Manager for all expenses incurred on their behalf. The Amended Ship Management Agreements provide also for superintendent fees of $1,000 per day payable to the Manager for each day in excess of 25 days per calendar year for which a superintendent performed
visits to the vessels, an annual incentive bonus of up to $72,000 based on key performance indicators predetermined annually and have clauses for decreased management fees in case of vessels lay-up. The management fees are subject to an annual adjustment, agreed between the parties in good faith, on
the basis of general inflation and proof of increases in actual costs incurred by the Manager. Each Amended Ship Management Agreement continues indefinitely until terminated by either party.
The total fees charged as per the Ship Management Agreements and the Amended Ship Management Agreements for the three and six months ended June 30, 2014 amounted to $377,441 and $723,727, respectively (for the three and six months ended June 30, 2013, $249,250 and $331,788,
respectively).
Commercial Management Agreement
On July 19, 2013, GAS-five Ltd., and on August 28, 2013, GAS-three Ltd. and GAS-four Ltd., entered into commercial management agreements with GasLog (the Commercial Management Agreements) that were amended upon completion of the IPO. Pursuant to the Commercial
F-40
Management Agreements the Partnership would receive commercial management services relating to the operation of the vessels, including and not limited to negotiation of the vessels possible employment, assessing market conditions on specific issues, keeping proper accounting records and handling and
advising on claims or disputes. The annual commercial management fee was $540,000 for each vessel payable quarterly in advance in lump sum amounts. The fair value of the services for the period from each vessels delivery date to the effective date of the commercial management agreements for which
no fees were paid have been recorded as Contributed capital-contributed services and included in general and administrative expenses.
Upon completion of the IPO on May 12, 2014, the vessel-owning subsidiaries entered into amended commercial management agreements with GasLog (the Amended Commercial Management Agreements), pursuant to which GasLog will provide certain commercial management services, including
chartering services, consultancy services on market issues and invoicing and collection of hire payables, to the Partnership. The annual commercial management fee under the amended agreements is $360,000 for each vessel payable quarterly in advance in lump sum amounts.
The total fees charged as per the Commercial Management Agreements and the Amended Commercial Management Agreements for the three and six months ended June 30, 2014 amounted to $331,500 and $736,500, respectively (for the three and six months ended June 30, 2013, $319,500 and
$421,500, respectively).
Omnibus Agreement
Upon completion of the IPO on May 12, 2014, the Partnership entered into an omnibus agreement with GasLog, our general partner and certain of our other subsidiaries. The omnibus agreement governs among other things (i) when and the extent the Partnership and GasLog may compete against
each other, (ii) the time and the value at which the Partnership may exercise the right to purchase certain offered vessels by GasLog (iii) certain rights of first offer granted to GasLog to purchase any of its vessels on charter for less than five full years from the Partnership and vice versa and (iv)
GasLogs provisions of certain indemnities to the Partnership. As of June 30, 2014, no such option was exercised.
Revolving Credit Facility with GasLog
Upon completion of the IPO on May, 2014, the Partnership entered into a $30,000,000 revolving credit facility with GasLog, to be used for general partnership purposes. The credit facility is for a term of 36 months, unsecured and bears interest at a rate of 5.0% per annum, with no commitment fee
for the first year. After the first year, the interest will increase to a rate of 6.0% per annum, with an annual 2.4% commitment fee on the undrawn balance. As of June 30, 2014 the total available amount of the revolving credit facility remained undrawn.
The Partnership had the following balances with related parties which have been included in the condensed combined and consolidated statements of financial position:
Amounts due from related parties
December 31, 2013
June 30, 2014
Due from GasLog
18,151
Total
18,151
Amount due to related parties
December 31, 2013
June 30, 2014
Due to GasLog LNG Services Ltd (a)
3,918,098
2,223,957
Due to GasLog (b)
839,106
Due to GasLog Carriers Ltd (c)
20,756,019
11,694,931
Total
24,674,117
14,757,994
F-41
(a)
The balance of $2,223,957 represents payments made by the Manager to cover operating expenses of the Partnership of $1,974,987 (2013:$3,790,231) as well as amounts owed for management services of $248,970 (2013:$127,867).
(b)
The balance of $839,106 represents outstanding commercial management fees of $630,400 (Note 7) as well as payments of $208,706 made by GasLog on behalf of the Partnership and remain outstanding as of June 30, 2014.
(c)
The balance of $11,694,931 (2013:$20,756,019) represents amounts paid by GasLog Carriers Ltd., prior to the IPO, to provide the Partnership with funding to cover expenses during the construction period.
4. Vessels
The movement in vessels is reported in the following table:
Vessels
Cost
At January 1, 2014
574,768,543
Additions
168,077
At June 30, 2014
574,936,620
Accumulated depreciation
At January 1, 2014
12,237,735
Depreciation expense
7,967,321
At June 30, 2014
20,205,056
Net book value
At December 31, 2013
562,530,808
At June 30, 2014
554,731,564
Vessels with an aggregate carrying amount of $554,731,564 as of June 30, 2014 (December 31, 2013: $562,530,808) have been pledged as collateral under the terms of the loan agreements.
5. Bank Loans
December 31,
2013
June 30,
Amounts due within one year
24,188,723
19,103,575
Less: unamortized deferred loan issuance costs
(2,113,937
)
(1,406,140
)
Loans current portion
22,074,786
17,697,435
Amounts due after one year
370,706,468
282,334,892
Less: unamortized deferred loan issuance costs
(6,789,470
)
(3,417,951
)
Loans non-current portion
363,916,998
278,916,941
Total
385,991,784
296,614,376
In connection with Partnerships IPO, GasLog obtained certain waivers and consents from its lenders and amended two of its credit facilities. The credit facility entered into by GAS-three Ltd. and GAS-four Ltd. was amended to, among other things, permit GasLog to contribute GAS-three Ltd. and
GAS-four Ltd. to the Partnership and add GasLog Partners Holdings LLC, as a guarantor. The credit facility entered into by GAS-five Ltd. and GasLogs subsidiary GAS-six Ltd. was amended to among other things, (1) divide the facility into two separate facilities on substantially the same terms as the
initial facility, with one of the facilities executed by GAS-five Ltd. for the portion allocated to the
GasLog Sydney
(2) permit GasLogs contribution of GAS-five Ltd. to the Partnership and (3) add GasLog Partners Holdings LLC as a guarantor and remove GasLog Carriers Ltd., a wholly owned
subsidiary of GasLog, as guarantor in connection with the GAS-five Ltd.
F-42
2014
facility. In connection with these amendments, the Partnership prepaid $82,633,649 of the new GAS-five Ltd. facility with proceeds of the initial public offering.
The main terms of the Partnerships loan facilities have been disclosed in the annual combined and consolidated financial statements for the year ended December 31, 2013, included in the Registration Statement. Refer to Note 9 Bank Loans. During the six months ended June 30, 2014, repayments
related to the loan facilities of $93,456,725 (six months ended June 30, 2013: $4,010,448) were made in accordance with repayment terms and the aforementioned amendments.
The carrying amount of the Partnerships bank debt recognized in the unaudited condensed combined and consolidated financial statements approximates its fair value after adjusting for the unamortized loan issuance costs.
6. Other Payables and Accruals
An analysis of other payables and accruals is as follows:
December 31, 2013
June 30, 2014
Accrued legal and professional fees
43,925
183,776
Unearned revenue
7,071,341
7,071,341
Other payables and accruals
294,902
716,687
Accrued crew expenses
401,870
677,072
Accrued interest
1,397,587
1,042,464
Accrued board of directors fees
144,758
Accrued management, commercial and administrative fees, (Note 3)
162,000
341,300
Total
9,371,625
10,177,398
7. General and Administrative Expenses
An analysis of general and administrative expenses is as follows:
Three months ended
Six months ended
June 30, 2013
June 30, 2014
June 30, 2013
June 30, 2014
Board of directors fees
144,758
207,258
Travel and accommodation
77,378
1,166
104,907
Legal and professional fees
9,332
183,830
15,942
191,252
Vessel naming ceremony expenses
63,475
199,714
Commercial management fees (Note 3)
319,500
331,500
421,500
736,500
Administrative fees (Note 3)
235,200
235,200
Foreign exchange differences
13,657
4,089
14,012
68,814
Other expenses
9,180
137,453
9,180
163,020
Total
415,144
1,114,208
661,514
1,706,951
F-43
8. Derivative Financial Instruments
Interest rate swap agreements
The fair value of the derivative assets is as follows:
December 31, 2013
June 30, 2014
Derivative assets carried at fair value through profit or loss (FVTPL)
Interest rate swaps
799,926
151,917
Total
799,926
151,917
Derivative financial instruments, current asset
151,917
Derivative financial instruments, noncurrent asset
799,926
Total
799,926
151,917
The fair value of the derivative liabilities is as follows:
December 31, 2013
June 30, 2014
Derivatives designated and effective as hedging instruments carried at fair value
Interest rate swaps
2,816,370
Financial liabilities carried at fair value through profit or loss (FVTPL)
Interest rate swaps
2,042,453
3,017,004
Total
4,858,823
3,017,004
Derivative financial instruments, current liability
4,233,398
1,827,845
Derivative financial instruments, noncurrent liability
625,425
1,189,159
Total
4,858,823
3,017,004
Interest rate swap agreements
The Partnership enters into fixed interest rate swap agreements which convert the floating interest rate exposure into a fixed interest rate in order to hedge a portion of its exposure to fluctuations in prevailing market interest rates. Under these swap transactions, the bank counterparty effects
quarterly floating-rate payments to the Partnership for the notional amount based on the three-month U.S. dollar LIBOR, and the Partnership effects quarterly payments to the bank on the notional amount at the respective fixed rates.
Interest rate swaps designated as cash flow hedging instruments
The principal terms of the interest rate swaps designated as cash flow hedging instruments were as follows:
Subsidiary
Counterparty
Trade
Effective
Termination
Fixed
Notional Amount
December 31,
June 30,
GAS-five Ltd.
(1)
Nordea Bank Finland
Nov 2011
May 2013
May 2018
2.04
%
58,235,293
GAS-five Ltd.
(2)
Nordea Bank Finland
Nov 2011
May 2013
May 2018
1.96
%
72,794,117
131,029,410
(1)
The Partnership terminated the swap agreement on May 8, 2014 by paying its fair value on that date being $1,501,399 plus accrued interest of $198,604 from the IPO proceeds. The cumulative loss of $1,112,891 from the period that hedging was effective was recycled to the profit or loss as a result of the debt being repaid in the three and six month period ended June 30,
2014.
(2)
The Partnership decreased the notional amount of the swap agreement by $21,935,119 on May 8, 2014 by paying the fair value of the reduced amount on that date being $512,302 plus accrued interest of $72,594. The cumulative loss of $356,204
F-44
Date
Date
Date
Interest
Rate
2013
2014
from the period that hedging was effective was recycled to the profit or loss in the three and six month period ended June 30, 2014. Subsequently, the hedge accounting for the remaining portion was discontinued.
The derivative instruments listed above qualified as cash flow hedging instruments for accounting purposes as of December 31, 2013.
For the three and six month period ended June 30, 2014, the effective portion of changes in the fair value of derivatives designated as cash flow hedging instruments amounting to a loss of $469,507 and $309,593, respectively has been recognized in other comprehensive income (June 30, 2013: gain of
$2,577,288 and $3,541,625 for the three and six month period, respectively). No loss relating to the ineffective portion was recognized for the three and six month period ended June 2014 in profit or loss under Financial costs including (gain)/loss on interest rate swaps (June 30, 2013: gain of $16,742 for
both the three and six month period).
Interest rate swaps held for trading
The principal terms of the interest rate swaps held for trading were as follows:
Subsidiary
Counterparty
Trade
Effective
Termination
Fixed
Notional Amount
December 31,
June 30,
GAS-three Ltd.
(1)
DNB bank ASA
April 2012
Jan 2013
Jan 2018
1.45
%
90,234,360
86,223,944
GAS-four Ltd.
(1)
DNB bank ASA
April 2012
Mar 2013
Mar 2018
1.50
%
90,234,360
86,223,944
GAS-five Ltd.
(2)
Nordea Bank Finland
Nov 2011
May 2013
May 2018
1.96
%
48,990,579
180,468,720
221,438,467
(1)
In 2013, hedge accounting for these interest rate swaps was discontinued because the effectiveness criteria were not met. The amount of the cumulative loss from the period that the hedges were effective, that was recycled to profit or loss for the three and six months ended June 30, 2014 was $193,781 and $385,432, respectively (for the three and six months ended June 30,
2013 was $193,781 and $263,144, respectively).
(2)
In 2014, hedge accounting for this interest rate swap was discontinued because the effectiveness criteria were not met. The amount of the cumulative loss from the period that the hedge was effective, that was recycled to profit or loss for the three and six months ended June 30, 2014 was $25,516.
The derivative instruments listed above were not designated as cash flow hedging instruments. The change in the fair value of these contracts for the three and six months ended June 30, 2014 amounted to a loss of $634,487 and $510,269, respectively (for the three and six months ended June 30, 2013
amounted to a net gain of $3,249,956 and $3,747,828, respectively), which was recognized against earnings in the period incurred and is included in Financial costs including (gain)/loss on swaps.
Fair value measurements
The fair value of the interest rate swaps at the end of the reporting period was determined by discounting the future cash flows using the interest rate yield curves at the end of the reporting period and the credit risk inherent in the contract. The Partnership uses its judgment to make assumptions
that are mainly based on market conditions for the estimation of the counterparty risk and the Partnerships own risk that are considered for the calculation of the fair value of the interest rate swaps. The interest rate swaps meet Level 2 classification, according to the fair value hierarchy as defined by
IFRS 7,
Financial Instruments Disclosure.
There were no financial instruments in Levels 1 and 3 and no transfers between Levels 1, 2 or 3 during the periods presented. The definitions of the Levels, provided by IFRS 7
Financial Instruments: Disclosures
, are based on the degree to which the fair value is
observable:
Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
F-45
Date
Date
Date
Interest
Rate
2013
2014
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
9. Financial costs and gain/loss on interest rate swaps
An analysis of financial costs and gain/loss on interest rate swaps is as follows:
Three months ended
Six months ended
June 30, 2013
June 30, 2014
June 30, 2013
June 30, 2014
Amortization of deferred loan issuance costs
439,602
3,704,321
595,822
4,232,754
Interest expense on loans and realized loss on cash flow hedges
2,553,441
2,646,985
3,500,992
5,922,808
Other financial costs including bank commissions
17,125
30,684
19,203
73,431
Total financial costs
3,010,168
6,381,990
4,115,947
10,228,993
Realized loss on interest rate swaps held for trading
573,782
674,644
754,713
1,225,526
Unrealized (gain)/loss on interest rate swaps held for trading (Note 8)
(3,249,956
)
634,487
(3,747,828
)
510,269
Recycled loss of cash flow hedges reclassified to profit or loss (Note 8)
193,781
1,688,392
263,144
1,880,043
Ineffective portion on cash flow hedges (Note 8)
(16,742
)
Total (gain)/loss on interest rate swaps
(2,482,393
)
2,997,523
(2,746,713
)
3,615,838
10. Partners Equity
As described in Note 1, on May 12, 2014, the Partnership completed its IPO and issued (1) 162,358 common units, 9,822,358 subordinated units and all of the incentive distribution rights to GasLog, (2) 400,913 general partner units to the general partner and (3) 9,660,000 common units (including 1,260,000 units in
relation to the overallotment option exercised in full by the underwriters) at a price of $21.00 per unit. The net proceeds from the IPO amounted to $186,030,150 after deducting underwriting discount and underwriters expenses of $13,729,850 and the equity offering expenses of $3,100,000.
Voting Rights
The following is a summary of the unitholder vote required for the approval of the matters specified below. Matters that require the approval of a unit majority require:
during the subordination period, the approval of a majority of the outstanding common units, excluding those common units held by the general partner and its affiliates, voting as a single class and a majority of the subordinated units voting as a single class; and
after the subordination period, the approval of a majority of the outstanding common units voting as a single class.
In voting their common units and subordinated units the general partner and its affiliates will have no fiduciary duty or obligation whatsoever to the Partnership or the limited partners, including any duty to act in good faith or in the best interests of the Partnership or the limited partners.
Each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, to preserve the Partnerships ability to claim an exemption from U.S. federal income tax under Section 883 of the Code, if at any time any person or group owns beneficially more
than 4.9% of any class of units then outstanding, any units beneficially owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes (except for purposes of
nominating a person for election to the board of directors), determining the presence of
F-46
a quorum or for other similar purposes under the partnership agreement, unless otherwise required by law. Effectively, this means that the voting rights of any such unitholders in excess of 4.9% will be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power
of all classes of units entitled to vote. The general partner, its affiliates and persons who acquired common units with the prior approval of the board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.
The Partnership will hold a meeting of the limited partners every year to elect one or more members of the board of directors and to vote on any other matters that are properly brought before the meeting. The general partner will initially retain the right to appoint three of the directors. At the
2015 annual meeting, which will be the first annual meeting after the IPO, the common unitholders will elect two of the directors. The two directors elected by the common unitholders at the 2015 annual meeting will be divided into classes to be elected by the common unitholders annually on a
staggered basis. Subordinated units will not be voted in the election of the two directors.
General Partner Interest
The partnership agreement provides that the general partner initially will be entitled to 2.0% of all distributions that the Partnership makes prior to its liquidation. The general partner has the right, but not the obligation, to contribute a proportionate amount of capital to the Partnership to maintain
its 2.0% general partner interest if the Partnership issues additional units. The general partners 2.0% interest, and the percentage of the Partnerships cash distributions to which it is entitled, will be proportionately reduced if the Partnership issues additional units in the future and the general partner
does not contribute a proportionate amount of capital to the Partnership in order to maintain its 2.0% general partner interest. The general partner will be entitled to make a capital contribution in order to maintain its 2.0% general partner interest in the form of the contribution to us of common units
based on the current market value of the contributed common units.
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. GasLog holds the incentive distribution rights following
completion of the IPO. The incentive distribution rights may be transferred separately from any other interests, subject to restrictions in the partnership agreement. Except for transfers of incentive distribution rights to an affiliate or another entity as part of a merger or consolidation with or into, or sale
of substantially all of the assets to, such entity, the approval of a majority of the Partnerships common units (excluding common units held by the general partner and its affiliates), voting separately as a class, generally is required for a transfer of the incentive distribution rights to a third party prior to
March 31, 2019. Any transfer by GasLog of the incentive distribution rights would not change the percentage allocations of quarterly distributions with respect to such right.
F-47
The following table illustrates the percentage allocation of the additional available cash from operating surplus in respect to such rights:
Marginal Percentage Interest in Distributions
Total Quarterly
Unitholders
General
Holders of
Minimum Quarterly Distribution
$
0.375
98.0
%
2.0
%
0
%
First Target Distribution
up to
$
0.43125
98.0
%
2.0
%
0
%
above
$
0.43125
Second Target Distribution
up to
$
0.46875
85.0
%
2.0
%
13.0
%
above
$
0.46875
Third Target Distribution
up to
$
0.5625
75.0
%
2.0
%
23.0
%
Thereafter
above
$
0.5625
50.0
%
2.0
%
48.0
%
11. Earnings Per Unit
The Partnership calculates earnings per unit by allocating reported profit for each period to each class of units based on the distribution policy for available cash stated in partnership agreement as generally described in Note 10 above.
Basic earnings per unit is determined by dividing net income reported at the end of each period by the weighted average number of units outstanding during the period. Diluted earnings per unit is equal to basic earnings per unit since there are no potential ordinary units assumed to have been
converted in common units.
As disclosed in Note 1, the general partner interest, the common units and the subordinated units were issued to GasLog in exchange for the shares in the Subsidiaries, which owned the three LNG vessels and to the other common unitholders in connection with the IPO, on May 12, 2014. Earnings
Per Unit (EPU) is presented for the period in which the units were outstanding, with earnings calculated as follows:
For the three months ended
For the six months ended
June 30, 2013
June 30, 2014
June 30, 2013
June 30, 2014
Profit for the period
8,403,346
2,384,901
10,608,209
10,261,106
Less:
Profit/(loss) attributable to operations through May 11, 2014
8,403,346
(1,438,063
)
10,608,209
6,438,142
Partnerships profit for the period May 12, 2014 to June 30, 2014
3,822,964
3,822,964
Partnerships profit for the period May 12, 2014 to June 30, 2014 attributable to:
Common unitholders
2,023,799
2,023,799
Subordinated unitholders
1,722,706
1,722,706
General partner
76,459
76,459
12. Commitments and Contingencies
Future gross minimum revenues receivable upon collection of hire under non-cancellable time charter agreements for vessels in operation as of June 30, 2014 are as follows (vessel off-hires and drydocking days that could occur but are not currently known are not taken into consideration; in addition
early delivery of the vessels by the charterers is not accounted for):
Period
June 30, 2014
Not later than one year
83,554,127
Later than one year and not later than three years
169,167,651
Later than three years and not later than five years
92,262,721
Total
344,984,499
F-48
Distribution
Target Amount
Partner
IDRs
Various claims, suits and complaints, including those involving government regulations, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, environmental claims, agents and insurers and from claims with suppliers relating to the operations of
the Partnerships vessels. Currently, management is not aware of any such claims or contingent liabilities requiring disclosure in the unaudited condensed combined and consolidated financial statements.
13. Subsequent Events
On July 30, 2014, the Board of Directors of GasLog Partners declared a prorated quarterly cash distribution, with respect to the quarter ended June 30, 2014, of $0.20604 per unit. The distribution was prorated for the period beginning on May 12, 2014, which was the closing date of GasLog Partners
IPO, and ending on June 30, 2014, and corresponds to a quarterly distribution of $0.375 per outstanding unit, or $1.5 per outstanding unit on an annualized basis. The prorated cash distribution is payable on August 14, 2014, to all unitholders of record as of August 11, 2014.
F-49
[This Page Intentionally Left Blank]
GasLog Partners LP
Common Units
PROSPECTUS
, 2014
Citigroup
Representing Limited Partner Interests
PART II
Item 6.
Indemnification of Directors and Officers.
The section of the prospectus entitled The Partnership AgreementIndemnification discloses that we will generally indemnify our directors, officers and the affiliates of our general partner to the fullest extent permitted by the law against all losses, claims, damages or similar events and is
incorporated herein by this reference. Reference is also made to the Underwriting Agreement filed as Exhibit 1.1 to this registration statement in which GasLog Partners LP and certain of its affiliates will agree to indemnify the underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, and to contribute to payments that may be required to be made in respect of these liabilities. We have also entered into indemnification agreements with our directors and officers. See Certain Relationships and Related Party Transactions.
Item 7.
Recent Sales of Unregistered Securities.
On January 23, 2014, in connection with the formation of GasLog Partners LP, GasLog Partners LP issued to (a) GasLog Partners GP LLC the 2.0% general partner interest in the partnership for $20 and (b) GasLog Ltd. the 98.0% limited partner interest in the partnership for $980. These issuances
were exempt from registration under Section 4(2) of the Securities Act of 1933.
There have been no other sales of unregistered securities within the past three years.
Item 8.
Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Description
1.1
Form of Underwriting Agreement
3.1
Certificate of Limited Partnership of GasLog Partners LP
3.2
Form of First Amended and Restated Agreement of Limited Partnership of GasLog Partners LP
3.3
Certificate of Formation of GasLog Partners GP LLC
3.4
Limited Liability Company Agreement of GasLog Partners GP LLC
5.1
Opinion of Cozen OConnor, with respect to the legality of the securities being registered
8.1
Opinion of Cravath, Swaine & Moore LLP, with respect to certain tax matters
8.2
Opinion of Cozen OConnor, with respect to certain tax matters
10.1
Form of Contribution Agreement
10.2
Form of Omnibus Agreement
10.3
Form of Administrative Services Agreement
10.4
Form of Commercial Management Agreement
10.5
Amended and Restated Ship Management Agreement for the GasLog Shanghai, dated
, 2014, between GAS-three Ltd. and GasLog LNG Services Ltd.
10.6
Amended and Restated Ship Management Agreement for the GasLog Santiago, dated
, 2014, between GAS-four Ltd. and GasLog LNG Services Ltd.
10.7
Amended and Restated Ship Management Agreement for the GasLog Sydney, dated
, 2014, between GAS-five Ltd. and GasLog LNG Services Ltd.
10.8**
Master Time Charter Party among GAS-one Ltd., GAS-two Ltd., GAS-three Ltd., GAS-four Ltd., GAS-five Ltd., GAS-six Ltd. and Methane Services Limited, dated May 9, 2011
10.9**
Confirmation Memorandum between GAS-three Ltd. and Methane Services Limited, dated May 9, 2011
II-1
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Number
Exhibit
Description
10.10**
Confirmation Memorandum between GAS-four Ltd. and Methane Services Limited, dated May 9, 2011
10.11**
Confirmation Memorandum between GAS-five Ltd. and Methane Services Limited, dated May 9, 2011
10.12**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-three Ltd. and Methane Services Limited, dated June 17, 2013
10.13**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-four Ltd. and Methane Services Limited, dated June 17, 2013
10.14**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-five Ltd. and Methane Services Limited, dated June 17, 2013
10.15**
Facilities Agreement dated March 14, 2012 relating to $272,500,000 loan facilities among GAS-three Ltd. and GAS-four Ltd. as borrowers, DnB Bank ASA and the Export-Import Bank of Korea as mandated lead arrangers, the financial institutions listed in Schedule 1 thereto as lenders and
DnB Bank ASA as hedging provider, bookrunner, agent and security agent
10.16
Form of $30.0 Million Revolving Credit Agreement by and between GasLog Partners LP and GasLog Ltd.
10.17
Second Supplemental Deed dated April 23, 2014, relating to a $272,500,000 loan facilities to GAS-three Ltd. and GAS-four Ltd. as borrowers, DnB Bank ASA and the Export-Import Bank of Korea as mandated lead arrangers, the financial institutions listed in Schedule 1 to the Facilities
Agreement as lenders and DnB Bank ASA as hedging provider, bookrunner, agent and security agent
10.18
Loan Agreement dated April 18, 2014 relating to $132,389,706 loan facility among GAS-five Ltd. as borrower, the banks and financial institutions listed in Schedule 1 thereto as lenders, Nordea Bank Finland Plc, London branch, ABN AMRO Bank N.V. and Citibank International Plc, London
Branch, as joint lead arrangers, the banks and financial institutions listed in Schedule 2 thereto as swap banks and Nordea Bank Finland Plc, London Branch as agent and security trustee
10.19
Amending and Restating Agreement dated April 18, 2014 relating to $277,000,000 loan facility among GAS-five Ltd. and GAS-six Ltd. as borrowers, GasLog Ltd. and GasLog Carriers Ltd. as guarantors, the banks and financial institutions listed in Schedule 1 thereto as lenders, Nordea Bank
Finland Plc, London branch, ABN AMRO Bank N.V. and Citibank International Plc, London Branch, as joint lead arrangers, the banks and financial institutions listed in Schedule 2 thereto as swap banks and Nordea Bank Finland Plc, London Branch as agent and security trustee
10.20
Share Purchase Agreement dated August 14, 2014, among GasLog Carriers Ltd., GasLog Ltd. and GasLog Partners LP
10.21
Amended and Restated Ship Management Agreement for the Methane Rita Andrea, dated
, 2014, between GAS-sixteen Ltd. and GasLog LNG Services Ltd.
10.22
Amended and Restated Ship Management Agreement for the Methane Jane Elizabeth, dated
, 2014, between GAS-seventeen Ltd. and GasLog LNG Services Ltd.
10.23**
LNG Time Charter Party between GAS-sixteen Ltd. and Methane Services Limited, dated April 4, 2014
10.24**
LNG Time Charter Party between GAS-seventeen Ltd. and Methane Services Limited, dated April 4, 2014
10.25**
Facility Agreement for $325,500,000 Loan Facility between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. as borrowers, Citibank, N.A., London Branch as mandated lead arranger, the financial institutions listed in Schedule 1 thereto as lenders, Citibank, N.A., London Branch as
bookrunner, Citibank International Plc as agent of the other finance parties, and Citibank, N.A., London Branch as security agent and trustee
II-2
Number
Exhibit
Description
10.26
Form of Supplemental Deed dated
, 2014, between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd., GasLog Ltd., GasLog Carriers Ltd., GasLog LNG Services Ltd., Citibank, N.A., London Branch, and Citibank International Plc
10.27
Form of Indemnification Agreement for the Partnerships directors and certain officers
23.1
Consent of Deloitte Hadjipavlou Sofianos & Cambanis S.A.
23.2
Consent of Cozen OConnor (included in Exhibit 5.1 and Exhibit 8.2)
23.3
Consent of Cravath, Swaine & Moore LLP (included in Exhibit 8.1)
23.4
Consent of Clarkson Research Services Limited
24.1
Power of Attorney (included on the signature page hereto)
**
Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the Securities and Exchange Commission.
Incorporated by reference to the Partnerships Registration Statement on Form F-1, which was declared effective by the Securities and Exchange Commission on May 6, 2014.
Incorporated by reference to Appendix A to the Prospectus contained within the Partnerships Registration Statement on Form F-1, which was declared effective by the Securities and Exchange Commission on May 6, 2014.
Item 9.
Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The registrant undertakes to send to each limited partner at least on an annual basis a detailed statement of any transactions with the general partner or its affiliates and of fees, commissions, compensation and other benefits paid, or accrued to the general partner or its affiliates for the fiscal year
completed, showing the amount paid or accrued to each recipient and the services performed.
The registrant undertakes to provide to the limited partners the financial statements required by Form 20-F for the first full fiscal year of operations of the partnership.
II-3
Number
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Principality of Monaco, on the day of August 14, 2014.
GASLOG PARTNERS LP
By:
/s/ A
NDREW
J. O
REKAR
Name:
Andrew J. Orekar
Title:
Chief Executive Officer
II-4
POWER OF ATTORNEY
Each person whose signature appears below appoints Andrew J. Orekar, Simon Crowe and Curtis V. Anastasio as his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement and any registration statement (including any amendments thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended and to file the same with all
exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as
he or she might or would do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the day of August 14, 2014.
Signature
Title
/
S
/ C
URTIS
V. A
NASTASIO
Curtis V. Anastasio
Chairman of the Board
/
S
/ A
NDREW
J. O
REKAR
Andrew J. Orekar
Chief Executive Officer
/
S
/ S
IMON
C
ROWE
Simon Crowe
Chief Financial Officer
/
S
/ D
ANIEL
B
RADSHAW
Daniel Bradshaw
Director
/
S
/ P
AMELA
G
IBSON
Pamela Gibson
Director
/
S
/ D
ONALD
J. K
INTZER
Donald J. Kintzer
Director
/
S
/ P
ETER
G. L
IVANOS
Peter G. Livanos
Director
II-5
(Principal Executive Officer)
(Principal Financial and Accounting Officer)
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrants duly authorized representative in the United States has signed this Registration Statement in the City of Newark, State of Delaware, on August 14, 2014.
PUGLISI & ASSOCIATES
By:
/s/ D
ONALD
J. P
UGLISI
Name:
Donald J. Puglisi
Title:
Managing Director
II-6
EXHIBIT INDEX
Set forth below is a list of exhibits that are being or will be filed with this Registration Statement on Form F-1.
Exhibit
Description
1.1
Form of Underwriting Agreement
3.1
Certificate of Limited Partnership of GasLog Partners LP
3.2
Form of First Amended and Restated Agreement of Limited Partnership of GasLog Partners LP
3.3
Certificate of Formation of GasLog Partners GP LLC
3.4
Limited Liability Company Agreement of GasLog Partners GP LLC
5.1
Opinion of Cozen OConnor, with respect to the legality of the securities being registered
8.1
Opinion of Cravath, Swaine & Moore LLP, with respect to certain tax matters
8.2
Opinion of Cozen OConnor, with respect to certain tax matters
10.1
Form of Contribution Agreement
10.2
Form of Omnibus Agreement
10.3
Form of Administrative Services Agreement
10.4
Form of Commercial Management Agreement
10.5
Amended and Restated Ship Management Agreement for the GasLog Shanghai, dated
, 2014, between GAS-three Ltd. and GasLog LNG Services Ltd.
10.6
Amended and Restated Ship Management Agreement for the GasLog Santiago, dated
, 2014, between GAS-four Ltd. and GasLog LNG Services Ltd.
10.7
Amended and Restated Ship Management Agreement for the GasLog Sydney, dated
, 2014, between GAS-five Ltd. and GasLog LNG Services Ltd.
10.8**
Master Time Charter Party among GAS-one Ltd., GAS-two Ltd., GAS-three Ltd., GAS-four Ltd., GAS-five Ltd., GAS-six Ltd. and Methane Services Limited, dated May 9, 2011
10.9**
Confirmation Memorandum between GAS-three Ltd. and Methane Services Limited, dated May 9, 2011
10.10**
Confirmation Memorandum between GAS-four Ltd. and Methane Services Limited, dated May 9, 2011
10.11**
Confirmation Memorandum between GAS-five Ltd. and Methane Services Limited, dated May 9, 2011
10.12**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-three Ltd. and Methane Services Limited, dated June 17, 2013
10.13**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-four Ltd. and Methane Services Limited, dated June 17, 2013
10.14**
Amendment and Restatement Agreement relating to Confirmation Memorandum between GAS-five Ltd. and Methane Services Limited, dated June 17, 2013
10.15**
Facilities Agreement dated March 14, 2012 relating to $272,500,000 loan facilities among GAS-three Ltd. and GAS-four Ltd. as borrowers, DnB Bank ASA and the Export-Import Bank of Korea as mandated lead arrangers, the financial institutions listed in Schedule 1 thereto as lenders and
DnB Bank ASA as hedging provider, bookrunner, agent and security agent
10.16
Form of $30.0 Million Revolving Credit Agreement by and between GasLog Partners LP and GasLog Ltd.
10.17
Second Supplemental Deed dated April 23, 2014, relating to a $272,500,000 loan facilities to GAS-three Ltd. and GAS-four Ltd. as borrowers, DnB Bank ASA and the Export-Import Bank of Korea as mandated lead arrangers, the financial institutions listed in Schedule 1 to the Facilities
Agreement as lenders and DnB Bank ASA as hedging provider, bookrunner, agent and security agent
Number
Exhibit
Description
10.18
Loan Agreement dated April 18, 2014 relating to $132,389,706 loan facility among GAS-five Ltd. as borrower, the banks and financial institutions listed in Schedule 1 thereto as lenders, Nordea Bank Finland Plc, London branch, ABN AMRO Bank N.V. and Citibank International Plc, London
Branch, as joint lead arrangers, the banks and financial institutions listed in Schedule 2 thereto as swap banks and Nordea Bank Finland Plc, London Branch as agent and security trustee
10.19
Amending and Restating Agreement dated April 18, 2014 relating to $277,000,000 loan facility among GAS-five Ltd. and GAS-six Ltd. as borrowers, GasLog Ltd. and GasLog Carriers Ltd. as guarantors, the banks and financial institutions listed in Schedule 1 thereto as lenders, Nordea Bank
Finland Plc, London branch, ABN AMRO Bank N.V. and Citibank International Plc, London Branch, as joint lead arrangers, the banks and financial institutions listed in Schedule 2 thereto as swap banks and Nordea Bank Finland Plc, London Branch as agent and security trustee
10.20
Share Purchase Agreement dated August 14, 2014, among GasLog Carriers Ltd., GasLog Ltd. and GasLog Partners LP
10.21
Amended and Restated Ship Management Agreement for the Methane Rita Andrea, dated
, 2014, between GAS-sixteen Ltd. and GasLog LNG Services Ltd.
10.22
Amended and Restated Ship Management Agreement for the Methane Jane Elizabeth, dated
, 2014, between GAS-seventeen Ltd. and GasLog LNG Services Ltd.
10.23**
LNG Time Charter Party between GAS-sixteen Ltd. and Methane Services Limited, dated April 4, 2014
10.24**
LNG Time Charter Party between GAS-seventeen Ltd. and Methane Services Limited, dated April 4, 2014
10.25**
Facility Agreement for $325,500,000 Loan Facility between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd. as borrowers, Citibank, N.A., London Branch as mandated lead arranger, the financial institutions listed in Schedule 1 thereto as lenders, Citibank, N.A., London Branch as
bookrunner, Citibank International Plc as agent of the other finance parties, and Citibank, N.A., London Branch as security agent and trustee
10.26
Form of Supplemental Deed dated
, 2014, between GAS-sixteen Ltd., GAS-seventeen Ltd. and GAS-eighteen Ltd., GasLog Ltd., GasLog Carriers Ltd., GasLog LNG Services Ltd., Citibank, N.A., London Branch, and Citibank International Plc
10.27
Form of Indemnification Agreement for the Partnerships directors and certain officers
23.1
Consent of Deloitte Hadjipavlou Sofianos & Cambanis S.A.
23.2
Consent of Cozen OConnor (included in Exhibit 5.1 and Exhibit 8.2)
23.3
Consent of Cravath, Swaine & Moore LLP (included in Exhibit 8.1)
23.4
Consent of Clarkson Research Services Limited
24.1
Power of Attorney (included on the signature page hereto)
**
Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the Securities and Exchange Commission.
Incorporated by reference to the Partnerships Registration Statement on Form F-1, which was declared effective by the Securities and Exchange Commission on May 6, 2014.
Incorporated by reference to Appendix A to the Prospectus contained within the Partnerships Registration Statement on Form F-1, which was declared effective by the Securities and Exchange Commission on May 6, 2014.
Number
Exhibit 1.1
GasLog Partners LP
[ ] Common Units
Representing Limited Partner Interests
Form of Underwriting Agreement
[ ], 2014
Citigroup Global Markets Inc.
388 Greenwich Street, 34th Floor
New York, NY 10013
[ ]
[ ]
As Representatives of the several Underwriters
named in
Schedule I
hereto,
Ladies and Gentlemen:
GasLog Partners LP, a limited partnership organized under the laws of the Republic of The Marshall Islands (the “ Partnership ”), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the “ Underwriters ”), for whom you are acting as representatives (the ” Representatives ”), an aggregate of [ ] of its common units (the “ Firm Units ”), each representing a limited partner interest in the Partnership (the “ Common Units ”), and, at the election of the Underwriters, up to an additional [ ] of its Common Units (the “ Option Units ”). The Firm Units and the Option Units that the Underwriters elect to purchase pursuant to Section 2 hereof are hereinafter referred to collectively as the “ Units ”.
GasLog Partners GP LLC, a limited liability company organized under the laws of the Republic of The Marshall Islands (the “ General Partner ”), serves as the sole general partner of the Partnership. GasLog Partners Holding LLC, a limited liability company organized under the laws of the Republic of The Marshall Islands (the “ Operating Company ”), is a wholly owned direct subsidiary of the Partnership. The entities set forth on Schedule III(a) are direct subsidiaries of the Operating Company.
GasLog Ltd., a Bermuda exempted company (“ GasLog ”), GasLog Carriers Ltd. and the Partnership entered into that certain Share Purchase Agreement, dated as of August [ ], 2014 (the “ Purchase Agreement ”), whereby, among other things, the Partnership agreed to purchase 100% of the ownership interests in the entities set forth on Schedule III(b) hereto from GasLog Carriers Ltd., a Bermuda exempted company and wholly owned subsidiary of GasLog (the “ Acquisition ”). The entities set forth on Schedule III(a) and Schedule III(b) hereto are referred to herein collectively as the “ Operating Subsidiaries ”.
The General Partner, the Partnership and the Operating Company are hereinafter referred to collectively as the “ Partnership Parties ” and, together with the Operating Subsidiaries, the “ Partnership Entities ”.
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Prior to or at the First Time of Delivery (as defined in Section 4 hereof), the Partnership Entities will have entered in a new financing agreement (or an amendment to existing financing agreements) in respect of financing agreements with respect to the vessels as set forth on Schedules III(a) and III(b) hereto (the “ New Credit Facility ”). This Agreement, the Purchase Agreement and the New Credit Facility are herein collectively referred to as the “ Operative Agreements ”).
This is to confirm the agreement among the Partnership Parties and the Underwriters concerning the purchase of the Units from the Partnership by the Underwriters.
1. The Partnership Parties represent and warrant to, and agree with, each of the Underwriters that:
(a) A registration statement on Form F-1 (File No. 333-[ ]) (the “ Initial Registration Statement ”) in respect of the Units has been filed with the Securities and Exchange Commission (the “ Commission ”); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to the Representatives, and, excluding exhibits thereto, to the Representatives for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a “ Rule 462(b) Registration Statement ”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “ Act ”), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a “ Preliminary Prospectus ”; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the “ Registration Statement ”; the Preliminary Prospectus relating to the Units that was included in the Registration Statement immediately prior to the Applicable Time, together with the information set forth on Schedule VI hereto, is hereinafter called the “ Pricing Prospectus ”; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the “ Prospectus ”; and any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Units is hereinafter called an “ Issuer Free Writing Prospectus ”);
(b) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Partnership by an Underwriter through the Representatives expressly for use therein;
(c) For the purposes of this Agreement, the “Applicable Time” is [ ] [a.][p.]m. (New York time) on the date of this Agreement. The Pricing Prospectus, as of the Applicable Time, did not include
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any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus listed on Schedule II hereto or any Testing-the-Waters-Communication (as defined herein) does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus, and each such Issuer Free Writing Prospectus or Testing-the-Waters-Communication, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however , that this representation and warranty shall not apply to statements or omissions made in an Issuer Free Writing Prospectus or Testing-the-Waters-Communication in reliance upon and in conformity with information furnished in writing to the Partnership by an Underwriter through the Representatives expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Partnership by an Underwriter through the Representatives expressly for use therein;
(e) From the time of the initial filing of the Registration Statement with the Commission (or, if earlier, the first date on which the Partnership engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the Applicable Time, the Partnership has been and is an “emerging growth company” as defined in Section 2(a) of the Act (an “ Emerging Growth Company ”). “ Testing-the-Waters Communication ” shall mean any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act;
(f) Each of the Partnership Parties (i) has not alone engaged in any Testing-the-Waters Communication and (ii) has not authorized anyone to engage in Testing-the-Waters Communications. None of the Partnership Parties have distributed or approved for distribution any Written Testing-the-Waters Communications. “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act;
(g) None of the Partnership Entities has sustained, since the date of the latest audited financial statements included in the Pricing Prospectus, any material loss or interference with its business from fire, explosion, flood, piracy, terrorism or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus, there has not been any material adverse change, or any development that would reasonably be expected to involve a prospective material adverse change, in or affecting the general affairs, management, financial position, shareholders’ equity or results of operations of the Partnership Entities, taken as a whole (a “ Material Adverse Effect ”), or any change in the share capital or long-term debt of the Partnership Entities, otherwise than as set forth or contemplated in the Pricing Prospectus;
(h) None of the Partnership Entities owns an interest in any material real property. Each of them has good and marketable title to all personal property owned by them which is material to the
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business of the Partnership Entities, including the GasLog Shanghai , GasLog Santiago and GasLog Sydney (collectively, the “ Vessels ”), in each case free and clear of all liens, encumbrances and defects except such as are described in the Pricing Prospectus, including those arising under credit facilities, or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property taken as a whole by the Partnership Entities; and any real property and buildings occupied by the Partnership Entities are occupied by them under valid, subsisting and enforceable contractual arrangements with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Partnership Entities, otherwise than as set forth or contemplated in the Pricing Prospectus;
(i) Each of the Partnership Entities has been duly formed or incorporated and is validly existing as a limited partnership, limited liability company, corporation or other entity, as applicable, in good standing under the laws of its respective jurisdiction of formation or incorporation, with all limited partnership, limited liability company, corporate or other entity power and authority, as applicable, to enter into and perform its obligations under the Operative Agreements to which it is a party, to own or lease and to operate its properties currently owned or leased or to be owned or leased at the First Time of Delivery and any other Time of Delivery (as such terms are defined herein) and to conduct its business as currently conducted or as to be conducted at the First Time of Delivery and any other Time of Delivery, in each case as described in the Pricing Prospectus, except where the failure to be so qualified or in good standing and to have such power or authority would not, individually or in the aggregate, result in a Material Adverse Effect. Each of the Partnership Entities is, and at the First Time of Delivery and any other Time of Delivery will be (i) duly qualified to do business as a foreign limited partnership, limited liability company, corporation or other entity, as applicable, and (ii) is in good standing under the laws of each jurisdictions that requires, and at the First Time of Delivery and any other Time of Delivery will require, such qualification or registration except to the extent that a lack of such qualification would not, individually or in the aggregate, have a Material Adverse Effect or would subject the limited partners of the Partnership to any material liability or disability;
(j) The General Partner has, and at the First Time of Delivery and any other Time of Delivery thereafter will have, full limited liability company power and authority to act as the general partner of the Partnership in all material respects as described in the Pricing Prospectus;
(k) As of the date hereof GasLog owns, and at the First Time of Delivery will own, (i) 162,358 Common Units, and (ii) 9,822,358 subordinated units representing limited partner interests in the Partnership (the “ Subordinated Units ” and together with the Common Units owned by GasLog, the “ Sponsor Units ”). The Sponsor Units, and the limited partner interests represented thereby, have been duly authorized for issuance and sale and are validly issued in accordance with the limited partnership agreement of the Partnership (as the same may be amended and restated at or prior to the First Time of Delivery, the “ Partnership Agreement ”) and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 30, 41, 51 and 60 of The Republic of The Marshall Islands Limited Partnership Act (the “ Marshall Islands LP Act ”)); and GasLog owns the Sponsor Units free and clear of all liens, encumbrances, security interests, charges, equities or other claims (“ Liens ”);
(l) As of the date hereof GasLog owns, and at the First Time of Delivery will own, 100% of the incentive distribution rights of the Partnership (the “ Incentive Distribution Rights”) ; the Incentive Distribution Rights have been duly authorized for issuance and sale, are validly issued in accordance with the Partnership Agreement and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 30, 41, 51 and 60 of the Marshall Islands LP Act); and GasLog owns the Incentive Distribution Rights free and clear of all Liens;
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(m) As of the date hereof the General Partner owns, and at the First Time of Delivery will own, the general partner units, representing a 2% general partner interest in the Partnership (the “ General Partner Interest ”). The General Partner Interest has been duly authorized for issuance and sale, is validly issued in accordance with the Partnership Agreement and is fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 30, 41, 51 and 60 of the Marshall Islands LP Act); and the General Partner owns the General Partner Interest free and clear of all Liens;
(n) As of the date hereof GasLog directly owns, and at the First Time of Delivery will own, 100% of the limited liability company interest in the General Partner, such limited liability company interest has been duly authorized and validly issued in accordance with the limited liability company agreement of the General Partner (as the same may be amended and restated at or prior to the First Time of Delivery, the “ General Partner LLC Agreement ”) and is fully paid (to the extent required by the General Partner LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 20, 31, 40 and 49 of The Republic of The Marshall Islands Limited Liability Company Act of 1996 (the “ Marshall Islands LLC Act ”)); and GasLog owns such limited liability company interest free and clear of all Liens;
(o) As of the date hereof the Partnership directly owns, and at the First Time of Delivery will directly own, 100% of the limited liability company interest in the Operating Company; such limited liability company interest has been duly authorized and validly issued in accordance with the limited liability company agreement of the Operating Company (as the same may be amended and restated at or prior to the First Time of Delivery, the “ Operating Company LLC Agreement ”) and is fully paid (to the extent required under the Operating Company LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 20, 31, 40 and 49 of the Marshall Islands LLC Act); and the Partnership owns such limited liability company interest free and clear of all Liens;
(p) As of the date hereof the Operating Company owns, and at the First Time of Delivery will directly own, 100% of the equity interests in each of the Operating Subsidiaries set forth on Schedule III(a) hereto; at the First Time of Delivery the Operating Company will directly own 100% of the equity interests in each of the Operating Subsidiaries listed on Schedule III(b) hereto. Such equity interests have been duly authorized and validly issued in accordance with the respective bye-laws of each Operating Subsidiary (as the same may be amended or restated at or prior to the First Time of Delivery, the “ Operating Subsidiaries Organizational Documents ” and together with the Partnership Agreement, the General Partner LLC Agreement and the Operating Company LLC Agreement, the “ Partnership Entities Organizational Agreements ”) and are fully paid (to the extent required under the Operating Subsidiaries Organizational Documents) and non-assessable (except as such nonassessability may be affected by the applicable statutes of the jurisdiction of formation of the applicable Operating Subsidiary and the Operating Subsidiaries Organizational Documents); and the Operating Company owns each of such equity interests free and clear of all Liens;
(q) Except as described in Sections 1(m) , 1(o) and 1(p) herein, none of the Partnership Entities owns, or, at the First Time of Delivery or any other Time of Delivery, will own, directly or indirectly, any equity or long-term debt securities of any corporation, partnership, limited liability company, joint venture, association or other entity;
(r) At the First Time of Delivery, assuming no exercise of the option provided in Section 2 , the issued and outstanding limited partner interests of the Partnership will consist of [ ] Common Units, 9,822,358 Subordinated Units and the Incentive Distribution Rights;
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(s) The Units to be sold by the Partnership pursuant to this Agreement, and the limited partner interests represented thereby, have been duly authorized for issuance and sale to the Underwriters in accordance with this Agreement and the Partnership Agreement, and when issued and delivered by the Partnership pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 30, 41, 51 and 60 of the Marshall Islands LP Act), will conform in all material respects to the information in the Pricing Prospectus and to the description of such Units contained in the Prospectus; the unitholders of the Partnership do not and will not have preemptive rights with respect to the Common Units; and none of the outstanding Common Units of the Partnership have been issued in violation of any preemptive or similar rights of any security holder;
(t) The issue and sale of the Units and the compliance by the Partnership Entities with this Agreement and the consummation of the transactions herein contemplated (i) will not conflict with or result in a breach or violation of any of the terms or provisions of, or require the consent of any person, or constitute a default or Debt Repayment Triggering Event (as defined below), or result in the imposition of any lien, charge or encumbrance on any property of the Partnership Entities, under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument, or give any person the right to terminate any agreement or contract to which any Partnership Entity is a party or by which any Partnership Entity is bound or to which any of the property or assets of the Partnership Entities is subject; and (ii) will not result in any violation of (A) the organizational or governing documents of any of the Partnership Entities or (B) any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Partnership Entities or any of their properties or assets, except in the case of clause (i), for any conflict, breach, or violation that would not result in a Material Adverse Effect or have a material adverse effect on the consummation of the transactions contemplated hereby; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Units or the consummation by the Partnership Entities of the transactions contemplated by this Agreement, except the registration under the Act of the Units and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Units by the Underwriters, and such other consents, approvals, authorizations, orders, registrations or qualifications that have already been obtained. A “ Debt Repayment Triggering Event ” means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any loan, note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to accelerate the due date of any payment of, or to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Partnership Entities (for the avoidance of doubt, Debt Repayment Triggering Event excludes any put right that is not triggered by the occurrence of an extraordinary event);
(u) This Agreement has been duly authorized, executed and delivered by each of the Partnership Parties;
(v) At the First Time of Delivery, each of the Operative Agreements, the Partnership Entities Organizational Agreements and the other instruments listed on Schedule VII (the “ Covered Agreements ”) hereto, as applicable, has been duly authorized, executed and delivered by the Partnership Entities party thereto, and each such agreement is a valid and legally binding agreement of each such Partnership Entity, enforceable against such party in accordance with its terms; provided, that , with respect to each such agreement, the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights and remedies generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (B) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing. The Operative
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Agreements, the Partnership Entities Organizational Agreements and the Covered Agreements referenced above are herein collectively referred to as the “ Operative Documents ;”
(w) The completion of the Acquisition in accordance with the terms of the Purchase Agreement, will be legally sufficient to transfer or convey to, or vest in, the Partnership Entities satisfactory title to, or valid rights to use or manage, all properties not already held by them that are, individually or in the aggregate, required to enable the Partnership Entities to conduct their operations in all material respects as contemplated by the Registration Statement, the Pricing Prospectus and the Prospectus, subject to the conditions, reservations, encumbrances and limitations described therein or contained in the Operative Documents. The Partnership Entities, upon execution and delivery of the Purchase Agreement, will succeed in all material respects to the business, assets, liabilities and operations of the entities set forth on Schedule III(b) hereto.
(x) None of the Partnership Entities is (i) in violation of its respective organizational or governing documents, (ii) in violation of any applicable statute, law, rule, regulation, judgment, order or decree of any competent court, regulatory body, administrative agency, governmental body, arbitrator or other authority or (iii) in default (or with the giving of notice or lapse of time would be in default) under any existing obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which any of them is a party or by which any of them is bound or to which any of the properties of any of them is subject, except in each case covered by clauses (ii) and (iii) such as would not result in a Material Adverse Effect or have a material adverse effect on the consummation of the transactions contemplated hereby;
(y) None of the Partnership Entities is currently prohibited, directly or indirectly, from paying any cash distributions to any other Partnership Entity, from making any other distribution on such entity’s equity securities, or from transferring any of such entity’s property or assets to any other Partnership Entity, except as described in the Pricing Prospectus;
(z) There are no contracts, agreements or understandings between the Partnership Parties and any person that would give rise to a valid claim against the Partnership or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the issuance and sale of the Units;
(aa) The statements set forth in the Pricing Prospectus and Prospectus under the captions “Our Cash Distribution Policy and Restrictions on Distributions,” “Business – Ship Time Charters,” “Business—Environmental and Other Regulation,” “Business—Legal Proceedings,” “Certain Relationships and Related Party Transactions,” “Description of the Common Units,” “The Partnership Agreement,” “Material U.S. Federal Income Tax Considerations,” and “Non-United States Tax Considerations”, insofar as such statements purport to summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings and present the information required to be shown;
(bb) There are no business relationships or related-party transactions involving the Partnership Entities or any other person required to be described in the Registration Statement, Pricing Prospectus and Prospectus which have not been described as required;
(cc) Any statistical and market-related data included in the Pricing Prospectus and Prospectus are based on or derived from sources that the Partnership Parties reasonably believe to be reliable and accurate, and the Partnership Parties have obtained the written consent for the use of such data from such sources to the extent required;
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(dd) No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Pricing Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith;
(ee) There are no legal or governmental proceedings pending to which any of the Partnership Entities is a party or of which any property of the Partnership Entities is the subject or, to the Partnership Parties’ knowledge, after due inquiry, to which any of the Partnership Entities’ directors or executive officers is a party, which, if determined adversely to any such entity, would individually or in the aggregate have a Material Adverse Effect; and, to the Partnership Parties’ knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others;
(ff) Other than as set forth in the Pricing Prospectus, (A)(i) to the Partnership Parties’ knowledge, after due inquiry, none of the Partnership Entities is in violation of any applicable United States federal, state, local or non-U.S. statute, law, rule, regulation, ordinance, code, other requirement or rule of law (including common law), or decision or order of any competent domestic or foreign governmental agency, governmental body or court applicable to them, relating to pollution, to the use, handling, transportation, treatment, storage, discharge, disposal or release of Hazardous Substances (as defined below), to the protection or restoration of the environment or natural resources (including biota), to health and safety as such relates to exposure to Hazardous Substances, and to natural resource damages (collectively, “ Environmental Laws ”), (ii) none of the Partnership Entities owns, operates or leases any real property contaminated with Hazardous Substances, (iii) none of the Partnership Entities is conducting or funding any investigation, remediation, remedial action or monitoring of actual or suspected Hazardous Substances in the environment, (iv) none of the Partnership Entities is liable or allegedly liable for any release or threatened release of Hazardous Substances, including at any off-site treatment, storage or disposal site, (v) none of the Partnership Entities is a party to any claim by any governmental agency or governmental body or person relating to Environmental Laws or Hazardous Substances, and (vi) the Partnership Entities have received and are in compliance with all, and have no liability under any, permits, licenses, authorizations, identification numbers or other approvals required under applicable Environmental Laws to conduct their respective businesses, except in each case covered by clauses (i) – (vi) such as would not individually or in the aggregate have a Material Adverse Effect; (B) to the Partnership Parties’ knowledge, there are no facts or circumstances that would reasonably be expected to result in a violation of, liability under, or claim against the Partnership Entities pursuant to any Environmental Law that would have a Material Adverse Effect; and (C) to the Partnership Parties’ knowledge, there are no requirements proposed for adoption or implementation under any Environmental Law that would reasonably be expected to have a Material Adverse Effect. For purposes of this subsection, “ Hazardous Substances ” means (x) petroleum and petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and mold and (y) any other chemical, material or substance defined or regulated as toxic or hazardous or as a pollutant, contaminant or waste under Environmental Laws;
(gg) Other than as set forth in the Pricing Prospectus, the Partnership Parties have reasonably concluded that none of the Partnership Entities has incurred any costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, individually or in the aggregate, have a Material Adverse Effect;
(hh) Other than as set forth in the Pricing Prospectus, the Partnership Entities possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities as necessary for the Partnership Entities to conduct their respective businesses as currently conducted, except as would not individually or in the aggregate have a Material Adverse Effect; and none
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of the Partnership Entities has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect;
(ii) The Partnership Entities own or possess, or hold a right or license to use, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and none of the Partnership Entities has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing, which if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect;
(jj) No material labor dispute, work stoppage, slow down or other conflict with the employees of the Partnership Parties exists or, to the Partnership Parties’ knowledge, is threatened or contemplated;
(kk) The Partnership Entities and the Vessels are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; none of the Partnership Entities has been refused any insurance coverage sought or applied for; and none of the Partnership Entities has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect;
(ll) None of the Partnership Entities has any off-balance sheet arrangements, except as described in the Registration Statement, the Pricing Prospectus and the Prospectus;
(mm) (A) None of the Partnership Entities or, to the Partnership Parties’ knowledge, any of their respective directors, executive officers, affiliates, employees or agents or other persons associated with or acting on behalf of the Partnership Entities: (i) knowingly does any business with or involving the government of, or any person or project located in, any country targeted by any of the economic sanctions promulgated by any Executive Order issued by the President of the United States or administered by the United States Treasury Department’s Office of Foreign Assets Control (the “ OFAC ”) (collectively, “ Sanctions ”); or (ii) knowingly supports or facilitates any such business or project, in each case other than as permitted under such economic sanctions; (B) none of the Partnership Parties is controlled (within the meaning of the Executive Orders or regulations promulgating such economic sanctions or the laws authorizing such promulgation) by any such government or person; (C) the proceeds from the offering of the Units contemplated hereby will not be used to fund any operations in, to finance any investments, projects or activities in, or to make any payments to, any country, or to make any payments to, or finance any activities with, any person targeted by any of such economic sanctions; and (D) the Partnership Parties maintain and have implemented adequate internal controls and procedures to monitor and audit transactions that are reasonably designed to detect and prevent any use of the proceeds from the offering of the Units contemplated hereby that is inconsistent with any of the representations and obligations under clause (C) of this paragraph or in the Registration Statement, Pricing Prospectus or Prospectus;
(nn) None of the Partnership Entities or, to the Partnership Parties’ knowledge, any of their respective directors, executive officers, affiliates, employees or agents or other persons associated with or acting on behalf of the Partnership Entities, has taken any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international
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organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to influence official action or secure an improper advantage in violation of any applicable law; and the Partnership Entities and, to the knowledge of the Partnership Parties, their respective affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintain and will continue to maintain policies and procedures designed to promote and achieve compliance with such laws and with the representation and warranty contained herein;
(oo) The operations of the Partnership Entities, are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including to the extent applicable those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “ Money Laundering Laws ”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator or non-governmental authority involving the Partnership Entities with respect to the Money Laundering Laws is pending or, to the Partnership Parties’ knowledge, threatened;
(pp) As of the effective date of the Registration Statement, the Partnership and, to the knowledge of the Partnership Parties, the officers and directors of the Partnership, in their capacities as such, were, and at the First Time of Delivery will be, in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith that are then in effect and with which any of them is required to comply, including Section 402 related to loans;
(qq) There are no restrictions on subsequent transfers of the Units under the laws of the Republic of The Marshall Islands;
(rr) Except as disclosed in the Pricing Prospectus, there are no contracts, agreements or understandings between the Partnership Parties and any person granting such person the right to require any of the Partnership Parties to file a registration statement under the Act with respect to any securities of the Partnership Entities or to require the Partnership Parties to include such securities with the Units registered pursuant to the Registration Statement;
(ss) The Common Units are listed on the New York Stock Exchange (the “ Exchange ”), and the Units have been authorized for listing on the Exchange, subject to official notice of issuance;
(tt) The Partnership Parties have taken all necessary actions to comply with all applicable corporate governance requirements of the Exchange that are, or will be, applicable to the Partnership, except for such requirements that have been waived and disclosed in the Pricing Prospectus;
(uu) Except as described in the Pricing Prospectus, the Partnership has not sold, issued or distributed any Common Units during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A or Regulation D or S under the Act, other than Common Units issued pursuant to employee benefit plans, qualified option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants;
(vv) None of the Partnership Entities has taken, directly or indirectly, any action which was designed to or which has constituted or which might reasonably be expected to cause or result in
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stabilization or manipulation of the price of any security of the Partnership to facilitate the sale or resale of the Units;
(ww) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any downgrading in the rating of any debt securities of the Partnership Parties by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) of the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Partnership Parties;
(xx) The Partnership is not and, after giving effect to the offering and sale of the Units and the application of the proceeds thereof, will not be required to register as an “investment company”, as such term is defined in the Investment Company Act of 1940, as amended;
(yy) At the time of filing the Initial Registration Statement and as of the Applicable Time, the Partnership was not and is not an “ineligible issuer”, as defined under Rule 405 under the Act;
(zz) As described in the Registration Statement and subject to the limitations and restrictions described therein, the Partnership Parties believe that the Partnership should not be a “passive foreign investment company” as defined in the Internal Revenue Code of 1986, as amended;
(aaa) The Partnership is a “foreign private issuer” as defined in Rule 405 under the Act;
(bbb) Except as described in the Pricing Prospectus, there are no affiliations or associations between any member of the Financial Industry Regulatory Authority (“ FINRA ”) and the Partnership Entities and, to the Partnership Parties’ knowledge, there are no affiliations or associations between (A) any member of FINRA and (b) any member of the Partnership’s officers, directors or 5% or greater security holders or any beneficial owner of the Partnership’s unregistered equity securities that were acquired at any time on or after the 180th day immediately preceding the date the Registration Statement was initially submitted to the Commission;
(ccc) Deloitte Hadjipavlou, Sofianos & Cambanis S.A. and Deloitte LLP, who have certified certain financial statements included in the Registration Statement, Pricing Prospectus and Prospectus, are independent public accountants with respect to the Partnership Entities as required by the Act and the rules and regulations of the Commission thereunder;
(ddd) The Partnership maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 (the “ Exchange Act ”)) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with international financial reporting standards as adopted by the International Accounting Standards Board (“ IFRS ”) and such system will comply in all material respects with the requirements of the Exchange Act when so required. The Partnership’s internal control over financial reporting is effective, and the Partnership is not aware of any material weaknesses in its internal control over financial reporting;
(eee) Since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Partnership’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting (each an “ Internal Control Event ”);
(fff) The Partnership maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such
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disclosure controls and procedures have been designed to ensure that material information relating to the Partnership and its subsidiaries is made known to the Partnership’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;
(ggg) The financial statements of the GasLog Partners LP and the Partnership included in the Pricing Prospectus, together with the related notes thereto, present fairly in all material respects the combined financial position of the Partnership as of the date shown, and such financial statements have been prepared in conformity with IFRS, applied on a consistent basis throughout the periods involved; and the schedules included in the Pricing Prospectus, if any, present fairly the information required to be stated therein. The selected financial data and the summary financial information included in the Pricing Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited and unaudited financial statements included in the Pricing Prospectus;
(hhh) Neither the Partnership’s independent auditors nor any internal auditor has recommended that the Partnership’s board of directors review or investigate, (i) adding to, deleting, changing the application of, or changing the Partnership’s disclosure with respect to, any of the Partnership’s material accounting policies; (ii) any matter which could result in a restatement of the Partnership’s audited balance sheet included in the Registration Statement; or (iii) any Internal Control Event;
(iii) The Vessels are owned directly by the respective Operating Subsidiary listed on Schedule III(a) hereto; each of the Vessels has been duly registered as a vessel under the laws and regulations and flag of the jurisdiction set forth opposite its name on Schedule III(a) in the sole ownership of the subsidiary set forth opposite its name on Schedule III(a) , and no other action is necessary to establish and perfect such entity’s title to and interest in such Vessel as against any charterer or other third party; each such subsidiary has good title to the applicable Vessel, free and clear of all mortgages, pledges, liens, security interests and claims and all defects of the title of record except for those mortgages, pledges, liens, security interests and claims arising under credit facilities, each as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, and any other encumbrances which would not, in the aggregate, result in a Material Adverse Effect; and each such Vessel is in good standing with respect to the payment of past and current taxes, fees and other amounts payable under the laws of the jurisdiction where it is registered as would affect its registry with the ship registry of such jurisdiction except for failures to be in good standing which would not, in the aggregate, result in a Material Adverse Effect. Each of the vessels to be purchased pursuant to the Purchase Agreement described in the Registration Statement, Pricing Prospectus and Prospectus (collectively, the “ Contracted Vessels ”) has been duly registered as a vessel under the laws and regulations and flag of the jurisdiction set forth opposite its name on Schedule III(b) ; upon completion of the Acquisition in accordance with the terms of the Purchase Agreement, the Contracted Vessels will be in the sole ownership of a subsidiary of the Partnership; the Partnership will use its reasonable best efforts so that, on such date, each such subsidiary of the Partnership will have good title to the applicable Contracted Vessel, free and clear of all mortgages, pledges, liens, security interests and claims and all defects of the title of record, except for any mortgages, pledges, liens, security interests or claims arising from any financing arrangement which is described in the Registration Statement, the Pricing Prospectus and the Prospectus and except for such encumbrances which would not, individually or in the aggregate, result in a Material Adverse Effect; and the Partnership will use its reasonable best efforts so that, on such date, each such Contracted Vessel will be in good standing with respect to the payment of past and current taxes, fees and other amounts payable under the laws of the jurisdiction where it is registered as would affect its registry with the ship registry of such jurisdiction, except for failures to be in good standing which would not, in the aggregate, result in a Material Adverse Effect;
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(jjj) Each Vessel is, and the Partnership will use its reasonable best efforts so that each Contracted Vessel will be as of its date of delivery, operated in compliance in all material respects with the rules, codes of practice, conventions, protocols, guidelines or similar requirements or restrictions imposed, published or promulgated by any governmental authority, classification society or insurer applicable to the respective vessel (collectively, “ Maritime Guidelines ”) and all applicable international, national, state and local conventions, laws, regulations, orders, governmental licenses and other requirements (including, without limitation, all Environmental Laws) in the jurisdictions in which the Partnership and its subsidiaries operate or where such vessel is operated, in each case as in effect on the date hereof, except where such failure to be in compliance would not have, individually or in the aggregate, a Material Adverse Effect. The Partnership Entities are qualified to own or lease, as the case may be, and operate such vessels under all applicable international, national, state and local conventions, laws, regulations, orders, governmental licenses and other requirements (including, without limitation, all Environmental Laws) and Maritime Guidelines, including the laws, regulations and orders of each such vessel’s flag state, in each case as in effect on the date hereof, except where such failure to be so qualified would not have, individually or in the aggregate, a Material Adverse Effect;
(kkk) None of the Partnership Parties is entitled to any immunity, whether characterized as sovereign immunity or otherwise, from any legal proceedings in respect of themselves or their respective properties under the laws of the United States or their jurisdiction of formation or incorporation; and
(lll) The Partnership Entities have filed all United States federal, state and local and non-U.S. tax returns that are required to be filed or have requested extensions thereof (except in any case in which the failure so to file would not, individually or in the aggregate, have a Material Adverse Effect); except as set forth in the Pricing Prospectus, the Partnership Entities have paid all taxes (including any assessments, fines or penalties that are currently owed and due) required to be paid by them and that are currently owed and due, except for any such taxes, assessments, fines or penalties currently being contested in good faith or as would not, individually or in the aggregate, have a Material Adverse Effect; and no capital gains, income, withholding or other taxes or stamp or other issuance or transfer taxes or duties or similar fees or charges are payable by or on behalf of the Underwriters in connection with the sale and delivery by the Partnership of the Units to or for the respective accounts of the Underwriters or the sale and delivery by the Underwriters of the Units to the initial purchasers thereof.
2. Subject to the terms and conditions herein set forth, (a) the Partnership agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Partnership, at a purchase price per Common Unit of $[ ], the number of Firm Units set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Option Units as provided below, the Partnership agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Partnership, at the purchase price per Common Unit set forth in clause (a) of this Section 2 , that portion of the number of Option Units as to which such election shall have been exercised (to be adjusted by the Representatives so as to eliminate fractional Common Units) determined by multiplying such number of Option Units by a fraction, the numerator of which is the maximum number of Option Units which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Option Units that all of the Underwriters are entitled to purchase hereunder.
The Partnership, as and to the extent indicated in Schedule I hereto, hereby grants severally and not jointly to the Underwriters the right to purchase at their election up to [ ] Option Units, at the purchase price per Common Unit set forth in the paragraph above; provided that the purchase price per Option Unit shall be reduced by an amount per Common Unit equal to any dividends or distributions declared by the Partnership and payable on the Firm Units but not payable on the Option Units. Any such
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election to purchase Option Units may be exercised only by written notice from the Representatives to the Partnership, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Option Units to be purchased and the business day on which such Option Units are to be delivered, as determined by the Representatives but in no event earlier than the First Time of Delivery or, unless the Representatives and the Partnership otherwise agree in writing, earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by the Representatives of the release of the Firm Units, the several Underwriters propose to offer the Firm Units for sale upon the terms and conditions set forth in the Prospectus.
4. (a) The Units to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours’ prior notice to the Partnership shall be delivered by or on behalf of the Partnership to the Representatives, through the facilities of the Depository Trust Company (“ DTC ”), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Partnership to the Representatives at least forty-eight hours in advance. The time and date of such delivery and payment shall be, with respect to the Firm Units, [ ] [a.][p.]m., New York City time, on [ ], 2014 or such other time and date as the Representatives and the Partnership may agree upon in writing, but not later than [ ], 2014, and, with respect to the Option Units, [ ] [a.][p.]m., New York time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters’ election to purchase such Option Units, or such other time and date as the Representatives and the Partnership may agree upon in writing, but not later than [ ], 2014. Such time and date for delivery of the Firm Units is herein called the “ First Time of Delivery ”, such time and date for delivery of the Option Units, if not the First Time of Delivery, is herein called the “ Second Time of Delivery ”, and each such time and date for delivery is herein called a “ Time of Delivery ”.
(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the Units and any additional documents requested by the Underwriters pursuant to Section 8(n) hereof, will be delivered at the offices of Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, TX 77002 (the “ Closing Location ”). A meeting will be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4 , “ New York Business Day ” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
5. The Partnership Parties agree with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery, which shall be disapproved by the Representatives promptly after reasonable notice thereof; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish the Representatives with copies thereof; to file promptly all material required to be filed by the Partnership with the Commission pursuant to Rule 433(d) under the
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Act; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Units, of the suspension of the qualification of the Units for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement, any Preliminary Prospectus, the Prospectus or Issuer Free Writing Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Units for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Units, provided that in connection therewith the Partnership shall not be required to qualify as a foreign corporation or to file a general consent to service of process or to subject itself to taxation for doing business in any jurisdiction if it is not otherwise so subject;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as the Representatives may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required, at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Units and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, to notify the Representatives and upon the request of the Representatives to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as the Representatives may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Units at any time nine months or more after the time of issue of the Prospectus, upon the request of the Representatives but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as the Representatives may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as practicable, but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Partnership and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Partnership, Rule 158);
(e) During the period beginning from the date hereof and continuing to and including the date 90 days after the date of the Prospectus (the “ Lock-Up Period ”), not to (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any securities of the Partnership that are substantially similar to the Units, including but not limited to any options or
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warrants to purchase Common Units or any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Units or any such substantially similar securities, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Units or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Units or such other securities, in cash or otherwise (other than (x) the Units to be sold hereunder, (y) securities offered or sold pursuant to employee stock option or other incentive compensation plans or employment arrangements existing on the date hereof as described in the Pricing Prospectus, or, provided such securities do not vest or become exercisable until after the Lock-Up Period, pursuant to incentive compensation plans or employment arrangements entered into in the ordinary course, or (z) the establishment of a trading plan pursuant to Rule 10b5-1 under the Act, for the transfer of Common Units, provided that such plan does not provide for the transfer of Common Units during the Lock-Up Period), without the prior written consent of Citigroup Global Markets Inc.;
(f) During the first 12 months following the last Time of Delivery, to furnish to its unitholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, unitholders’ equity and cash flows of the Partnership and its consolidated subsidiaries certified by an independent registered public accounting firm) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its unitholders consolidated summary financial information of the Partnership and its subsidiaries for such quarter in reasonable detail reviewed in accordance with SAS 100 by an independent registered public accounting firm; provided , however , that the Partnership may satisfy the requirements of this subsection by making any such reports, communications or information available on its website or by filing or furnishing such information with the Commission via EDGAR;
(g) During a period of three years from the effective date of the Registration Statement, to furnish to the Representatives copies of all reports or other communications (financial or other) furnished to unitholders, and to deliver to the Representatives as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Partnership is listed; provided , however , that the Partnership may satisfy the requirements of this subsection by making any such reports, communications or information available on its web site or by filing or furnishing such information with the Commission via EDGAR;
(h) The Partnership will promptly notify the Representatives if the Partnership ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Units within the meaning of the Act and (ii) completion of the Lock-Up Period referred to in Section 5(e) hereof.
(i) If at any time following the distribution of any Written Testing-the-Waters Communication, any event occurs as a result of which such Written Testing-the-Waters Communication would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made at such time not misleading, the Partnership will (i) promptly notify the Representatives so that use of the Written Testing-the-Waters Communication may cease until it is amended or supplemented; (ii) amend or supplement the Written Testing-the-Waters Communication to correct such statement or omission; and (iii) supply any amendment or supplement to the Representatives in such quantities as may be reasonably requested.
(j) To use the net proceeds received by the Partnership from the sale of the Units pursuant to this Agreement in the manner specified in the Pricing Prospectus under the caption “Use of Proceeds”;
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(k) To use its reasonable best efforts to list, subject to notice of issuance, the Units on the Exchange;
(l) To file with the Commission such information on Form 20-F as may be required by Rule 463 under the Act;
(m) If the Partnership elects to rely upon Rule 462(b), the Partnership shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 p.m., New York time, on the date of this Agreement, and the Partnership shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act; and
(n) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Partnership’s trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Units (the “ License ”); provided, however , that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred.
6. (a) The Partnership represents and agrees that, without the prior consent of the Representatives, it has not made and will not make any offer relating to the Units that would constitute a “free writing prospectus” as defined in Rule 405 under the Act; each Underwriter represents and agrees that, without the prior consent of the Partnership and the Representatives, it has not made and will not make any offer relating to the Units that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Partnership and the Representatives is listed on Schedule II hereto.
(b) The Partnership has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and the Partnership represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to file with the Commission any electronic road show.
(c) The Partnership agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Partnership will give prompt notice thereof to the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however , that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Partnership by an Underwriter through the Representatives expressly for use therein.
7. The Partnership covenants and agrees with the several Underwriters that the Partnership will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Partnership’s counsel and accountants in connection with the registration of the Units under the Act and all other expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any agreement among Underwriters, this Agreement,
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any Blue Sky memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Units; (iii) all expenses in connection with the qualification of the Units for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey; (iv) all fees and expenses in connection with listing the Units on the Exchange; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, any required review by FINRA of the terms of the sale of the Units (such expenses of counsel shall not exceed $25,000); (vi) the cost of preparing certificates, as applicable; (vii) the cost and charges of any transfer agent or registrar; (viii) 50% of the cost of private aircraft chartered in connection with the road show; and (ix) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 7 . It is understood, however, that the Underwriters will pay (x) the remaining 50% of the cost of private aircraft chartered in connection with the road show; and (y) except as provided in this Section 7 , and Sections 9 and 13 hereof, all of their own costs and expenses, including the fees and disbursements of their counsel, transfer taxes on resale of any of the Units by them, and any advertising expenses connected with any offers they may make. In addition, the Partnership agrees to pay the out-of-pocket expenses of [ ] in its capacity as the QIU (as defined below).
8. The obligations of the Underwriters hereunder, as to the Units to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Partnership Parties herein are, at and as of such Time of Delivery, true and correct, the condition that the Partnership Parties shall have performed all of their obligations hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Partnership pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Partnership has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 p.m., New York time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of the Representatives;
(b) Latham & Watkins LLP, counsel for the Underwriters, shall have furnished to the Representatives such written opinion or opinions, dated such Time of Delivery, in form and substance reasonably satisfactory to the Representatives, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;
(c) Cravath, Swaine & Moore LLP, U.S. counsel for the Partnership Parties, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives, to the effect set forth in Annex I ;
(d) Cozen O’Connor, special counsel on matters of Marshall Islands law for the Partnership Parties, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives, to the effect set forth in Annex II ;
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(e) Conyers Dill & Pearman Limited, special Bermuda counsel for the Partnership Parties, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives, to the effect set forth in Annex III ;
(f) Special English counsel for the Partnership Parties, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives, to the effect set forth in Annex IV ;
(g) On the date hereof and at each Time of Delivery, Deloitte Hadjipavlou, Sofianos & Cambanis S.A. and Deloitte LLP shall have each furnished to the Representatives a letter or letters, dated the respective dates of delivery thereof, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, Pricing Prospectus and Prospectus, in form and substance satisfactory to the Representatives;
(h) (i) None of the Partnership Entities shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood, piracy, terrorism or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus and (ii) since the respective dates as of which information is given in the Pricing Prospectus there shall not have been any change in the capital or long-term debt of the Partnership Entities or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, unitholders’ or shareholders’ equity, as applicable, or results of operations of the Partnership Entities, otherwise than as set forth or contemplated in the Pricing Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Units being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;
(i) On or after the Applicable Time (i) no downgrading shall have occurred in the rating accorded the Partnership Parties’ debt securities or preferred stock by any “nationally recognized statistical rating organization”, as such term is defined in Section 3(a)(62) of the Exchange Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Partnership Parties’ debt securities or preferred stock;
(j) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange or the NASDAQ Global Select Stock Market; (ii) a suspension or material limitation in trading in the Partnership Parties’ securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the Republic of The Marshall Islands or the declaration by the United States of a national emergency or war; or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Units being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;
(k) The Units to be sold by the Partnership at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange;
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(l) The Partnership shall have obtained and delivered to the Underwriters executed copies of an agreement substantially in form attached hereto as Schedule IV from those individuals and entities listed on Schedule V ;
(m) The Partnership shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and
(n) The Partnership shall have furnished or caused to be furnished to the Representatives at such Time of Delivery certificates of officers of the Partnership satisfactory to the Representatives as to the accuracy of the representations and warranties of the Partnership herein at and as of such Time of Delivery, as to the performance by the Partnership of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (f) of this Section and as to such other matters as the Representatives may reasonably request.
9. (a) The Partnership Parties will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Written Testing-the-Waters Communication, any Issuer Free Writing Prospectus or any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided , however , that the Partnership Parties shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus, the Prospectus, or any amendment or supplement thereto, any Written Testing-the-Waters Communication or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Partnership Parties by any Underwriter through the Representatives expressly for use therein.
(b) Each Underwriter, severally and not jointly, will indemnify and hold harmless the Partnership Parties against any losses, claims, damages or liabilities to which the Partnership Parties may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Written Testing-the-Waters Communication or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Written Testing-the-Waters Communication or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Partnership Parties by such Underwriter through the Representatives expressly for use therein; and will reimburse the Partnership Parties for any legal or other expenses reasonably incurred by the Partnership Parties in connection with investigating or defending any such action or claim as such expenses are incurred.
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(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above or Section 10 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection or Section 10 , notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection or Section 10 . In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection or Section 10 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Partnership Parties on the one hand and the Underwriters on the other from the offering of the Units. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Partnership Parties on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Partnership Parties on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Partnership Parties bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Partnership Parties on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Partnership Parties and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or
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claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Units underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Partnership Parties under this Section 9 shall be in addition to any liability which the Partnership Parties may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act, each broker-dealer affiliate of any Underwriter and each director, officer, employee and agent of any Underwriter or broker-dealer affiliate of any Underwriter; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Partnership (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Partnership) and to each person, if any, who controls the Partnership within the meaning of the Act.
10. The Partnership Parties hereby confirm that at their request [ ] has without compensation acted as “qualified independent underwriter” (in such capacity, the “ QIU ”), within the meaning of FINRA Rule 5121, in connection with the offering of the Units. The Partnership Parties will indemnify and hold harmless the QIU, its directors, officers, employees and agents and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which the QIU may become subject, under the Act, the Exchange Act, other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the QIU’s acting (or alleged failing to act) as such “qualified independent underwriter” and will reimburse the QIU for any legal or other expenses reasonably incurred by the QIU in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, provided, however, that the Partnership Parties will not be liable in any such case to the extent that any such loss, claim, damage or liability is finally judicially determined to have resulted from the gross negligence or willful misconduct of the QIU.
11. (a) If any Underwriter shall default in its obligation to purchase the Units which it has agreed to purchase hereunder at a Time of Delivery, the Representatives may in their discretion arrange for the Representatives or another party or other parties to purchase such Units on the terms contained herein. If within thirty-six hours after such default by any Underwriter the Representatives do not arrange for the purchase of such Units, then the Partnership shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representatives to purchase such Units on such terms. In the event that, within the respective prescribed periods, the Representatives notify the Partnership that the Representatives have so arranged for the purchase of such Units, or the Partnership notifies the Representatives that it has so arranged for the purchase of such Units, the Representatives or the Partnership shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Partnership agrees to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in the opinion of the Representatives may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section 11 with like effect as if such person had originally been a party to this Agreement with respect to such Units.
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(b) If, after giving effect to any arrangements for the purchase of the Units of a defaulting Underwriter or Underwriters by the Representatives and the Partnership as provided in subsection (a) above, the aggregate number of such Units which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Units to be purchased at such Time of Delivery, then the Partnership shall have the right to require each non-defaulting Underwriter to purchase the number of Units which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Units which such Underwriter agreed to purchase hereunder) of the Units of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the Units of a defaulting Underwriter or Underwriters by the Representatives and the Partnership as provided in subsection (a) above, the aggregate number of such Units which remains unpurchased exceeds one-eleventh of the aggregate number of all the Units to be purchased at such Time of Delivery, or if the Partnership shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Units of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Partnership to sell the Option Units) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Partnership, except for the expenses to be borne by the Partnership Parties, as applicable, and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties and other statements of the Partnership Parties and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Partnership, or any officer or director or controlling person of the Partnership, and shall survive delivery of and payment for the Units.
13. If this Agreement shall be terminated pursuant to Section 11 hereof, the Partnership Parties, as applicable, shall not then be under any liability to any Underwriter except as provided in Sections 7 and 9 hereof; but, if for any other reason, any Units are not delivered by or on behalf of the Partnership as provided herein, the Partnership Parties will reimburse the Underwriters through the Representatives for all out-of-pocket expenses approved in writing by the Representatives, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Units not so delivered, but the Partnership Parties shall then be under no further liability in respect of the Units not so delivered to any Underwriter except as provided in Sections 7 and 9 hereof.
14. In all dealings hereunder, the Representatives shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representatives.
All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Representatives at, in the case of Citigroup Global Markets Inc., to Citigroup General Counsel by facsimile at (212) 816-7912, and confirmed to Citigroup Global Markets Inc. at 388 Greenwich Street, New York, NY 10013, Attention: General Counsel, in the case of [ ], to [ ], Attention: [ ], and in the case of [ ], to [ ], Attention: [ ], Facsimile: [ ]; and if to the Partnership shall be delivered or sent by mail, telex or facsimile transmission to the address of the Partnership set forth in the Registration Statement,
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Attention: Chief Financial Officer; provided, however , that any notice to an Underwriter pursuant to Section 9(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters’ Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Partnership by the Representatives upon request; provided, however , that notices under Section 5(e) shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Representatives at, in the case of Citigroup Global Markets Inc., to Citigroup General Counsel by facsimile at (212) 816-7912, and confirmed to Citigroup Global Markets Inc. at 388 Greenwich Street, New York, NY 10013, Attention: General Counsel, in the case of [ ], to [ ], Attention: [ ], and in the case of [ ], to [ ], Attention: [ ], Facsimile: [ ]. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.
In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Partnership, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.
15. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Partnership Parties and, to the extent provided in Sections 9 and 12 hereof, the officers and directors of the Partnership and each person who controls the Partnership or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Units from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.
17. The Partnership Parties acknowledge and agree that (i) the purchase and sale of the Units pursuant to this Agreement is an arm’s-length commercial transaction between the Partnership Parties, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Partnership Parties, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Partnership Parties with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Partnership Parties on other matters) or any other obligation to the Partnership Parties except the obligations expressly set forth in this Agreement and (iv) the Partnership Parties have consulted their own legal and financial advisors to the extent they deemed appropriate. The Partnership Parties agree that they will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Partnership Parties, in connection with such transaction or the process leading thereto.
18. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Partnership Parties and the Underwriters, or any of them, with respect to the subject matter hereof.
19. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK. The Partnership Parties agree that any suit or proceeding arising in respect of this agreement or the engagement of the Representatives will be tried exclusively in the U.S. District
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Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York, and the Partnership Parties agree to submit to the jurisdiction of, and to venue in, such courts.
20. The Partnership has appointed C T Corporation as its authorized agent (the “ Authorized Agent ”) upon whom process may be served in any suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated herein which may be instituted, by any Underwriter, the directors, officers, employees and agents of any Underwriter, or by any person who controls any Underwriter, and expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Partnership hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and each of them agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Partnership.
21. The Partnership Parties and each of the Underwriters hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
22. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.
[ Remainder of page intentionally left blank. ]
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If the foregoing is in accordance with the understanding of the Representatives, please sign and return to the Representatives one copy for the Partnership Parties and each of the Representatives plus one copy for each counsel counterparts hereof, and upon the acceptance hereof by the Representatives, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Partnership Parties. It is understood that the acceptance by the Representatives of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of agreement among Underwriters, the form of which shall be submitted to the Partnership for examination upon request, but without warranty on the part of the Representatives as to the authority of the signers thereof.
Very truly yours, | ||
GasLog Partners GP LLC | ||
By: | GasLog Ltd., as sole member | |
By: | ||
Name: Paul Wogan | ||
Title: Chief Executive Officer | ||
GasLog Partners LP | ||
By: | ||
Name: Andrew Orekar | ||
Title: Chief Executive Officer | ||
GasLog Partners Holdings LLC | ||
By: | GasLog Partners LP, as sole member | |
By: | ||
Name: Andrew Orekar | ||
Title: Chief Executive Officer |
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Accepted as of the date hereof:
Citigroup Global Markets Inc.
By: | ||
Name: | ||
Title: | ||
[ ] | ||
By: | ||
Name: | ||
Title: | ||
[ ] | ||
By: | ||
Name: | ||
Title: | ||
On behalf of each of the Underwriters |
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Schedule I
Underwriter |
Total Number of
Firm Units to be Purchased |
Number of
Optional Units to be Purchased if Maximum Option Exercised |
||
Citigroup Global Markets Inc. | [ ] | [ ] | ||
[ ] | [ ] | [ ] | ||
[ ] | [ ] | [ ] | ||
Total | [ ] | [ ] |
|
Schedule II
[None.]
|
Schedule III(a)
Owned Vessels | ||||||
Vessel | Flag | Owning Entity | IMO Number | |||
GasLog Shanghai | Bermuda | GAS-three Ltd. | 9600528 | |||
GasLog Santiago | Bermuda | GAS-four Ltd. | 9600530 | |||
GasLog Sydney | Bermuda | GAS-five Ltd. | 9626273 |
Schedule III(b)
Contracted Vessels
Vessel | Flag | Owning Entity | IMO Number | |||
Methane Rita Andrea | Bermuda | GAS-sixteen Ltd. | 9307188 | |||
Methane Jane Elizabeth | Bermuda | GAS-seventeen Ltd. | 9307190 |
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Schedule IV
Form of Lock-Up Agreement
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GasLog Partners LP
Lock-Up Agreement
________, 2014
Citigroup Global Markets Inc.
388 Greenwich Street, 34th Floor
New York, NY 10013
[ ]
[ ]
As Representatives of the several Underwriters
Re: GasLog Partners LP – Lock-Up Agreement
Ladies and Gentlemen:
The undersigned understands that Citigroup Global Markets Inc., [ ], and [ ], as representatives, propose to enter into an Underwriting Agreement on behalf of the several Underwriters named in Schedule I to such agreement (collectively, the “ Underwriters ”), with GasLog Partners GP LLC, a limited liability company organized under the laws of the Republic of The Marshall Islands (the “ General Partner ”), GasLog Partners LP, a limited partnership organized under the laws of the Republic of The Marshall Islands (the “ Partnership ”), and GasLog Partners Holdings LLC, a limited liability company organized under the laws of the Republic of The Marshall Islands (the “ Operating Company ” and together with the General Partner and the Partnership, the “ Partnership Parties ”), providing for a public offering of the Partnership’s common units, representing limited partner interests in the Partnership (the “ Common Units ”) pursuant to a Registration Statement on Form F-1 (the “ Registration Statement ”) filed with the Securities and Exchange Commission (the “ SEC ”).
In consideration of the agreement by the Underwriters to offer and sell the Common Units, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that, during the period specified in the following paragraph (the “ Lock-Up Period ”), the undersigned will not offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any Common Units of the Partnership, or any options or warrants to purchase any Common Units of the Partnership, or any securities convertible into, exchangeable for or that represent the right to receive Common Units of the Partnership, whether now owned or hereinafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the SEC (collectively the “ Undersigned’s Units ”). The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Units even if such Common Units would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Units or with respect to any security that includes, relates to, or derives any significant part of its value from such Common Units.
The initial Lock-Up Period will commence on the date of this Lock-Up Agreement and continue for 90 days after the public offering date set forth on the final prospectus used to sell the Common Units (the “ Public Offering Date ”) pursuant to the Underwriting Agreement.
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Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Units (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, (iii) with the prior written consent of Citigroup Global Markets Inc. on behalf of the Underwriters, (iv) to any of its Affiliates (as such term is defined in Rule 405 under the U.S. Securities Act of 1933, as amended) or as distributions to members, general partners and limited partners or shareholders of the undersigned who, in any case under this clause (iv), agree to be bound by the terms of this Lock-Up Agreement, provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), shall be required or shall be voluntarily made, or (v) in the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Common Units, provided that such plan does not provide for the transfer of Common Units during the Lock-Up Period. For purposes of this Lock-Up Agreement, “ immediate family ” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. In addition, notwithstanding the foregoing, if the undersigned is a corporation, the corporation may transfer the Undersigned’s Units to any wholly owned subsidiary of such corporation; provided, however , that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding such Common Units subject to the provisions of this Lock-Up Agreement and there shall be no further transfer of such Common Units except in accordance with this Lock-Up Agreement, and provided further that any such transfer shall not involve a disposition for value. The undersigned now has, and, except as contemplated by clauses (i) through (v) above, for the duration of this Lock-Up Agreement will have, good and marketable title to the Undersigned’s Units, free and clear of all liens, encumbrances, and claims whatsoever. The undersigned also agrees and consents to the entry of stop transfer instructions with the Partnership’s transfer agent and registrar against the transfer of the Undersigned’s Units except in compliance with the foregoing restrictions.
The undersigned understands that the Partnership Parties and the Underwriters are relying upon this Lock-Up Agreement in proceeding toward consummation of the offering. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns.
* * *
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If (i) the Partnership notifies you in writing that it does not intend to proceed with the public offering, (ii) the Registration Statement filed with the SEC with respect to the public offering of the Common Units is withdrawn or (iii) for any reason the Underwriting Agreement shall be terminated prior to the First Time of Delivery (as defined in the Underwriting Agreement), the provisions of this Lock-Up Agreement shall be terminated and the undersigned shall be released from its obligations hereunder.
Very truly yours, | ||
[Exact Name of Unitholder] | ||
Authorized Signature | ||
Title |
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Schedule V
List of Individuals and Entities Subject to Lock Up Agreement
Curtis V. Anastasio
Daniel Bradshaw
Simon Crowe
Pamela Gibson
Donald J. Kintzer
Peter G. Livanos
Andrew J. Orekar
Graham Westgarth
Basic Management Company Inc.
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Schedule VI
Information Included in the Pricing Prospectus
Initial price to the public: $[ ] per Common Unit
Number Common Units offered to the public: [ ]
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Schedule VII
Covered Agreements
1. | Master Time Charter Party, dated May 9, 2011, between GAS-one Ltd., GAS-two Ltd., GAS-three Ltd., GAS-four Ltd., GAS-five Ltd. and GAS-six Ltd. and Methane Services Limited. |
2. | Confirmation Memorandum – SHI HN 1946, dated May 9, 2011, between GAS-three Ltd. and Methane Services Limited. |
3. | Amendment and Restatement Agreement relating to Confirmation Memorandum – SHI HN 1946, dated June 17, 2013, between GAS-three Ltd. and Methane Services Limited. |
4. | Confirmation Memorandum – SHI HN 1947, dated May 9, 2011, between GAS-four Ltd. and Methane Services Limited. |
5. | Amendment and Restatement Agreement relating to Confirmation Memorandum – SHI HN 1947, dated June 17, 2013, between GAS-four Ltd. and Methane Services Limited. |
6. | Confirmation Memorandum – SHI HN 2016, dated May 9, 2011, between GAS-five Ltd. and Methane Services Limited. |
7. | Amendment and Restatement Agreement relating to Confirmation Memorandum – SHI HN 2016, dated June 17, 2013, between GAS-five Ltd. and Methane Services Limited. |
8. | LNG Time Charter Party between GAS-sixteen Ltd. and Methane Services Limited, dated April 4, 2014. |
9. | LNG Time Charter Party between GAS-seventeen Ltd. and Methane Services Limited, dated April 4, 2014. |
IV- 1 |
Exhibit 5.1
August 14, 2014
GasLog Partners LP
Gildo Pastor Center
7 Rue du Gabian
MC 98000
Monaco
Re: |
GasLog Partners LP
Registration Statement on Form F-1 |
Ladies and Gentlemen:
We have acted as counsel to Gaslog Partners LP, a limited partnership organized under the laws of the Republic of the Marshall Islands (the “ Partnership ”) in connection with the registration of its common units, including common units to be sold by the Partnership pursuant to the underwriters’ option to purchase additional common units (together, the “ Units ”), representing limited partner interests in the Partnership, pursuant to the Partnership’s registration statement on Form F-1 (such registration statement as amended or supplemented from time to time) (the “ Registration Statement ”) as filed with the U.S. Securities and Exchange Commission (the “ Commission ”) under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”). The Units are being offered in the Partnership’s public offering pursuant to an underwriting agreement (the “ Underwriting Agreement ”) to be entered into among the Partnership, GasLog Partners GP LLC, a Marshall Islands limited liability company and the general partner (the “ General Partner ”) of the Partnership, GasLog Partners Holding LLC, Citigroup Global Markets Inc. and the representatives of the underwriters named therein.
We have examined originals or copies, certified or otherwise identified to our satisfaction, of:
(i) | the Registration Statement and the prospectus contained therein (the “ Prospectus ”); |
(ii) | the First Amended and Restated Agreement of Limited Partnership of the Partnership filed with the Commission on April 21, 2014; |
(iii) | the form of Underwriting Agreement; and |
(iv) | such other papers, documents, agreements, and records of the Partnership and the General Partner and such other instruments, certificates and documents as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed. |
In such examinations, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, the genuineness of all signatures and the legal competence or capacity of persons or entities to complete the execution of documents. As to matters of fact material to this opinion that have not been independently established, we have relied upon representations, statements, and certificates of public officials, directors or officers of the Partnership and the General Partner, and others, in each case as we have deemed relevant and appropriate, and upon the representations and warranties of each of the Partnership and the General Partner to be made in the Underwriting Agreement. We have not independently verified the facts so relied on.
In rendering this opinion, we have also assumed that:
(i) | the issuance and sale of the Units complies in all respects with the terms, conditions and restrictions set forth in the Prospectus and all of the instruments and other documents relating thereto or executed or to be executed in connection therewith; |
(ii) | the Underwriting Agreement will be duly and validly authorized by all parties thereto, and executed and delivered by such parties prior to the issuance and delivery of the Units; and |
(iii) | the Underwriting Agreement is valid and enforceable against the parties thereto. |
This opinion letter is limited to Marshall Islands Law as of the date hereof.
Based on the foregoing, and having regard to legal considerations which we deem relevant, and subject to the qualifications, limitations and assumptions set forth herein, we are of the opinion that under the laws of the Republic of the Marshall Islands, when the Units are issued
2
and delivered against payment therefor in accordance with the terms of the Underwriting Agreement, the Registration Statement and the Prospectus, the Units will be validly issued, fully paid and nonassessable.
Our opinion is as of the date hereof and we have no responsibility to update this opinion for events and circumstances occurring after the date hereof or as to facts relating to prior events that are subsequently brought to our attention. We disavow any undertaking to advise you of any changes in law.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our name in the Prospectus. In giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations of the Commission promulgated thereunder with respect to any part of the Registration Statement.
Very truly yours,
/s/ Cozen O’Connor
3
Exhibit 8.1
August 14, 2014
GasLog Partners LP
Ladies and Gentlemen:
We have acted as United States counsel to GasLog Partners LP, a Marshall Islands limited partnership (the “Partnership”), in connection with the registration by the Partnership of its common units under the Securities Act of 1933 (the “Securities Act”) on a Registration Statement on Form F−1 filed on the date hereof with the Securities and Exchange Commission (the “SEC”) (such registration statement, as amended or supplemented from time to time, being hereinafter referred to as the “Registration Statement”).
For purposes of our opinion set forth below, we have reviewed and relied upon the Registration Statement, including the prospectus contained therein (the “Prospectus”), and such other documents, records and instruments as we have deemed necessary and appropriate. In such review, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the conformity to original documents of all documents submitted to us as duplicate copies and the authenticity of the originals of such documents. We have not undertaken any independent investigation of any factual matter set forth in any of the foregoing. In addition, we have relied upon certain statements of factual matters made by the Partnership, which we have neither investigated nor verified. Any inaccuracy in any of the aforementioned documents or statements could adversely affect our opinion.
In rendering our opinion, we have considered the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated thereunder by the U.S. Department of Treasury (the “Regulations”), pertinent judicial authorities, rulings of the Internal Revenue Service, and such other authorities as we have considered relevant, in each case as in effect on the date hereof. It should be noted that the Code, Regulations, judicial decisions, administrative interpretations and other authorities are subject to change at any time, possibly with retroactive effect. A material
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change in any of the materials or authorities upon which our opinion is based could affect the conclusions set forth herein. There can be no assurance, moreover, that any opinion expressed herein will be accepted by the Internal Revenue Service, or if challenged, by a court.
Based upon and subject to the foregoing, although the discussion in the Registration Statement, and the Prospectus contained therein, under the headings “Business—Taxation of the Partnership—United States” and “Material U.S. Federal Income Tax Considerations” does not purport to discuss all possible United States federal income tax consequences of the matters discussed therein, we hereby confirm that the statements of law (including the qualifications thereto) under such headings represent our opinion of the material United States federal income tax consequences of the matters discussed therein as of the date hereof.
Our opinion does not relate to any factual or accounting matters, determinations or conclusions, and we have not expressed an opinion as to any matter not specifically described in the foregoing sentence. We disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or subsequent changes in applicable law. Any changes in the facts set forth or assumed herein may affect the conclusions stated herein.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Prospectus. The giving of this consent does not constitute an admission that we are “experts” within the meaning of the Securities Act or included in the categories of persons whose consent is required by Section 7 of the Securities Act or the rules and regulations of the SEC.
This opinion is rendered to you for the purpose of being included as an exhibit to the Registration Statement.
Very truly yours, | |
/s/ Cravath, Swaine & Moore LLP |
GasLog Partners LP
Gildo Pastor Center
7 Rue du Gabian
MC 98000, Monaco
Exhibit 8.2
August 14, 2014
GasLog Partners LP
Gildo Pastor Center
7 Rue du Gabian
MC 98000
Monaco
Re: |
GasLog Partners LP
Registration Statement on Form F-1 |
Ladies and Gentlemen:
We have acted as special counsel as to matters of the law of the Republic of the Marshall Islands (“ Marshall Islands Law ”) for GasLog Partners LP, a Marshall Islands limited partnership (the “ Partnership ”), in connection with the proposed public offering by the Partnership of its common units, each representing limited partnership interests in the Partnership, pursuant to the Partnership’s registration statement on Form F-1 (such registration statement, any amendments or supplements thereto, including any post-effective amendments, the “ Registration Statement ”).
As counsel, we have examined originals or copies (certified or otherwise identified to our satisfaction) of the following documents:
(i) | the Registration Statement and the prospectus included therein (the “ Prospectus ”); and |
(ii) | such other papers, documents, agreements, certificates of public officials and certificates of representatives of the Partnership, and subsidiaries and affiliates of the Partnership as we have deemed relevant and necessary as the basis for the opinion hereafter expressed. |
In such examination, we have assumed (a) the legal capacity of each natural person, (b) the genuineness of all signatures and the authenticity of all documents submitted to us as originals, (c) the conformity to original documents of all documents submitted to us as conformed or photostatic copies, (d) that the documents reviewed by us in connection with the rendering of the opinion set forth herein are true, correct and complete and (e) the truthfulness of
each statement as to all factual matters contained in any document or certificate encompassed within the due diligence review undertaken by us. As to any questions of fact material to our opinion, we have, when relevant facts were not independently established, relied upon the aforesaid certificates.
This opinion letter is limited to Marshall Islands Law and rendered as of the date hereof. We expressly disclaim any responsibility to advise of any development or circumstance of any kind, including any change of law or fact that may occur after the date of this opinion letter that might affect the opinion expressed herein.
Based on the facts as set forth in this Prospectus and having regard to legal considerations which we deem relevant, and subject to the qualifications, limitations and assumptions set forth herein, we hereby confirm that we have reviewed the discussion set forth in the Prospectus under the captions “ Business—Taxation of the Partnership —Marshall Islands ” and “ Non-United States Tax Considerations—Marshall Islands Tax Consequences ” and we confirm that the statements in such discussions to the extent they constitute summaries of law or legal conclusions, unless otherwise noted, are the opinions of Cozen O’Connor with respect to the taxation of the Partnership under Marshall Islands law and Marshall Islands tax consequences as of the effective date of the Registration Statement (except for the representations and statements of fact of the Partnership included under such captions, as to which we express no opinion).
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm in the Prospectus. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the “ Securities Act ”), or the rules and regulations promulgated thereunder, nor do we admit that we are experts with respect to any part of the Registration Statement within the meaning of the term “ expert ” as used in the Securities Act.
Very truly yours,
/s/ Cozen O’Connor
2 |
Exhibit 10.20
SHARE PURCHASE AGREEMENT
Dated August 14, 2014
among
GASLOG CARRIERS LTD.,
GASLOG LTD.
and
GASLOG PARTNERS LP
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TABLE OF CONTENTS
Page | ||
ARTICLE I | ||
Interpretation | ||
SECTION 1.01. Definitions | 2 | |
ARTICLE II | ||
Purchase and Sale of Shares; Closing | ||
SECTION 2.01. Purchase and Sale of Shares | 8 | |
SECTION 2.02. Closing | 8 | |
SECTION 2.03. Place of Closing | 8 | |
SECTION 2.04. Purchase Price for Shares | 8 | |
SECTION 2.05. Working Capital Adjustment | 8 | |
SECTION 2.06. Payment of the Purchase Price | 10 | |
ARTICLE III | ||
Representations and Warranties of the Buyer | ||
SECTION 3.01. Organization and Limited Partnership Authority | 10 | |
SECTION 3.02. Agreement Not in Breach of Other Instruments | 10 | |
SECTION 3.03. No Legal Bar | 10 | |
SECTION 3.04. Securities Act | 10 | |
SECTION 3.05. Independent Investigation | 11 | |
ARTICLE IV | ||
Representations and Warranties Regarding the Sponsor | ||
SECTION 4.01. Organization and Corporate Authority | 11 | |
SECTION 4.02. Agreement Not in Breach | 11 | |
SECTION 4.03. No Legal Bar | 11 | |
ARTICLE V | ||
Representations and Warranties Regarding the Seller and the GAS-sixteen Vessel Owner | ||
SECTION 5.01. Organization Good Standing and Authority | 12 | |
SECTION 5.02. Capitalization; Good and Marketable Title to GAS-sixteen Shares | 12 | |
SECTION 5.03. GAS-sixteen Organizational Documents | 12 | |
SECTION 5.04. Agreement Not in Breach | 12 | |
SECTION 5.05. The GAS-sixteen Shares | 12 | |
SECTION 5.06. No Legal Bar | 13 | |
SECTION 5.07. Litigation | 13 |
i |
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SECTION 5.08. Indebtedness to and from Officers, etc | 13 |
SECTION 5.09. Personnel | 13 |
SECTION 5.10. Contracts and Agreements | 14 |
SECTION 5.11. Compliance with Law | 14 |
SECTION 5.12. No Undisclosed Liabilities | 14 |
SECTION 5.13. Payment of Taxes | 15 |
SECTION 5.14. Permits | 15 |
SECTION 5.15. No Material Adverse Change in Business | 15 |
SECTION 5.16. Tax Classification | 15 |
ARTICLE VI | |
Representations and Warranties Regarding the Seller and the GAS-seventeen Vessel Owner | |
SECTION 6.01. Organization Good Standing and Authority | 16 |
SECTION 6.02. Capitalization; Good and Marketable Title to GAS-seventeen Shares | 16 |
SECTION 6.03. GAS-seventeen Organizational Documents | 16 |
SECTION 6.04. Agreement Not in Breach | 16 |
SECTION 6.05. The GAS-seventeen Shares | 16 |
SECTION 6.06. Litigation | 17 |
SECTION 6.07. Indebtedness to and from Officers, etc | 17 |
SECTION 6.08. Personnel | 17 |
SECTION 6.09. GAS-seventeen Contracts and Agreements | 17 |
SECTION 6.10. Compliance with Law | 18 |
SECTION 6.11. No Undisclosed Liabilities | 18 |
SECTION 6.12. Payment of Taxes | 18 |
SECTION 6.13. Permits | 19 |
SECTION 6.14. No Material Adverse Change in Business | 19 |
SECTION 6.15. Tax Classification | 19 |
ARTICLE VII | |
Representations and Warranties Regarding the GAS-sixteen Vessel | |
SECTION 7.01. Title to GAS-sixteen Vessel | 19 |
SECTION 7.02. No Encumbrances | 20 |
SECTION 7.03. Condition | 20 |
ARTICLE VIII | |
Representations and Warranties Regarding the GAS-seventeen Vessel | |
SECTION 8.01. Title to GAS-seventeen Vessel | 20 |
SECTION 8.02. No Encumbrances | 20 |
SECTION 8.03. Condition | 20 |
ii |
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ARTICLE IX | |
Covenants | |
SECTION 9.01. Financial Statements | 21 |
SECTION 9.02. Expenses | 21 |
SECTION 9.03. Commercially Reasonable Efforts; Financing | 21 |
SECTION 9.04. Tests and Surveys | 22 |
SECTION 9.05. Further Assurances | 22 |
SECTION 9.06. Covenants of Sponsor and Seller Prior to Closing | 22 |
SECTION 9.07. Credit Facilities | 23 |
SECTION 9.08. Management Agreements | 23 |
ARTICLE X | |
Conditions to Closing | |
SECTION 10.01. Conditions to the Obligations of Sponsor, Seller and Buyer | 23 |
SECTION 10.02. Conditions to the Obligation of Buyer | 24 |
SECTION 10.03. Conditions to the Obligation of Sponsor and Seller | 24 |
ARTICLE XI | |
Amendments and Waivers | |
SECTION 11.01. Amendments and Waivers | 25 |
ARTICLE XII | |
Indemnification | |
SECTION 12.01. Indemnity by the Seller | 25 |
SECTION 12.02. Limitation Regarding Indemnification | 26 |
SECTION 12.03. Indemnity by the Buyer | 26 |
SECTION 12.04. Exclusive Post-Closing Remedy | 27 |
ARTICLE XIII | |
Termination | |
SECTION 13.01. Termination | 27 |
SECTION 13.02. Effect of Termination | 28 |
ARTICLE XIV | |
Miscellaneous | |
SECTION 14.01. Governing Law | 28 |
SECTION 14.02. Counterparts | 28 |
SECTION 14.03. Complete Agreement | 28 |
SECTION 14.04. Interpretation | 28 |
iii |
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SECTION 14.05. Severability | 29 |
SECTION 14.06. Third Party Rights | 29 |
SECTION 14.07. Notices | 29 |
SECTION 14.08. Representations and Warranties to Survive | 30 |
SECTION 14.09. Remedies | 30 |
SECTION 14.10. Non-recourse to General Partner | 30 |
iv |
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SHARE PURCHASE AGREEMENT (the “ Agreement ”), dated as of August 14, 2014, is made by and among GASLOG LTD. (the “ Sponsor ”), a Bermuda exempted company, GASLOG CARRIERS LTD. (the “ Seller ”), a Bermuda exempted company and a wholly owned subsidiary of the Sponsor (and together with the Sponsor, and their affiliates other than the Buyer Entities, the “ Seller Entities ”) and GASLOG PARTNERS LP (the “ Buyer ”), a limited partnership organized under the laws of the Republic of the Marshall Islands.
WHEREAS the Seller is the registered owner and sole shareholder of record of all the authorised and issued share capital of GAS-sixteen Ltd., a Bermuda exempted company, with its registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda (the “ GAS-sixteen Vessel Owner ”) and such GAS-sixteen Vessel Owner is the registered owner of the Bermuda flagged LNG carrier the Methane Rita Andrea (the “ GAS-sixteen Vessel ”); and the Seller is the registered owner and sole shareholder of record of all the authorised and issued share capital of GAS-seventeen Ltd., a Bermuda exempted company, with its registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda (the “ GAS-seventeen Vessel Owner ,” and, together with the GAS-sixteen Vessel Owner, the “ Vessel Owners ”), and such GAS-seventeen Vessel Owner is the registered owner of the Bermuda flagged LNG carrier the Methane Jane Elizabeth (the “ GAS-seventeen Vessel, ” and, together with the GAS-sixteen Vessel, the “ Vessels ”).
WHEREAS the Buyer wishes to purchase from the Seller, and the Seller wishes to sell to the Buyer, all of the authorised and issued share capital of the GAS-sixteen Vessel Owner (the “ GAS-sixteen Shares ”) which are registered in the sole name of the Seller; and the Buyer wishes to purchase from the Seller, and the Seller wishes to sell to the Buyer, all of the authorised and issued share capital of the GAS-seventeen Vessel Owner (the “ GAS-seventeen Shares ,” and, together with the GAS-sixteen Shares, the “ Shares ”) which are registered in the name of the Seller.
WHEREAS the GAS-sixteen Vessel is employed under a LNG time charter party dated April 4, 2014 entered into by Methane Services Limited, a company incorporated under the laws of England and Wales and whose registered office is at 100 Thames Valley Park Drive, Reading, Berkshire RG6 1PT, United Kingdom, as charterer (the “ Charterer ”) for a duration of six years (plus certain options to extend at the Charterer’s option) commenced on April 10, 2014 with a rate at $65,750 per day (as amended or supplemented, the “ GAS-sixteen Charter ”); and the GAS-seventeen Vessel is employed under a LNG time charter party dated April 4, 2014 by the Charterer for a duration of five years and six months (plus certain options to extend at the Charterer’s option) commenced on April 10, 2014 with a rate at $65,750 per day (as amended or supplemented, the “ GAS-seventeen Charter ”, and together with the GAS-sixteen Charter, the “ Charters ”).
WHEREAS the GAS-sixteen Vessel Owner and the Sponsor have entered into a commercial management agreement dated April 10, 2014 for the commercial management of the GAS-sixteen Vessel (the “ GAS-sixteen Commercial Management Agreement ”); the GAS-sixteen Vessel Owner and GasLog LNG Services Ltd. (the “ Manager ”) have entered into a ship management agreement dated April 10, 2014 for the
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technical management of the GAS-sixteen Vessel (“ GAS-sixteen Technical Management Agreement ,” and together with the GAS-sixteen Commercial Management Agreement, the “ GAS-sixteen Management Agreements ”); the GAS-seventeen Vessel Owner and the Sponsor have entered into a commercial management agreement dated April 10, 2014 for the commercial management of the GAS-seventeen Vessel (the “ GAS-seventeen Commercial Management Agreement ”); and the GAS-seventeen Vessel Owner and the Manager have entered into a ship management agreement dated April 10, 2014 for the technical management of the GAS-seventeen Vessel (the “ GAS-seventeen Technical Management Agreement ,” and together with the GAS-seventeen Commercial Management Agreement, the “ GAS-seventeen Management Agreements ,” and the GAS-seventeen Management Agreements collectively with the GAS-sixteen Management Agreements, the “ Management Agreements ”).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Interpretation
SECTION 1.01. Definitions. In this Agreement, unless the context requires otherwise or unless otherwise specifically provided herein, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:
“ Acquisition ” has the meaning given to it in Section 2.01.
“ Actual Adjustment ” means (x) the Purchase Price as adjusted by adding the New Working Capital Adjustment as finally determined pursuant to 2.05(b), minus (y) the Estimated Closing Payment.
“ Agreement ” means this Agreement, including its preamble and schedules.
“ Applicable Law ” in respect of any Person, property, transaction or event, means all laws, statutes, ordinances, regulations, municipal by-laws, treaties, judgments and decrees applicable to that Person, property, transaction or event and, whether or not having the force of law, all applicable official directives, rules, consents, approvals, authorizations, guidelines, orders, codes of practice and policies of any Governmental Authority having or purporting to have authority over that Person, property, transaction or event and all general principles of common law and equity.
“ Board of Directors ” means the board of directors of the Buyer.
“ Buyer ” has the meaning given to it in the preamble.
“ Buyer Entities ” means the Buyer and its subsidiaries.
“ Buyer Indemnitees ” has the meaning given to it in Section 12.01.
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“ Charter ” has the meaning given to it in the preamble.
“ Charterer ” has the meaning given to it in the preamble.
“ Closing ” has the meaning given to it in Section 2.02.
“ Closing Date ” has the meaning given to it in Section 2.02.
“ Commission ” means the Securities and Exchange Commission.
“ Commitment ” means (a) options, warrants, convertible securities, exchangeable securities, subscription rights, conversion rights, exchange rights or other contracts that could require a Person to issue any of its equity interests or to sell any equity interests it owns in another Person (other than this Agreement and the related transaction documents); (b) any other securities convertible into, exchangeable or exercisable for, or representing the right to subscribe for any equity interest of a Person or owned by a Person; and (c) stock appreciation rights, phantom stock, profit participation, or other similar rights with respect to a Person.
“ Commitment Documents ” means the commitment letter dated August 5, 2014 between Citibank, N.A., London Branch and the Buyer, and the co-ordination letter dated August 5, 2014 between Citigroup Global Markets Limited and the Buyer.
“ Conflicts Committee ” means the Conflicts Committee of the Board of Directors.
“ Covered Environmental Losses ” means all Losses suffered or incurred by the Buyer Entities by reason of, arising out of or resulting from:
(a) any violation or correction of violation of Environmental Laws; or
(b) any event or condition relating to environmental or human health and safety matters, in each case, associated with the ownership or operation by the Buyer Entities or the Seller Entities of the Vessel Owners and their assets (including, without limitation, the presence of Hazardous Substances on, under, about or migrating to or from the Vessel Owners or the disposal or release of, or exposure to, Hazardous Substances generated by or otherwise related to operation of the Vessel Owners and their assets), including, without limitation, the reasonable and documented cost and expense of (i) any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation or other corrective action required or necessary under Environmental Laws, (ii) the preparation and implementation of any closure, remedial, corrective action or other plans required or necessary under Environmental Laws and (iii) any environmental or toxic tort (including, without limitation, personal injury or
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property damage claims) pre-trial, trial or appellate legal or litigation support work;
but only to the extent that such violation complained of under clause (a) , or such events or conditions included in clause (b) , is proven to have occurred before the Closing Date; and, provided, that in no event shall Losses to the extent arising from a change in any Environmental Law after the Closing Date be deemed Covered Environmental Losses.
“ Credit Facility ” means the $325,500,000 facility agreement dated April 1, 2014 between the GAS-sixteen Vessel Owner, the GAS-seventeen Vessel Owner, and GAS-eighteen Ltd. as borrowers, the banks and financial institutions named as lenders therein, Citibank, N.A., London Branch as mandated lead arranger, Citibank, N.A., London Branch as bookrunner, Citibank International PLC as agent and Citibank N.A., London Branch as security agent and trustee.
“ Encumbrance ” means any mortgage, lien, charge, assignment, adverse claim, hypothecation, restriction, option, covenant, condition or encumbrance, whether fixed or floating, on, or any security interest in, any property whether real, personal or mixed, tangible or intangible, any pledge or hypothecation of any property, any deposit arrangement, priority, conditional sale agreement, other title retention agreement or equipment trust, capital lease or other security arrangements of any kind.
“ Environmental Laws ” means all international, federal, state, foreign and local laws, statutes, rules, regulations, treaties, conventions, orders, judgments and ordinances having the force and effect of law and relating to protection of natural resources, health and safety and the environment, each in effect and as amended through the Closing Date.
“ Equity Interest ” means (a) with respect to any entity, any and all shares or other ownership interest and any Commitments with respect thereto, (b) any other direct equity ownership or participation in a Person and (c) any Commitments with respect to the interests described in (a) or (b).
“ Estimated Adjustment Amount ” means a good faith estimate of the Net Working Capital Adjustment, as determined by the Seller and calculated in accordance with this Agreement.
“ GAS-seventeen Balance Sheet ” has the meaning given to it in Section 6.11.
“ GAS-seventeen Charter ” has the meaning given to it in the preamble.
“ GAS-seventeen Commercial Management Agreement ” has the meaning given to it in the preamble.
“ GAS-seventeen Contracts ” means the GAS-seventeen Memorandum of Agreement, the Credit Facility and all related financing and security, the GAS-seventeen Charter and the GAS-seventeen Management Agreements.
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“ GAS-seventeen Management Agreements ” has the meaning given to it in the preamble.
“ GAS-seventeen Memorandum of Agreement ” means the agreement dated April 4, 2014 between Brazil Shipping II Ltd. and GAS-seventeen Ltd. related to the sale of the Methane Jane Elizabeth .
“ GAS-seventeen Organizational Documents ” has the meaning given to it in Section 6.03.
“ GAS-seventeen Purchase Price ” has the meaning given to it in Section 2.04.
“ GAS-seventeen Shares ” has the meaning given to it in the preamble.
“ GAS-seventeen Technical Management Agreement ” has the meaning given to it in the preamble.
“ GAS-seventeen Vessel ” has the meaning given to it in the preamble.
“ GAS-seventeen Vessel Owner ” has the meaning given to it in the preamble.
“ GAS-sixteen Balance Sheet ” has the meaning given to it in Section 5.12.
“ GAS-sixteen Charter ” has the meaning given to it in the preamble.
“GAS-sixteen Commercial Management Agreement ” has the meaning given to it in the preamble.
“ GAS-sixteen Contracts ” means the GAS-sixteen Memorandum of Agreement, the Credit Facility and all related financing and security, the GAS-sixteen Charter and the GAS-sixteen Management Agreements.
“ GAS-sixteen Management Agreements ” has the meaning given to it in the preamble.
“ GAS-sixteen Memorandum of Agreement ” means the agreement dated April 4, 2014 between Brazil Shipping II Ltd. and GAS-sixteen Ltd. related to the sale of the Methane Rita Andrea .
“ GAS-sixteen Organizational Documents ” has the meaning given to it in Section 5.03.
“ GAS-sixteen Purchase Price ” has the meaning given to it in Section 2.04.
“ GAS-sixteen Shares ” has the meaning given to it in the preamble.
“GAS-sixteen Technical Management Agreement ” has the meaning given to it in the preamble.
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“ GAS-sixteen Vessel ” has the meaning given to it in the preamble.
“ GAS-sixteen Vessel Owner ” has the meaning given to it in the preamble.
“ GPHL ” means GasLog Partners Holdings LLC, a Marshall Islands limited liability company and wholly-owned subsidiary of the Buyer.
“ Governmental Authority ” means any domestic or foreign government, including federal, provincial, state, municipal, county or regional government or governmental or regulatory authority, domestic or foreign, and includes any department, commission, bureau, board, administrative agency or regulatory body of any of the foregoing and any multinational or supranational organization.
“ Hazardous Substances ” means (a) each substance defined, designated or classified as a hazardous waste, hazardous substance, hazardous material, solid waste, contaminant or toxic substance under Environmental Laws; (b) petroleum and petroleum products, including crude oil and any fractions thereof; (c) natural gas, synthetic gas and any mixtures thereof; (d) any radioactive material; and (e) any asbestos-containing materials in a friable condition.
“ IFRS ” has the meaning given to it in Section 5.12.
“ Losses ” means losses, damages, liabilities, claims, demands, causes of action, judgments, settlements, fines, penalties, costs and expenses (including, without limitation, court costs and reasonable attorneys’ fees and experts’ fees) of any and every kind or character; provided , however , that such term shall not include any special, indirect, incidental or consequential damages.
“ Management Agreements ” has the meaning given to it in the preamble.
“ Manager ” has the meaning given to it in the preamble.
“ MLP Guarantee ” means the guarantee to be executed by the Buyer and GPHL in favor of the Security Agent (as such term is defined in the Credit Facility) on or before the Closing Date (to the extent that the New Credit Facility is not entered into and funded on or before the Closing Date) with respect to the obligations of the GAS-sixteen Vessel Owner and the GAS-seventeen Vessel Owner under the Credit Facility.
“ Net Working Capital ” means, with respect to the Vessel Owners, those current assets of the Vessel Owners (on a combined basis), as of 11:59 p.m. on the day preceding the Closing Date that are included in the line item categories of current assets specifically identified on Exhibit A , less those current liabilities of the Vessel Owners (on a combined basis), as of 11:59 p.m. on the day preceding the Closing Date that are included in the line item categories of current liabilities specifically identified on Exhibit A , in each case, without duplication, and as determined in accordance with IFRS as applied on a consistent basis.
“ Net Working Capital Adjustment ” means (i) the amount by which Net Working Capital exceeds the Net Working Capital Threshold or (ii) the amount by which
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Net Working Capital is less than the Net Working Capital Threshold, as applicable; provided that any amount which is calculated pursuant to clause (ii) above shall be deemed to be a negative number.
“ Net Working Capital Threshold ” means U.S. dollars $2,000,000.
“ New Credit Facility ” means the $450,000,000 facility agreement contemplated by the Commitment Documents, which facility is expected to be entered into for the refinancing of the existing debt (including the related portions of the Credit Facility) related to the vessels owned by GAS-three Ltd., GAS-four Ltd., GAS-five Ltd., (each a Bermuda exempted company, with their registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda) the GAS-sixteen Vessel Owner and the GAS-seventeen Vessel Owner.
“ Parties ” means all parties to this Agreement and “ Party ” means any one of them.
“ Partnership Agreement ” means the Agreement of Limited Partnership of the Buyer dated May 12, 2014, as amended from time to time.
“ Person ” means an individual, entity or association, including any legal personal representative, corporation, body corporate, firm, partnership, trust, trustee, syndicate, joint venture, unincorporated organization or Governmental Authority.
“ Permits ” has the meaning given to it in Section 5.14.
“ Purchase Price ” has the meaning given to it in Section 2.04.
“ Securities Act ” means the Securities Act of 1933, as amended from time to time.
“ Seller ” has the meaning given to it in the preamble.
“ Seller Entities ” has the meaning given to it in the preamble.
“ Seller Indemnitees ” has the meaning given to it in Section 12.03.
“ Shares ” has the meaning given to it in the preamble.
“ Sponsor ” has the meaning given to it in the preamble.
“ Taxes ” means all income, franchise, business, property, sales, use, goods and services or value added, withholding, excise, alternate minimum capital, transfer, excise, customs, anti-dumping, stumpage, countervail, net worth, stamp, registration, franchise, payroll, employment, health, education, business, school, property, local improvement, development, education development and occupation taxes, surtaxes, duties, levies, imposts, rates, fees, assessments, dues and charges and other taxes required to be reported upon or paid to any domestic or foreign jurisdiction and all interest and penalties thereon.
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“ Vessels ” has the meaning given to it in the preamble.
“ Vessel Owners ” has the meaning given to it in the preamble.
ARTICLE II
Purchase and Sale of Shares; Closing
SECTION 2.01. Purchase and Sale of Shares. The Seller agrees to sell and transfer to the Buyer, the Sponsor agrees to cause the Seller to sell and transfer to the Buyer and the Buyer agrees to purchase from the Seller for the applicable Purchase Price and in accordance with and subject to the terms and conditions set forth in this Agreement, the Shares which in turn shall result in the Buyer indirectly owning the Vessels (the “ Acquisition ”). The Seller shall transfer the Shares to GPHL, a wholly-owned subsidiary of Buyer, at Closing, unless Buyer shall before Closing nominate a different Buyer Entity to receive the Shares.
SECTION 2.02. Closing. On the terms of this Agreement and subject to the satisfaction or waiver of the conditions set forth in Article X, the sale and transfer of the Shares and payment of the Purchase Price shall take place on the date that is five business days after the satisfaction or waiver of all of the conditions set forth in Article X (other than those conditions to be satisfied on the Closing Date) (such date, the “ Closing Date ”) or such other date as the Sponsor, Seller and Buyer shall otherwise agree. The sale and transfer of the Shares is hereinafter referred to as “ Closing ”.
SECTION 2.03. Place of Closing. The Closing shall take place at Gildo Pastor Center, 7 Rue du Gabian, MC 98000, Monaco or any other place as designated by the Sponsor.
SECTION 2.04. Purchase Price for Shares. On the Closing Date, (i) the Buyer shall pay to the Seller (to such account and beneficiary being a Seller Entity as the Seller shall designate) the amount of U.S. dollars 164,000,000 (the “ GAS-sixteen Purchase Price ”) in exchange for the GAS-sixteen Shares, and (ii) the Buyer shall pay to the Seller (to such account and beneficiary being a Seller Entity as the Seller shall designate) the amount of U.S. dollars 164,000,000 (the “ GAS-seventeen Purchase Price ,” and together with the GAS-sixteen Purchase Price, the “ Purchase Price ”) in exchange for the GAS-seventeen Shares, in each case subject to adjustment pursuant to Section 2.05. The Purchase Price may be payable by Buyer in part, in lieu of cash, by the transfer of associated debt obligations of the Vessel Owners under the Credit Facility and the granting of the MLP Guarantee. The Buyer shall have no responsibility or liability hereunder for the Seller’s allocation and distribution of the Purchase Price among the Seller Entities.
SECTION 2.05. Working Capital Adjustment.
(a) No later than one Business Days prior to the Closing Date, the Seller shall deliver to the Buyer a calculation of the Estimated Adjustment Amount, and
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the Purchase Price payable on the Closing Date shall be adjusted by adding the Estimated Adjustment Amount (such adjusted amount, the “ Estimated Closing Payment ”).
(b) As soon as practicable, but no later than 30 days after the Closing Date, Buyer shall prepare and deliver to the Seller a proposed calculation of the Net Working Capital, including the components thereof (the “ Proposed Calculations ”). If the Seller does not give written notice of dispute (a “ Dispute Notice ”) to Buyer within 30 days of receiving the Proposed Calculations, the Proposed Calculations shall be deemed to set forth the final Net Working Capital; provided , however , that the Dispute Notice may include only objections based on (x) noncompliance with the standards set forth in this Agreement for the preparation of the Net Working Capital or (y) mathematical errors in the calculation of the Net Working Capital. If the Seller gives a Dispute Notice to Buyer (which Dispute Notice must set forth, in reasonable detail, the items and amounts in dispute and all other items and amounts not so disputed shall be deemed final) within such 30-day period, Buyer and the Seller shall use commercially reasonable efforts to resolve the dispute during the 30-day period commencing on the date Buyer receives the Dispute Notice from the Seller. If the Seller and Buyer do not agree upon a final resolution with respect to such disputed items within such 30-day period, then the remaining items in dispute shall be submitted immediately to an independent accounting firm mutually acceptable to Buyer and the Seller. Any accounting firm so agreed (the “ Accounting Firm ”) shall be required to render a determination of the applicable dispute within 45 days after referral of the matter to such Accounting Firm, which determination must be in writing and must set forth, in reasonable detail, the basis therefor; provided that the Accounting Firm may (i) only consider those items and amounts as to which the Seller and Buyer have disagreed within the time periods and on the terms specified above and (ii) only make adjustments based on noncompliance with the standards set forth in this Agreement for the determination of the Net Working Capital. The determination made by the Accounting Firm with respect to the remaining disputed items shall not exceed or be less than the amounts proposed by the Seller and Buyer, as the case may be. The terms of appointment and engagement of the Accounting Firm shall be as agreed upon between the Seller and Buyer, and any associated engagement fees shall be borne 50% by the Seller and 50% by Buyer. The determination of such Accounting Firm shall be conclusive and binding for all purposes of this Agreement. Buyer and Seller shall provide each other reasonable access to financial and other records in connection with the determination of the Net Working Capital under this Section 2.05(b).
(c) Adjustment to Estimated Closing Payment:
(i) If the Actual Adjustment is a positive amount, Buyer shall pay to the Seller an amount equal to such positive amount by wire transfer or delivery of immediately available funds, in each case, within three Business Days after the date on which the Net Working Capital is finally determined pursuant to Section 2.05(b).
(ii) If the Actual Adjustment is a negative amount, Seller shall pay to Buyer an amount equal to such negative amount by wire transfer or delivery of immediately available funds, in each case, within three Business Days
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after the date on which the Net Working Capital is finally determined pursuant to Section 2.05(b).
SECTION 2.06. Payment of the Purchase Price. The Purchase Price (to the extent paid in U.S. dollars) will be paid by the Buyer to the Seller by wire transfer of immediately available funds to an account and beneficiary being a Seller Entity designated in writing by the Seller.
ARTICLE III
Representations and Warranties of the Buyer
The Buyer represents and warrants to the Seller that as of the date hereof and as of the Closing Date:
SECTION 3.01. Organization and Limited Partnership Authority. The Buyer is duly formed, validly existing and in good standing under the laws of the Republic of the Marshall Islands, and has all requisite limited partnership power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Buyer, has been effectively authorized by all necessary action, limited partnership or otherwise, and constitutes legal, valid and binding obligations of the Buyer. No meeting has been convened or resolution proposed or petition presented and no order has been made to wind up the Buyer.
SECTION 3.02. Agreement Not in Breach of Other Instruments. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with, any agreement or other instrument to which the Buyer is a party or by which it is bound, the Certificate of Formation and the Partnership Agreement, any judgment, decree, order or award of any court, governmental body or arbitrator by which the Buyer is bound, or any law, rule or regulation applicable to the Buyer which would have a material effect on the transactions contemplated hereby.
SECTION 3.03. No Legal Bar. The Buyer is not prohibited by any order, writ, injunction or decree of any body of competent jurisdiction from consummating the transactions contemplated by this Agreement and no such action or proceeding is pending or, to the best of its knowledge and belief, threatened against the Buyer which questions the validity of this Agreement, any of the transactions contemplated hereby or any action which has been taken by any of the parties in connection herewith or in connection with any of the transactions contemplated hereby.
SECTION 3.04. Securities Act. The Shares purchased by the Buyer pursuant to this Agreement are being acquired for investment purposes only and not with a view to any public distribution thereof, and the Buyer shall not offer to sell or otherwise dispose of the Shares so acquired by it in violation of any of the registration requirements of the Securities Act. The Buyer acknowledges that it is able to fend for itself, can bear
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the economic risk of its investment in the Shares, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in all of the Shares. The Buyer understands that, when transferred to the Buyer at the Closing, none of the Shares will be registered pursuant to the Securities Act and that all of the Shares will constitute “restricted securities” under the federal securities laws of the United States.
SECTION 3.05. Independent Investigation. The Buyer has had the opportunity to conduct to its own satisfaction independent investigation, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Vessel Owners and the Vessels and, in making the determination to proceed with the transactions contemplated hereby, has relied solely on the results of its own independent investigation and the representations and warranties set forth in Articles IV, V, VI, VII and VIII.
ARTICLE IV
Representations and Warranties Regarding the Sponsor
The Seller represents and warrants to the Buyer that as of the date hereof and as of the Closing Date:
SECTION 4.01. Organization and Corporate Authority. The Sponsor is duly incorporated, validly existing and in good standing under the laws of Bermuda, and has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Sponsor, has been effectively authorized by all necessary action, corporate or otherwise, and constitutes legal, valid and binding obligations of the Sponsor. No meeting has been convened or resolution proposed or petition presented and no order has been made to wind up the Sponsor.
SECTION 4.02. Agreement Not in Breach. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of the terms hereof will not result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with, any agreement or other instrument to which the Sponsor is a party or by which it is bound, the Memorandum of Association and Bye-laws of the Sponsor, any judgment, decree, order or award of any court, governmental body or arbitrator by which the Sponsor is bound, or any law, rule or regulation applicable to the Sponsor.
SECTION 4.03. No Legal Bar. The Sponsor is not prohibited by any order, writ, injunction or decree of any body of competent jurisdiction from consummating the transactions contemplated by this Agreement and no such action or proceeding is pending or, to the best of its knowledge and belief, threatened against the Sponsor which questions the validity of this Agreement, any of the transactions contemplated hereby or any action which has been taken by any of the parties in connection herewith or in connection with any of the transactions contemplated hereby.
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ARTICLE V
Representations and Warranties Regarding the Seller and the GAS-sixteen Vessel Owner
The Seller represents and warrants to the Buyer that as of the date hereof and as of the Closing Date:
SECTION 5.01. Organization Good Standing and Authority. The Seller is a Bermuda exempted company duly incorporated, validly existing and in good standing under the laws of Bermuda. This Agreement has been duly executed and delivered by the Seller, has been effectively authorized by all necessary action, corporate or otherwise, and constitutes legal, valid and binding obligations of the Seller. The GAS-sixteen Vessel Owner is a Bermuda exempted company duly registered, validly existing and in good standing under the laws of Bermuda. Each of the Seller and the GAS-sixteen Vessel Owner has full corporate power and authority to carry on its business as it is now, and has since its formation been, conducted, and is entitled to own, lease or operate the properties and assets it now owns, leases or operates and to enter into legal and binding contracts. No meeting has been convened or resolution proposed or petition presented and no order has been made to wind up the Seller or the GAS-sixteen Vessel Owner.
SECTION 5.02. Capitalization; Good and Marketable Title to GAS-sixteen Shares. The GAS-sixteen Shares have been duly authorized and validly issued and are fully paid and nonassessable, and constitute the total issued and outstanding Equity Interests of the GAS-sixteen Vessel Owner. There are not outstanding (i) any options, warrants or other rights to purchase from the Seller any equity interests of the GAS-sixteen Vessel Owner, (ii) any securities convertible into or exchangeable for shares of such equity interests of the GAS-sixteen Vessel Owner or (iii) any other commitments of any kind for the issuance of additional shares of equity interests or options, warrants or other securities of the GAS-sixteen Vessel Owner.
SECTION 5.03. GAS-sixteen Organizational Documents. The Seller Entities have supplied to the Buyer true and correct copies of the organizational documents of the GAS-sixteen Vessel Owner, as in effect as of the date hereof (the “ GAS-sixteen Organizational Documents ”).
SECTION 5.04. Agreement Not in Breach. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate, or result in a breach of, any of the terms and provisions of, or constitute a default under, or conflict with, or give any other party thereto a right to terminate any agreement or other instrument to which the Seller or the GAS-sixteen Vessel Owner is a party or by which it is bound including, without limitation, any of the GAS-sixteen Organizational Documents, any judgment, decree, order or award of any court, governmental body or arbitrator applicable to the GAS-sixteen Vessel Owner or the GAS-sixteen Contracts.
SECTION 5.05. The GAS-sixteen Shares. Assuming the Buyer or the applicable Buyer Entity has the requisite power and authority to be the lawful owner of the GAS-sixteen Shares, upon delivery to the Buyer or the applicable Buyer Entity at the
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Closing of instruments sufficient to evidence the transfer from the Seller to the Buyer (or the applicable Buyer Entity) of the GAS-sixteen Shares under the Applicable Laws of the relevant jurisdiction, or delivery of such GAS-sixteen Shares by electronic means, and upon or simultaneously with the Seller’s receipt of the GAS-sixteen Purchase Price, the Buyer or the applicable Buyer Entity shall own good and valid title to the GAS-sixteen Shares, free and clear of any Encumbrances, other than those arising under the Credit Facility and the GAS-sixteen Charter or otherwise from acts of the Buyer Entities and an updated Register of Members of the GAS-sixteen Vessel Owner, certified by the Secretary of the GAS-sixteen Vessel Owner, shall be delivered to the Buyer. Other than this Agreement and any related transaction documents, the GAS-sixteen Organizational Documents, the Credit Facility and the GAS-sixteen Charter and restrictions imposed by Applicable Law, at the Closing, the GAS-sixteen Shares will not be subject to any voting trust agreement or other contract, agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend rights or disposition of the GAS-sixteen Shares, other than any agreement to which any Buyer Entity is a party.
SECTION 5.06. No Legal Bar . The Seller is not prohibited by any order, writ, injunction or decree of any body of competent jurisdiction from consummating the transactions contemplated by this Agreement and no such action or proceeding is pending or, to the best of its knowledge and belief, threatened against the Seller which questions the validity of this Agreement, any of the transactions contemplated hereby or any action which has been taken by any of the parties in connection herewith or in connection with any of the transactions contemplated hereby.
SECTION 5.07. Litigation. (a) There is no action, suit or proceeding to which the GAS-sixteen Vessel Owner is a party (either as a plaintiff or defendant) pending before any court or governmental agency, authority or body or arbitrator; there is no action, suit or proceeding threatened against the GAS-sixteen Vessel Owner; and, to the best knowledge of the Seller, there is no basis for any such action, suit or proceeding.
(b) The GAS-sixteen Vessel Owner has not been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the business, assets or properties of the GAS-sixteen Vessel Owner.
(c) There is not in existence any order, judgment or decree of any court or other tribunal or other agency enjoining or requiring the GAS-sixteen Vessel Owner to take any action of any kind with respect to its business, assets or properties.
SECTION 5.08. Indebtedness to and from Officers, etc. The GAS-sixteen Vessel Owner will not be indebted, directly or indirectly, to any person who is an officer (save to the company secretary in respect of professional and transactional fees), director, stockholder or employee of the Seller or any spouse, child, or other relative or any affiliate of any such person, nor shall any such officer, director, stockholder, employee, relative or affiliate be indebted to the GAS-sixteen Vessel Owner.
SECTION 5.09. Personnel. The GAS-sixteen Vessel Owner has no employees.
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SECTION 5.10. Contracts and Agreements. Other than the GAS-sixteen Contracts, there are no material contracts or agreements, written or oral, to which the GAS-sixteen Vessel Owner is a party or by which any of its assets are bound.
(a) Each of the GAS-sixteen Contracts is a valid and binding agreement of the GAS-sixteen Vessel Owner, and to the best knowledge of the Seller, of all other parties thereto.
(b) The GAS-sixteen Vessel Owner has fulfilled all material obligations required pursuant to its GAS-sixteen Contracts to have been performed by it prior to the date hereof and has not waived any material rights thereunder, including payment in full of the purchase price for the GAS-sixteen Vessel, together with any other payments of the GAS-sixteen Vessel Owner due thereunder.
(c) There has not occurred any material default under any of the GAS-sixteen Contracts on the part of the GAS-sixteen Vessel Owner, or to the best knowledge of the Seller, on the part of any other party thereto nor has any event occurred which with the giving of notice or the lapse of time, or both, would constitute any material default on the part of the GAS-sixteen Vessel Owner under any of the GAS-sixteen Contracts nor, to the best knowledge of the Seller, has any event occurred which with the giving of notice or the lapse of time, or both, would constitute any material default on the part of any other party to any of the GAS-sixteen Contracts.
SECTION 5.11. Compliance with Law. The conduct of business by the GAS-sixteen Vessel Owner does not and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate any Applicable Laws of any country, province, state or other governing body, the enforcement of which would materially and adversely affect the business, assets, condition (financial or otherwise) or prospects of the GAS-sixteen Vessel Owner taken as a whole, nor has the GAS-sixteen Vessel Owner received any notice of any such violation.
SECTION 5.12. No Undisclosed Liabilities. Except for such liabilities, debts, obligations, encumbrances, defects, restrictions or claims of a general nature and magnitude that would arise in connection with the operation of LNG carriers of the same type as the GAS-sixteen Vessel in the ordinary course of business and obligations arising under the GAS-sixteen Contracts, the GAS-sixteen Vessel Owner (or the GAS-sixteen Vessel owned by it) has no liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, and whether due or to become due (including, without limitation, any liability for Taxes and interest, penalties and other charges payable with respect to any such liability or obligation) that: (i) have not been disclosed in writing to the Buyer Entities prior to the date hereof or (ii) have not been set forth in the unaudited balance sheet of the GAS-sixteen Vessel Owner as of June 30, 2014, provided to Buyer prior to the execution of this Agreement (the “ GAS-sixteen Balance Sheet ”). The GAS-sixteen Balance Sheet (A) was derived from and has been prepared in accordance with the underlying books and records of the GAS-sixteen Vessel Owner, (B) has been prepared in accordance with international financial reporting standards (“ IFRS ”) (subject to the absence of footnote disclosure) and (C) fairly presents the assets, liabilities
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(including reserves) and financial position of the GAS-sixteen Vessel Owner as of the date thereof.
SECTION 5.13. Payment of Taxes. The GAS-sixteen Vessel Owner has filed all foreign, federal, state and local income and franchise tax returns required to be filed, which returns are correct and complete in all material respects, and has timely paid all taxes due from it, and the GAS-sixteen Vessel is in good standing with respect to the payment of past and current Taxes, fees and other amounts payable under the laws of the jurisdiction where it is registered as would affect its registry with the ship registry of such jurisdiction.
SECTION 5.14. Permits. The GAS-sixteen Vessel Owner has such permits, consents, licenses, franchises, concessions, certificates and authorizations (“ Permits ”) of, and has all declarations and filings with, and is qualified and in good standing in each jurisdiction of, all federal, provincial, state, local or foreign Governmental Authorities and other Persons, as are necessary to own or lease its properties and to conduct its business in the manner that is standard and customary for a business of its nature other than such Permits the absence of which, individually or in the aggregate, has not and could not reasonably be expected to materially or adversely affect the GAS-sixteen Vessel Owner or the GAS-sixteen Vessel, and the GAS-sixteen Vessel Owner has fulfilled and performed all its obligations with respect to such Permits which are or will be due to have been fulfilled and performed by such date and no event has occurred that would prevent such Permits from being renewed or reissued or that allows, or after notice or lapse of time would allow, revocation or termination thereof or results or would result in any impairment of the rights of the holder of any such Permit, except for such nonrenewals, nonissues, revocations, terminations and impairments that would not, individually or in the aggregate, materially or adversely affect the GAS-sixteen Vessel Owner or the GAS-sixteen Vessel, and none of such Permits contains any restriction that is materially burdensome to the GAS-sixteen Vessel Owner.
SECTION 5.15. No Material Adverse Change in Business. Since December 31, 2013, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, properties, business affairs or business prospects of the GAS-sixteen Vessel Owner, whether or not arising in the ordinary course of business, that would have or could reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the GAS-sixteen Vessel Owner.
SECTION 5.16. Tax Classification . The GAS-sixteen Vessel Owner has made an election under U.S. Treasury Regulation Section 301.7701-3(c) to be classified as a disregarded entity for U.S. Federal income tax purposes, and such election is in effect as of the date hereof.
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ARTICLE
VI
Representations and Warranties Regarding the Seller and the GAS-seventeen Vessel Owner
The Seller represents and warrants to the Buyer that as of the date hereof and as of the Closing Date:
SECTION 6.01. Organization Good Standing and Authority. The GAS-seventeen Vessel Owner is a Bermuda exempted company duly registered, validly existing and in good standing under the laws of Bermuda. The GAS-seventeen Vessel Owner has full corporate power and authority to carry on its business as it is now, and has since its formation been, conducted, and is entitled to own, lease or operate the properties and assets it now owns, leases or operates and to enter into legal and binding contracts. No meeting has been convened or resolution proposed or petition presented and no order has been made to wind up the GAS-seventeen Vessel Owner.
SECTION 6.02. Capitalization; Good and Marketable Title to GAS-seventeen Shares. The GAS-seventeen Shares have been duly authorized and validly issued and are fully paid and nonassessable, and constitute the total issued and outstanding Equity Interests of the GAS-seventeen Vessel Owner. There are not outstanding (i) any options, warrants or other rights to purchase from the Seller any equity interests of the GAS-seventeen Vessel Owner, (ii) any securities convertible into or exchangeable for shares of such equity interests of the GAS-seventeen Vessel Owner or (iii) any other commitments of any kind for the issuance of additional shares of equity interests or options, warrants or other securities of the GAS-seventeen Vessel Owner.
SECTION 6.03. GAS-seventeen Organizational Documents. The Seller Entities have supplied to the Buyer true and correct copies of the organizational documents of the GAS-seventeen Vessel Owner, as in effect as of the date hereof (the “ GAS-seventeen Organizational Documents ”).
SECTION 6.04. Agreement Not in Breach. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate, or result in a breach of, any of the terms and provisions of, or constitute a default under, or conflict with, or give any other party thereto a right to terminate any agreement or other instrument to which the GAS-seventeen Vessel Owner is a party or by which it is bound including, without limitation, any of the GAS-seventeen Organizational Documents, any judgment, decree, order or award of any court, governmental body or arbitrator applicable to the GAS-seventeen Vessel Owner or the GAS-seventeen Contracts.
SECTION 6.05. The GAS-seventeen Shares. Assuming the Buyer or the applicable Buyer Entity has the requisite power and authority to be the lawful owner of the GAS-seventeen Shares, upon delivery to the Buyer or the applicable Buyer Entity at the Closing of instruments sufficient to evidence the transfer from the Seller to the Buyer (or the applicable Buyer Entity) of the GAS-seventeen Shares under the Applicable Laws of the relevant jurisdiction, or delivery of such GAS-seventeen Shares
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by electronic means, and upon or simultaneously with the Seller’s receipt of the GAS-seventeen Purchase Price, the Buyer or the applicable Buyer Entity shall own good and valid title to the GAS-seventeen Shares, free and clear of any Encumbrances, other than those arising under the Credit Facility and the GAS-seventeen Charter or otherwise from acts of the Buyer Entities and an updated Register of Members of the GAS-seventeen Vessel Owner, certified by the Secretary of the GAS-seventeen Vessel Owner, shall be delivered to the Buyer. Other than this Agreement and any related transaction documents, the GAS-seventeen Organizational Documents, the Credit Facility and the GAS-seventeen Charter and restrictions imposed by Applicable Law, at the Closing, the GAS-seventeen Shares will not be subject to any voting trust agreement or other contract, agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend rights or disposition of the GAS-seventeen Shares, other than any agreement to which any Buyer Entity is a party.
SECTION 6.06. Litigation. (a) There is no action, suit or proceeding to which the GAS-seventeen Vessel Owner is a party (either as a plaintiff or defendant) pending before any court or governmental agency, authority or body or arbitrator; there is no action, suit or proceeding threatened against the GAS-seventeen Vessel Owner; and, to the best knowledge of the Seller, there is no basis for any such action, suit or proceeding.
(b) The GAS-seventeen Vessel Owner has not been permanently or temporarily enjoined by any order, judgment or decree of any court or any governmental agency, authority or body from engaging in or continuing any conduct or practice in connection with the business, assets or properties of the GAS-seventeen Vessel Owner.
(c) There is not in existence any order, judgment or decree of any court or other tribunal or other agency enjoining or requiring the GAS-seventeen Vessel Owner to take any action of any kind with respect to its business, assets or properties.
SECTION 6.07. Indebtedness to and from Officers, etc. The GAS-seventeen Vessel Owner will not be indebted, directly or indirectly, to any person who is an officer (save to the company secretary in respect of professional and transactional fees), director, stockholder or employee of the Seller or any spouse, child, or other relative or any affiliate of any such person, nor shall any such officer, director, stockholder, employee, relative or affiliate be indebted to the GAS-seventeen Vessel Owner.
SECTION 6.08. Personnel. The GAS-seventeen Vessel Owner has no employees.
SECTION 6.09. GAS-seventeen Contracts and Agreements. Other than the GAS-seventeen Contracts, there are no material contracts or agreements, written or oral, to which the GAS-seventeen Vessel Owner is a party or by which any of its assets are bound.
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(a) Each of the GAS-seventeen Contracts is a valid and binding agreement of the GAS-seventeen Vessel Owner, and to the best knowledge of the Seller, of all other parties thereto.
(b) The GAS-seventeen Vessel Owner has fulfilled all material obligations required pursuant to its GAS-seventeen Contracts to have been performed by it prior to the date hereof and has not waived any material rights thereunder, including payment in full of the purchase price for the GAS-seventeen Vessel, together with any other payments of the GAS-seventeen Vessel Owner due thereunder.
(c) There has not occurred any material default under any of the GAS-seventeen Contracts on the part of the GAS-seventeen Vessel Owner, or to the best knowledge of the Seller, on the part of any other party thereto nor has any event occurred which with the giving of notice or the lapse of time, or both, would constitute any material default on the part of the GAS-seventeen Vessel Owner under any of the GAS-seventeen Contracts nor, to the best knowledge of the Seller, has any event occurred which with the giving of notice or the lapse of time, or both, would constitute any material default on the part of any other party to any of the GAS-seventeen Contracts.
SECTION 6.10. Compliance with Law. The conduct of business by the GAS-seventeen Vessel Owner does not and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate any Applicable Laws of any country, province, state or other governing body, the enforcement of which would materially and adversely affect the business, assets, condition (financial or otherwise) or prospects of the GAS-seventeen Vessel Owner taken as a whole, nor has the GAS-seventeen Vessel Owner received any notice of any such violation.
SECTION 6.11. No Undisclosed Liabilities. Except for such liabilities, debts, obligations, encumbrances, defects, restrictions or claims of a general nature and magnitude that would arise in connection with the operation of LNG carriers of the same type as the GAS-seventeen Vessel in the ordinary course of business and obligations arising under the GAS-seventeen Contracts, the GAS-seventeen Vessel Owner (or the GAS-seventeen Vessel owned by it) has no liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, and whether due or to become due (including, without limitation, any liability for Taxes and interest, penalties and other charges payable with respect to any such liability or obligation) that: (i) have not been disclosed in writing to the Buyer Entities prior to the date hereof or (ii) have not been set forth in the unaudited balance sheet of the GAS-seventeen Vessel Owner as of June 30, 2014, provided to Buyer prior to the execution of this Agreement (the “ GAS-seventeen Balance Sheet ”). The GAS-seventeen Balance Sheet (A) was derived from and has been prepared in accordance with the underlying books and records of the GAS-seventeen Vessel Owner, (B) has been prepared in accordance with IFRS (subject to the absence of footnote disclosure) and (C) fairly presents the assets, liabilities (including reserves) and financial position of the GAS-seventeen Vessel Owner as of the date thereof.
SECTION 6.12. Payment of Taxes. The GAS-seventeen Vessel Owner has filed all foreign, federal, state and local income and franchise tax returns required to
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be filed, which returns are correct and complete in all material respects, and has timely paid all taxes due from it, and the GAS-seventeen Vessel is in good standing with respect to the payment of past and current Taxes, fees and other amounts payable under the laws of the jurisdiction where it is registered as would affect its registry with the ship registry of such jurisdiction.
SECTION 6.13. Permits. The GAS-seventeen Vessel Owner has such Permits of, and has all declarations and filings with, and is qualified and in good standing in each jurisdiction of, all federal, provincial, state, local or foreign Governmental Authorities and other Persons, as are necessary to own or lease its properties and to conduct its business in the manner that is standard and customary for a business of its nature other than such Permits the absence of which, individually or in the aggregate, has not and could not reasonably be expected to materially or adversely affect the GAS-seventeen Vessel Owner or the GAS-seventeen Vessel, and the GAS-seventeen Vessel Owner has fulfilled and performed all its obligations with respect to such Permits which are or will be due to have been fulfilled and performed by such date and no event has occurred that would prevent such Permits from being renewed or reissued or that allows, or after notice or lapse of time would allow, revocation or termination thereof or results or would result in any impairment of the rights of the holder of any such Permit, except for such nonrenewals, nonissues, revocations, terminations and impairments that would not, individually or in the aggregate, materially or adversely affect the GAS-seventeen Vessel Owner or the GAS-seventeen Vessel, and none of such Permits contains any restriction that is materially burdensome to the GAS-seventeen Vessel Owner.
SECTION 6.14. No Material Adverse Change in Business. Since December 31, 2013, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, properties, business affairs or business prospects of the GAS-seventeen Vessel Owner, whether or not arising in the ordinary course of business, that would have or could reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the GAS-seventeen Vessel Owner.
SECTION 6.15. Tax Classification . The GAS-seventeen Vessel Owner has made an election under U.S. Treasury Regulation Section 301.7701-3(c) to be classified as a disregarded entity for U.S. Federal income tax purposes, and such election is in effect as of the date hereof.
ARTICLE VII
Representations and Warranties Regarding the GAS-sixteen Vessel
The Seller represents and warrants to the Buyer that as of the date hereof and as of the Closing Date:
SECTION 7.01. Title to GAS-sixteen Vessel. The GAS-sixteen Vessel Owner is the owner (beneficially and of record) of the GAS-sixteen Vessel and has good and marketable title to the GAS-sixteen Vessel.
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SECTION 7.02. No Encumbrances. The assets of the GAS-sixteen Vessel Owner and the GAS-sixteen Vessel are free of all Encumbrances other than the Encumbrances arising under the GAS-sixteen Charter and the Credit Facility.
SECTION 7.03. Condition. The GAS-sixteen Vessel is (i) adequate and suitable for use by the GAS-sixteen Vessel Owner in the manner that is standard and customary for a vessel of its type and age, ordinary wear and tear excepted; (ii) seaworthy in all material respects for hull and machinery insurance warranty purposes and in good running order and repair; (iii) insured against all usual risks, and in amounts, consistent with common industry practices; (iv) in compliance with applicable maritime laws and regulations; and (v) in compliance in all material respects with the requirements of its class and classification society; and all class certificates of the GAS-sixteen Vessel are clean and valid and free of recommendations affecting class; and the Buyer acknowledges and agrees that, subject only to the representations and warranties in this Agreement, it is acquiring the GAS-sixteen Vessel on an “as is, where is” basis.
ARTICLE VIII
Representations and Warranties Regarding the GAS-seventeen Vessel
The Seller represents and warrants to the Buyer that as of the date hereof and as of the Closing Date:
SECTION 8.01. Title to GAS-seventeen Vessel. The GAS-seventeen Vessel Owner is the owner (beneficially and of record) of the GAS-seventeen Vessel and has good and marketable title to the GAS-seventeen Vessel.
SECTION 8.02. No Encumbrances. The assets of the GAS-seventeen Vessel Owner and the GAS-seventeen Vessel are free of all Encumbrances other than the Encumbrances arising under the GAS-seventeen Charter and the Credit Facility.
SECTION 8.03. Condition. The GAS-seventeen Vessel is (i) adequate and suitable for use by the GAS-seventeen Vessel Owner in the manner that is standard and customary for a vessel of its type and age, ordinary wear and tear excepted; (ii) seaworthy in all material respects for hull and machinery insurance warranty purposes and in good running order and repair; (iii) insured against all usual risks, and in amounts, consistent with common industry practices; (iv) in compliance with applicable maritime laws and regulations; and (v) in compliance in all material respects with the requirements of its class and classification society; and all class certificates of the GAS-seventeen Vessel are clean and valid and free of recommendations affecting class; and the Buyer acknowledges and agrees that, subject only to the representations and warranties in this Agreement, it is acquiring the GAS-seventeen Vessel on an “as is, where is” basis.
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ARTICLE IX
Covenants
SECTION 9.01. Financial Statements. The Seller Entities agree to cause the Vessel Owners to provide access to the books and records of the Vessel Owners to allow the Buyer to prepare at the Buyer’s expense any information, review or audit the Buyer reasonably believes is required to be furnished or provided by the Buyer pursuant to applicable securities laws, including in connection with obtaining Buyer’s financing for the Acquisition and the filing of a registration statement with the Commission in connection therewith. The Seller will (a) provide the Buyer or the Buyer’s auditors access to the Seller’s work papers and (b) use its commercially reasonable efforts to assist the Buyer with any such information, review or audit and to provide other financial information reasonably requested by the Buyer or its auditors, including the delivery by the Seller Entities of any information, letters and similar documentation, including reasonable “management representation letters” and attestations.
SECTION 9.02. Expenses. All costs, fees and expenses incurred in connection with this Agreement and the related transaction documents (including those related to the MLP Guarantee and the New Credit Facility) shall be paid by the Buyer, including all costs, fees and expenses incurred in connection with conveyance fees, recording charges and other fees and charges applicable to the transfer of the Shares. Sponsor and Buyer shall enter a letter agreement related to certain rights and obligations related to certain depot spares prior to Closing. In addition:
(i) all costs and expenses incurred by the Buyer to load the Vessel with fuel oil, lubricating oil, greases, fresh water and other stores necessary to operate the Vessel after the Closing shall be for the Buyer’s account;
(ii) all unused fuel oil, lubricating oil, greases, fresh water, and other stores on the Vessels at the Closing shall become the Buyer’s property after the Closing without extra payment;
(iii) all spare parts and spare equipment, including spare tail-end shafts, spare propellers and propeller blades, if any, belonging to the Vessel Owners at the time of Closing used or unused, and on board shall become the Buyer’s property after the Closing, and spares on order are to be included; and
(iv) subject to the provisions of Section 2.05, all bank account balances, cash, current assets and current liabilities of the Vessel Owners at the time of Closing shall remain the assets of the Vessel Owners and shall not be transferred to the Seller Entities in connection with Closing.
SECTION 9.03. Commercially Reasonable Efforts; Financing . On the terms and subject to the conditions of this Agreement, each of the Sponsor, Seller and Buyer shall use its commercially reasonable efforts to cause the Closing to occur, including taking all commercially reasonable actions necessary to comply promptly with all legal requirements that may be imposed on it or any of its affiliates with respect to the
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Closing and to obtain any such consents required to be obtained by it in connection with the transfer of the Vessel Owners. Sponsor and Seller shall also provide such reasonable cooperation in connection with the arrangement of the Buyer’s financing as may be reasonably requested by Buyer, including providing information and documents, and other actions that are or may be customary in connection with comparable financing transactions. Each of Sponsor, Seller and Buyer shall not, and shall not permit any of their respective affiliates to, take any actions that would, or that could reasonably be expected to, result in any of the conditions set forth in Article X not being satisfied (including obtaining any consent, authorization, order or approval of, or any exemption by, any Governmental Authority required to be obtained or made by Sponsor, Seller or Buyer in connection with the acquisition of the Vessel Owners or the taking of any action contemplated by this Agreement in accordance with its terms).
SECTION 9.04. Tests and Surveys . The Seller and the Sponsor will grant to the Buyer the right, exercisable at the Buyer’s risk and expense, to make such surveys, tests and inspections of the Vessels as the Buyer may deem desirable, so long as such surveys, tests or inspections do not damage the Vessels or interfere with the activities of the Seller Entities or the Charterer thereon so long as the Buyer has furnished the Seller and the Sponsor with evidence that adequate liability insurance is in full force and effect.
SECTION 9.05. Further Assurances . From time to time after the date of this Agreement, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with Applicable Law, as may be necessary or appropriate (a) more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement, or which are intended to be so granted, (b) more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests distributed, contributed and assigned by this Agreement or intended so to be and (c) to more fully and effectively carry out the purposes and intent of this Agreement.
SECTION 9.06. Covenants of Sponsor and Seller Prior to Closing . From the date of this Agreement to the Closing Date, Sponsor and Seller shall cause the Vessel Owners to conduct their business in the usual, regular and ordinary course in substantially the same manner as previously conducted. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Closing, except with the prior written consent of Buyer, the Sponsor and Seller shall not permit the Vessel Owners to:
(a) enter into any contracts or other written or oral agreements;
(b) (i) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, (ii) split, combine or reclassify any of its capital stock or issue any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) purchase, redeem or
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otherwise acquire any shares of capital stock or any other securities of the Vessel Owners or any options, warrants, calls or rights to acquire any such shares or other securities; or
(c) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or exchangeable for, any shares of its capital stock, or any stock options, warrants, calls or rights to acquire any such shares, voting securities or convertible securities or any stock appreciation rights or other rights that are linked in any way to the price of the Shares or the value of the Vessel Owners or any part thereof.
SECTION 9.07. Credit Facilities .
(a) Unless the New Credit Facility is entered into in a form satisfactory to Sponsor, Seller and Buyer and funded on or before the Closing Date, the Sponsor, Seller and Buyer shall use, and shall cause their respective subsidiaries to use, commercially reasonable efforts to execute the MLP Guarantee and any other amendments to the Credit Facility as may be required in connection with the Closing of the transactions contemplated by this Agreement.
(b) The Sponsor, Seller and Buyer shall use, and shall cause their respective subsidiaries to use, commercially reasonable efforts to take, or cause to be taken, such actions and do, or cause to be done, such things as are necessary, proper or advisable in connection with entering into the New Credit Facility on the Closing Date or in a reasonable period of time thereafter.
SECTION 9.08. Management Agreements . The Sponsor, Seller and Buyer shall cause the Management Agreements to be amended and restated, effective as of the Closing, so as to be substantially the same (including with respect to pricing terms) as the commercial management agreements and ship managements agreements for the vessels in the Buyer’s fleet as of the date hereof.
ARTICLE X
Conditions to Closing
SECTION 10.01. Conditions to the Obligations of Sponsor, Seller and Buyer . The obligations of Sponsor, Seller and Buyer to effect the Closing shall be subject to the satisfaction or waiver by Sponsor, Seller and Buyer on or prior to the Closing Date of the following conditions:
(a) no Governmental Authority shall have entered any order that remains in effect which would restrain, enjoin or otherwise prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby in accordance with the terms of this Agreement;
(b) all approvals of Governmental Authorities required to consummate the transactions contemplated by this Agreement shall have been obtained;
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(c) no Applicable Law shall have been enacted by any Governmental Authority which prohibits the consummation of the Closing; and
(d) either (i) the MLP Guarantee and any other amendments to the Credit Facility required in connection with the Closing of the transactions contemplated by this Agreement in such form as the Majority Lenders (as such term is defined in the Credit Facility) may require have been entered into or (ii) the New Credit Facility has been entered into in a form satisfactory to Sponsor, Buyer and Seller and funded on or before the Closing Date.
SECTION 10.02. Conditions to the Obligation of Buyer . The obligation of Buyer to effect the Closing shall be subject to the satisfaction or waiver by Buyer on or prior to the Closing Date of each of the following conditions:
(a) the availability, in the Buyer’s sole discretion, of sufficient funds to pay the Purchase Price and other costs associated with the Acquisition;
(b) each of the representations and warranties of Seller contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, with the same effect as if those representations and warranties had been made on and as of the Closing Date except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be so true and correct as of such date, and except to the extent the failure to be so true and correct would not be material;
(c) Seller Entities shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by Seller Entities at or before the Closing; and
(d) the results of any searches, surveys, tests or inspections conducted pursuant to Section 9.04 are, in the reasonable opinion of the Buyer, satisfactory.
SECTION 10.03. Conditions to the Obligation of Sponsor and Seller . The obligation of Sponsor and Seller to effect the Closing shall be subject to the satisfaction or waiver by Sponsor and Seller on or prior to the Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, with the same effect as if those representations and warranties had been made on and as of the Closing Date except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be so true and correct as of such date, and except to the extent the failure to be so true and correct would not be material; and
(b) Buyer Entities shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by Buyer Entities at or before the Closing.
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ARTICLE XI
Amendments and Waivers
SECTION 11.01. Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each party hereto. By an instrument in writing the Buyer, on the one hand, or the Sponsor and Seller, on the other hand, may waive compliance by the other with any term or provision of this Agreement that such other party was or is obligated to comply with or perform.
ARTICLE XII
Indemnification
SECTION 12.01. Indemnity by the Seller. From and after the Closing, the Seller shall be liable for, and shall indemnify the Buyer and each of its subsidiaries and each of their directors, employees, agents and representatives (the “ Buyer Indemnitees ”) against and hold them harmless from, any Losses, suffered or incurred by such Buyer Indemnitee:
(a) by reason of, arising out of or otherwise in respect of (i) any inaccuracy in, or breach of, any representation or warranty (without giving effect to any supplement to any disclosure schedules after the date hereof or qualifications as to materiality or dollar amount or other similar qualifications), or (ii) a failure to perform or observe any covenant, agreement or obligation of, the Seller Entities in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by the Seller Entities;
(b) with respect to any fees, expenses or other payments incurred or owed by the Seller Entities or the Vessel Owner to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transactions contemplated by this Agreement;
(c) by reason of, arising out of or otherwise in respect of obligations, liabilities, expenses, cost and claims relating to, arising from or otherwise attributable to the assets owned by the Vessel Owner or the assets, operations, and obligations of the Vessel Owner or the businesses thereof, in each case, to the extent relating to, arising from, or otherwise attributable to facts, circumstances or events occurring prior to the Closing Date;
(d) with respect to any Covered Environmental Losses relating to the Vessel Owners to the extent Sponsor or Seller is notified by Buyer of any such Covered Environmental Losses within five years after the Closing Date;
(e) with respect to any Losses to the Buyer arising from:
(i) the failure of the Buyer, immediately after the Closing
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Date, to be the owner of such valid leasehold interests or fee ownership interests in and to the Vessel Owners and Vessels as are necessary to enable the Buyer to own and operate the Vessel Owners and Vessels in substantially the same manner that the Vessel Owners and Vessels were owned and operated by the Seller immediately prior to the Closing Date; or
(ii) the failure of the Vessel Owners to have by the Closing Date any consent or governmental permit necessary to allow the Vessel Owners to own or operate the Vessels in substantially the same manner that the Vessels were owned and operated by the Seller Entities immediately prior to the Closing Date;
in each of clauses (i) and (ii) above, to the extent that the Sponsor or Seller is notified by the Buyer of such Losses within three years after the Closing Date; or
(f) with respect to all federal, state, foreign and local income tax liabilities attributable to the operation of the Vessel Owners prior to the Closing Date, but excluding any federal, state, foreign and local income taxes reserved on the books of the Buyer on the Closing Date.
SECTION 12.02. Limitation Regarding Indemnification .
(a) The aggregate liability of the Seller under Section 12.01(d) above shall not exceed $5,000,000. Furthermore, no claim may be made against the Seller for indemnification pursuant to Section 12.01(d), unless the aggregate dollar amount of all claims for indemnification pursuant to such section shall exceed $500,000, in which case the Seller shall be liable for claims for indemnification only to the extent such aggregate amount exceeds $500,000. The limitations set forth in this Section 12.02 shall also apply to any claim under Section 12.01(a)(i) to the extent related to environmental or health and human safety matters.
(b) The aggregate liability of the Seller under Section 12.01 above shall not exceed $328,000,000.
(c) The aggregate liability of the Buyer under Section 12.03 below shall not exceed $328,000,000.
(d) Except as otherwise set forth in this Article XII or in Section 14.08, the indemnification obligations set forth in this Article XII shall survive until the expiration of the applicable statute of limitations.
SECTION 12.03. Indemnity by the Buyer. From and after the Closing, the Buyer shall be liable for, and shall indemnify the Seller and Sponsor and their respective subsidiaries and each of their directors, employees, agents and representatives (the “ Seller Indemnitees ”) against and hold them harmless from, any Losses, suffered or incurred by such Seller Indemnitee:
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(a) by reason of, arising out of or otherwise in respect of (i) any inaccuracy in, or breach of, any representation or warranty (without giving effect to any supplement to the disclosure schedules occurring after the date hereof or qualifications as to materiality or dollar amount or other similar qualifications), or (ii) a failure to perform or observe any covenant, agreement or obligation of, the Buyer Entities in or under this Agreement or in or under any document, instrument or agreement delivered pursuant to this Agreement by the Buyer Entities; or
(b) with respect to any fees, expenses or other payments incurred or owed by the Buyer Entities to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transactions contemplated by this Agreement.
SECTION 12.04. Exclusive Post-Closing Remedy. From and after the Closing, and except for any remedies for wilful misconduct or actual fraud or for payments under Section 2.05, the rights and remedies set forth in this Article XII shall constitute the sole and exclusive rights and remedies of the Parties under or with respect to the subject matter of this Agreement.
ARTICLE XIII
Termination
SECTION 13.01. Termination . This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of the Sponsor, Seller and Buyer;
(b) by Seller and Sponsor, on the one hand, or Buyer, on the other hand, by written notice to the other, if:
(i) the Closing shall not have occurred by April 1, 2015, unless such date is extended by the mutual written consent of Sponsor, Seller and Buyer;
(ii) a Governmental Authority has entered any permanent order which restrains, enjoins or otherwise prevents the performance of this Agreement or the consummation of any of the transactions contemplated hereby in accordance with the terms of this Agreement; or
(iii) an Applicable Law has been enacted by any Governmental Authority which prohibits the consummation of the Closing;
provided that no Party may terminate this Agreement pursuant to this Section 13.01(b) if that Party has breached its obligations under this Agreement in a manner that shall have proximately caused the failure of the Closing to occur by such date;
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(c) by Seller and Sponsor if either of the conditions set forth in Section 10.03(a) or 10.03(b) are not satisfied, and such failure shall not have been cured within 30 days following written notice of such failure;
(d) by the Buyer if:
(i) either of the conditions set forth in Section 10.02(b) or 10.03(c) are not satisfied, and such failure shall not have been cured within 30 days following written notice of such failure; or
(ii) the results of any searches, surveys, tests or inspections conducted pursuant to Section 9.04 are, in the reasonable opinion of the Buyer, unsatisfactory.
SECTION 13.02. Effect of Termination . In the event of the termination of this Agreement pursuant to Section 13.01, this Agreement shall become void and have no effect, without any liability to any Person in respect hereof or the transaction contemplated hereby on the part of any Party, or any of its directors, officers, employees, agents, legal and financial advisors, representatives, stockholders, or affiliates; provided, however , that the agreements contained in Section 9.02 (Expenses), this Section 13.02 and Article XIV shall survive the termination of this Agreement.
ARTICLE XIV
Miscellaneous
SECTION 14.01. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed wholly within such jurisdiction without giving effect to conflict of law principles thereof other than Section 5-1401 of the New York General Obligations Law, except to the extent that it is mandatory that the law of some other jurisdiction, wherein the Vessels are located, shall apply.
SECTION 14.02. Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument.
SECTION 14.03. Complete Agreement. This Agreement and Schedules hereto contain the entire agreement between the parties hereto with respect to the transactions contemplated herein and, except as provided herein, supersede all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings.
SECTION 14.04. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
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SECTION 14.05. Severability. If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any governmental body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect, as nearly as possible, to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.
SECTION 14.06. Third Party Rights. Except to the extent provided in Article XII, a Person who is not a party to this Agreement has no right to enforce or to enjoy the benefit of any term of this Agreement.
SECTION 14.07. Notices. Any notice, claim or demand in connection with this Agreement shall be delivered to the parties at the following addresses (or at such other address or facsimile number for a party as may be designated by notice by such party to the other party):
(a) | if to GASLOG CARRIERS LTD., as follows: | |
GasLog Carriers Ltd. | ||
c/o GasLog Monaco S.A.M. | ||
Gildo Pastor Center | ||
7 Rue du Gabian | ||
MC 98000, Monaco | ||
Attention: Legal | ||
Facsimile: +377 9797-5124 | ||
(b) | if to GASLOG LTD., as follows: | |
GasLog Ltd. | ||
c/o GasLog Monaco S.A.M. | ||
Gildo Pastor Center | ||
7 Rue du Gabian | ||
MC 98000, Monaco | ||
Attention: Legal | ||
Facsimile: +377 9797-5124 | ||
(c) | if to GASLOG PARTNERS LP, as follows: | |
GasLog Partners LP | ||
c/o GasLog Monaco S.A.M. | ||
Gildo Pastor Center | ||
7 Rue du Gabian | ||
MC 98000, Monaco | ||
Attention: Andrew J. Orekar ( Chief Executive Officer) | ||
Facsimile: +377 9797-5124 |
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and any such notice shall be deemed to have been received (i) on the next working day in the place to which it is sent, if sent by facsimile or (ii) forty eight (48) hours from the time of dispatch, if sent by courier.
SECTION 14.08. Representations and Warranties to Survive. All representations and warranties contained in this Agreement shall survive the Closing and shall remain operative and in full force and effect after the Closing, regardless of (a) any investigation made by or on behalf of any Party or its affiliates, any Person controlling any Party, its officers or directors, and (b) delivery of and payment for the Shares, for a period of three years from the date of this Agreement. At the end of such three year period, such representations and warranties will terminate, and no claim may be brought in respect of such representations and warranties under Article XII or otherwise, except for claims that have been asserted prior to such date.
SECTION 14.09. Remedies. Except as expressly provided in Section 12.04, the rights, obligations and remedies created by this Agreement are cumulative and in addition to any other rights, obligations or remedies otherwise available at law or in equity. Except as expressly provided in this Agreement, nothing in this Agreement will be considered an election of remedies.
SECTION 14.10. Non-recourse to General Partner. Neither the Buyer’s general partner nor any other owner of Equity Interests in the Buyer shall be liable for the obligations of the Buyer under this Agreement or any of the related transaction documents, including, in each case, by reason of any payment obligation imposed by governing partnership statutes.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed as of the date first above written.
Gaslog carriers ltd., |
by | /s/ Simon Crowe | ||
Name: Simon Crowe | |||
Title: Director |
GASLOG ltd., | |||
by | /s/ Paul Wogan | ||
Name: Paul Wogan | |||
Title: Chief Executive Officer |
GASLOG PARTNERS LP, | |||
by | /s/ Andrew J. Orekar | ||
Name: Andrew J. Orekar | |||
Title: Chief Executive Officer |
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Exhibit A - Net Working Capital Line Items
Current Assets | ||||
Trade and other receivables | ||||
Inventories | ||||
Prepayments and other current assets | ||||
Cash and cash equivalents | ||||
Total Current Assets (A) | $ | |||
Current Liabilities | ||||
Trade accounts payable | ||||
Ship management creditors | ||||
Amounts due to related parties | ||||
Other payables and accruals | ||||
Total Current Liabilities (B) | $ | |||
Net Working Capital (A)-(B) | $ |
Exhibit 10.21
Dated , 2014
GAS-SIXTEEN LTD.
and
GASLOG LNG SERVICES LTD.
AMENDED AND RESTATED
SHIP MANAGEMENT AGREEMENT
in respect of the Vessel, “METHANE RITA ANDREA”
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TABLE OF CONTENTS
CLAUSE NO. | PAGE | |
1. | DEFINITIONS AND INTERPRETATION | 1 |
2. | APPOINTMENT OF MANAGERS | 6 |
3. | MANAGEMENT SERVICES | 6 |
4. | MANAGERS’ OBLIGATIONS | 17 |
5. | OWNERS’ OBLIGATIONS | 18 |
6. | INSURANCE POLICIES | 18 |
7. | MANAGEMENT FEE | 19 |
8. | VESSEL EXPENSES | 21 |
9. | MANAGERS’ RIGHT TO SUB-CONTRACT | 21 |
10. | RESPONSIBILITIES | 22 |
11. | DOCUMENTATION | 23 |
12. | DEPLOYMENT OF THE VESSEL | 24 |
13. | AUDITING | 25 |
14. | INSPECTION OF VESSEL | 25 |
15. | COMPLIANCE WITH LAWS AND REGULATIONS ETC. | 25 |
16. | DURATION OF THE AGREEMENT | 25 |
17. | TERMINATION | 25 |
18. | MISCELLANEOUS | 27 |
19. | LAW AND ARBITRATION | 28 |
20. | NOTICES AND BANK ACCOUNTS | 28 |
ANNEX “A”
DETAILS OF VESSEL |
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ANNEX “B”
DETAILS OF CREW / OFFICERS RATINGS |
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ANNEX “C”
INITIAL BUDGET |
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ANNEX “D”
OPERATIONAL AND MAINTENANCE PROTOCOL |
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ANNEX “E”
PERMANENT INSTRUCTIONS |
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ANNEX “F’
FORM OF ACCOUNTING SYSTEM |
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ANNEX “G”
CONFIDENTIALITY AGREEMENT |
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ANNEX “H”
INCENTIVE BONUS PLAN |
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ANNEX “I”
PRIMARY TERMINALS |
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THIS SHIP MANAGEMENT AGREEMENT is made the ___th day of ___, 2014
BETWEEN:
(1) | GAS-sixteen Ltd., a company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda (the “Owners”) ; |
(2) | GasLog LNG Services Ltd., a company incorporated in Bermuda and having a branch office at 69 Akti Miaouli, Piraeus GR 18537, Greece (the “Managers”) . |
WHEREAS:
(A) | On April 10, 2014, Gas-sixteen Ltd. and GasLog Ltd. entered into that certain Ship Management Agreement. |
(B) | The Owners, as of the Effective Date, are the registered owners of the 145.622.251m 3 Liquefied Natural Gas Carrier “METHANE RITA ANDREA” (the “Vessel” ) as more particularly described in Annex “A” hereto and wish to engage the Managers to manage and operate the Vessel; |
(C) | The Managers, being fully experienced, qualified and able vessel managers, wish to manage and operate the Vessel subject to and in accordance with the terms set out in this Agreement. |
IT IS AGREED AS FOLLOWS:
1. | DEFINITIONS AND INTERPRETATION |
1.1. | Definitions |
In this Agreement save where the context otherwise requires, the following words and expressions shall have the meanings hereby assigned to them:
“Affiliate” means any entity which, directly or indirectly, through one or more intermediaries, Controls or is Controlled by, or is under common Control with that party;
“Agreement” means this ship management agreement including the Annexes attached hereto as amended from time to time in accordance with the terms hereof;
“Annual Budget” shall have the meaning ascribed to it in Clause 3.3.2 below;
“Charter” means any future charter entered into between the Owners and any future charterer of the Vessel notified to the Managers pursuant to Clause 5.3;
“Charterers” means any future charterers of the Vessel notified to the Managers pursuant to Clause 5.3;
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“Communication Expenses” means the costs incurred by the Managers in performing the Management Services and for the account of the Owners in respect of all communications between the shore and the Vessel as detailed in the Annual Budget;
“Control” and “Controlled” mean the holding of power to direct or cause the direction of management, policies and decisions of a company, corporation, partnership or other entity including, without limitation, through control by direct or indirect means of not less than fifty per cent (50%) of the voting rights in such company, corporation, partnership or other entity;
“Crew” means the Officers and Ratings and any other individual who has signed Articles on the Vessel and is employed from time to time by the Managers under Managers’ obligation to provide the Management Services;
“Crew Insurances” means insurances against crew risks which shall include, but not be limited to, death, sickness, repatriation, injury, shipwreck and loss of personal effects;
“Crew Support Costs” means all expenses of a general nature which are not particularly referable to any individual vessel for the time being managed by the Managers and which are incurred by the Managers for the purpose of providing efficient and economic Management Services and, without prejudice to the generality of the foregoing, shall include the cost of crew standby pay, training schemes for officers and ratings, cadet training schemes, sick pay, study pay, recruitment and interviews;
“Dollar” or “US$” means the currency of the United States of America;
“EDP Expenses” means the costs of any new computer software or hardware (including licensing, maintenance, installation and training costs) that may be installed or developed, in relation to the Vessel;
“Effective Date” means the date of this Agreement;
“Emergency Situation” means an emergency situation that:
(i) | involves a threat to human life; |
(ii) | involves a risk of loss of the Vessel or its cargo or of serious damage to the Vessel; |
(iii) | involves a risk of the Vessel causing serious environmental damage; |
(iv) | involves a risk of the Vessel being stolen, impounded or seized; or |
(v) | involves a security or safety risk to the Vessel, such as but not limited to terrorism, piracy, etc. |
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“Flag Administration / State” shall mean such state or registry as the Owners shall from time to time specify;
“HSSE Report” means a report on the health, safety, security and environmental status of the Vessel (together with relevant statistics) and including details of any specific health, safety, security and/or environmental incidents prepared in accordance with Clause 3.4.9;
“Incentive Bonus” means the bonus payable by the Owners to the Managers in accordance with Clause 7.7;
“ISM Code” means the International Ship Management Code for the Safe Operation of Ships and for Pollution Prevention as adopted by the International Maritime Organisation (IMO) by resolution A.741(18) as amended from time to time;
“ISPS Code” means the International Ship and Port Facility Security Code adopted by the International Maritime Organization Assembly as the same may have been or may be amended or supplemented from time to time;
“Maintenance Schedule” means a schedule referred to in Clause 3.2.1(iii) detailing the maintenance required for the Vessel for the period from delivery to the next dry-docking of the Vessel thereafter for each subsequent 30 month period to coincide with Classification Society Intermediate Survey;
“Managed Fleet” means all vessels owned, leased, or chartered by Owners or Owners’ Affiliates and managed by Managers pursuant to a ship management agreement or similar arrangement;
“Management Fee” means the fee payable by the Owners to the Managers in consideration of the Management Services, as specified in Clauses 7.1 to 7.3 and as adjusted pursuant to Clause 7.4;
“Management Services” means the services specified in Clause 3;
“Managers’ Account” means the bank account in the name of the Managers as specified in Clause 20.3, or such other bank account of the Managers as may be notified to the Owners from time to time;
“MTSA Code” means the Maritime Transportation Security Act as enacted by the United States of America as the same may have been amended or supplemented from time to time;
“Officers” means the Master and the officers (including, but not limited to, the Senior Officers) of the Vessel, whose numbers, rank and nationality are currently specified in Annex “B” attached hereto, as updated from time to time;
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“OPA 90” means the Oil Pollution Act of 1990 as enacted by the United States of America as the same may have been amended or supplemented from time to time;
“Operational and Maintenance Protocol” means the protocol set forth on Annex “D” attached hereto;
“Operational Costs” means costs and expenses incurred by the Managers on behalf of the Owners to operate and maintain the Vessel including Communication Expenses and EDP Expenses;
“Owners’ Insurances” means the insurance policies to be procured by the Owners in respect of the Vessel and as described in Clause 6.1(i), (ii), (iii), and (iv);
“Permanent Instructions” means the instructions relating to the operational procedures for communications between the Owners, Charterers and the Crew as currently specified in Annex “E” attached hereto which may be amended pursuant to Clause 12.2;
“Quality Assurance & Quality Management System” shall have the meaning ascribed to it in Clause 3.8.1;
“Ratings” means the ratings of the Vessel, whose numbers, rank and nationality are currently specified in Annex “B” as updated from time to time;
“Review Date” means January 1;
“Senior Officer” means the following positions or roles on the Vessel:
(i) | the Master; |
(ii) | the Chief Engineer; |
(iii) | the Chief Officer; |
(iv) | the Second Engineer; or |
(v) | any other person whose rank or role on the vessel is required and designated as Senior Officer by the Flag Administration |
“Severance Costs” means the costs which the Managers as employers of the Crew are legally obliged to pay, and actually do pay, to or in respect of the Crew as a result of the early termination of any employment contract for service on the Vessel;
“ SMS ” means a safety management system which complies with all laws, rules and regulations, and with all the codes, guidelines and standards recommended by the International Maritime Organization (including without limitation, the ISM
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Code), any relevant flag state and the classification society and approved by Owners, which may from time to time be applicable to the Vessel and/or the Owners and/or the Managers, and which is otherwise appropriate having regard to the Managers’ obligations under this Agreement;
“SOPEP” means the shipboard oil pollution emergency plan in the form approved by the Marine Environment Protection Committee of the International Maritime Organization pursuant to the requirements of Regulations 25 of Annex H of the International Convention of the Protection of Pollution from Ships, 1973, as modified by the Protocol of 1989 relating thereto, as amended (MARPOL 73/78);
“STCW 95” means the International Convention on Standards of Training, Certification and Watch-keeping for Seafarers, 1978, as amended in 1995 or any subsequent amendment thereto;
“Supplementary Budget” shall have the meaning ascribed to it in Clause 3.3.4 below;
“Training Matrix” means the most updated Training Matrix as mutually agreed between the parties, as amended, supplemented or updated from time to time;
“Vessel Account” means a bank account in the name of the Managers opened and operated in accordance with Clause 8.4, the details of which shall be notified to the Owners from time to time;
“Vessel Condition Report” means a report detailing the physical condition, the progress of the Maintenance Schedule and the performance of the Vessel;
“Vessel Data” means all records, invoices, logs, certificates and performance and maintenance data relating to the Vessel and all correspondence and documentation generated, collected or compiled during the provision of the Management Services by either former managers of the Vessel and given to the Managers, or by the Managers, to enable the Owners to effectively operate, manage or sell the Vessel, but excluding the Managers’ internal correspondence and any correspondence (other than invoices) between the Managers and their suppliers;
“Working Day” means a day when most banks are open for business in London, New York, Athens, and country of location of relevant bank accounts of Owners.
1.2. | Interpretation |
1.2.1. | “Owners”, “Managers” and “Charterers” include their respective successors and assigns. |
1.2.2. | Clause headings are inserted for convenience and shall be ignored in construing this Agreement. |
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1.2.3. | Unless the context otherwise requires, words denoting the singular number include the plural number and vice versa. |
1.2.4. | References to clauses and annexes are to Clauses and Annexes of this Agreement except where otherwise expressly stated. |
1.2.5. | Reference to any document includes the same as varied, supplemented or replaced from time to time. |
1.2.6. | References to any enactment include any re-enactments, amendments and extensions thereof. |
2. | APPOINTMENT OF MANAGERS |
2.1. | From the Effective Date and continuing, unless and until terminated as provided herein, the Owners hereby appoint the Managers and the Managers hereby agree to act as managers of the Vessel. |
2.2. | Subject to the terms and conditions contained herein, during the period of this Agreement, the Managers shall carry out the Management Services as agents for and on behalf of the Owners. The Managers shall have authority to take such actions as they may from time to time consider necessary to enable them to perform their duties and obligations as set out in this Agreement in accordance with first class LNG ship management practice within the limits of authority delegated to them hereunder. |
3. | MANAGEMENT SERVICES |
3.1. | Crew Management |
3.1.1. | The Managers shall provide suitably and adequately qualified Crew for the Vessel in accordance with any requirements of the Owners, as described in the Operational and Maintenance Protocol set forth on Annex “D”, and the provisions of the STCW 95 and the requirements of this Agreement. |
3.1.2. | The Managers shall be responsible for: |
(i) | selecting, with Owners’ approval, which may be expressed from time to time in the form of standing instructions to the Managers for specific experience and qualification criteria pertaining to the Crew, including but not limited to the Training Matrix, and engaging the Crew (subject to the provisions of Clause 3.1.6 below) for the Vessel including payroll arrangements, pension administration, and insurances for the Crew other than those mentioned in Clause 6; |
(ii) | ensuring at all times the availability and supply of an adequate complement of Crew (including Master, Officers and Ratings complying with Annex “B”) relative to the particular operational status and size of the |
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Vessel;
(iii) | ensuring that the applicable requirements of the law of the flag of the Vessel are satisfied in respect of manning levels, rank, qualification and certification of the Crew and employment regulations (including those standards set forth by the International Transport Workers’ Federation (ITF)) pertaining to Crew’s tax, payroll, social insurance, welfare, discipline and other applicable requirements; |
(iv) | ensuring that all members of the Crew have passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical certificates issued in accordance with appropriate flag state requirements. In the absence of applicable Flag State requirements the medical certificate shall be dated not more than three months prior to the respective Crew member leaving their country of domicile and maintained for the duration of his service on board the Vessel; |
(v) | ensuring that the Crew shall have a command of the English language of a sufficient standard to enable them to perform their duties safely; |
(vi) | arranging transportation of the Crew, including repatriation, at Owners’ cost, unless otherwise arranged by Owners; |
(vii) | providing continuing training of the Crew and supervising their efficiency and competence, consistent with Owners’ requirements but in any event never less than the applicable international or Flag State standard for LNG vessels; |
(viii) | whenever the Vessel is operational, issuing instructions to the Master in accordance with the requirements of the Owners or Charterers, to trade along the most geographically direct, economical and safe route (except for any justifiable deviation allowed under English common law or the Hague Visby Rules and including all deviations that may be necessary in an Emergency Situation) and ensuring the Vessel is worked at a fuel-efficient speed consistent both with port arrival instructions given by the Owners and/or Charterers and with sea conditions; |
(ix) | issuing instructions to the Master to keep full and correct log books and furnishing the Owners with true and accurate copies of such log books when required; |
(x) | conducting union negotiations (if applicable); |
(xi) | operating a drug and alcohol policy, prepared by the Managers and approved by the Owners (such approval not to be unreasonably withheld or delayed), which includes, as a minimum, the principles set forth in the “Guidelines for the Control of Drugs and Alcohol Aboard Ship” of the Oil |
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Companies International Marine Forum dated June 1995 (and in an amendments or successors thereto);
(xii) | ensuring that the Crew and any other person on board the Vessel proceeding to sea shall be insured for the Crew Insurances with a first class insurance company, underwriter or protection and indemnity association ( the “Crew Insurances”); |
(xiii) | ensuring that all premiums or calls in respect of the Crew Insurances are paid promptly by their due date; and |
(xiv) | ensuring that the Crew Insurances shall name the Owners as co-assured (unless advised by the Owners to the contrary). |
3.1.3. | The Managers shall appoint a superintendent (ship manager) to be responsible for the day to day operation, maintenance and repair of the Vessel, the cost of which shall, subject to Clause 7.4, be included in the Management Fee. Should the Owners have reason to be dissatisfied with the superintendent so appointed, they shall raise their complaint with the Managers. The Managers shall investigate any such complaint promptly and, should the complaint prove to be well founded, the Managers shall replace such superintendent at no extra cost to the Owners. |
3.1.4. | The Managers shall institute onboard and shall ensure onboard compliance with a uniform standard of dress amongst the crew and officers, and uniform credentialing or identification of all Crew and Officers. |
3.1.5. | Should the Owners have any reason to be dissatisfied with any of the Crew, they shall raise their complaint with the Managers. The Managers shall investigate the complaint promptly and, should the complaint be well founded, the Managers shall replace the Crew member in question and undertake changes in the appointment of the Crew as the Owners may reasonably require. |
3.1.6. | The Managers shall employ the Crew in their name and for their own account and, for the avoidance of doubt, the Managers do not have authority to conclude or enter into contracts of employment with the Crew for and on behalf of the Owners and shall indemnify and hold harmless the Owners against all actions, proceedings, claims, demands or liabilities whatsoever and howsoever arising from the Managers’ breach of this Clause 3.1.6 or in relation to any disputes relating to Crew contracts of employment. |
3.1.7. | Except as allowed in clause 3.1.2(i), the Managers may not appoint any Senior Officers without the prior approval of the Owners (which shall not be unreasonably withheld or delayed), except that in the event that a shortage of crew would be likely to result under the terms of the Charter: |
(i) | in the Vessel going off hire under its Charter; or |
(ii) | an Emergency Situation; |
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and in such circumstances it is not practical for the Managers to wait for Owners’ approval, the Managers may make such temporary appointments as they deem necessary; however, the Vessel’s manning shall always remain in compliance with the regulations of the Flag State’s minimum manning requirements. Officers CV and accomplished Training Matrix should be provided to the Owners for reviewing prior promotion or assignment to a Senior Officer position.
The Owners reserve the right to interview and approve all Senior Officers candidates.
3.2. | Operational and Technical Management |
3.2.1. | The Managers shall provide operational and technical management of the Vessel which includes, but is not limited to, the following functions: |
(i) | provision of competent personnel with suitable experience of the LNG industry to supervise the maintenance and general efficiency of the Vessel in line with the Training Matrix and the requirements of the Charter; |
(ii) | all maintenance and work for the Vessel so as to ensure that the Vessel complies with all applicable laws including but not limited to IMO, MARPOL and SOLAS (and including, for the avoidance of doubt, all the provisions of the ISM Code), regulations and/or other requirements of the flag of the Vessel and of the Primary Terminals and other places where she trades, all applicable international conventions, all applicable regulations and/or requirements of any terminals or facilities in such port(s) or place(s) where the Vessel may load or discharge, and all requirements and recommendations of the Vessel’s classification society applicable to a Vessel carrying LNG worldwide within the limits of the Charter; |
(iii) | preparing the Maintenance Schedule and regular updates on request (such updates to commence at delivery of the Vessel from the shipyard, and then each year on or around the anniversary upon which the Vessel was classified by its classification society) for approval by the Owners (such approval not to be unreasonably withheld or delayed); |
(iv) | arrangement and supervision of dry dockings, repairs, alterations and the upkeep of the Vessel in accordance with first class LNG ship management practice provided that the Owners shall allocate sufficient funds and approve the relevant Annual Budgets and Supplementary Budgets to ensure that Managers can incur the necessary expenditure to ensure that the Vessel will comply with the law of the flag of the Vessel and of the places where she trades, and all requirements and recommendations of the classification society; |
(v) | investigating and reporting to Owners any technical faults or problems material to the performance of the Vessel and arranging for their repair in |
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consultation with the Owners;
(vi) | arrange for the victualing and storing of the Vessel appropriate to the declared operational status of the Vessel and place and effect payment for contracts for lubricating oil, paints and all consumable materials where they are not for the Charterers’ account, together with any other contracts that may be agreed with the Owners from time to time in accordance with Clause 3.2.2; |
(vii) | appointment of surveyors and technical consultants as the Managers may consider from time to time be necessary; |
(viii) | development, implementation of and maintenance of a SMS and obtaining and maintaining valid certificates evidencing compliance with this Clause, including without limitation, a valid document of compliance in relation to itself and valid safety management certificates in respect of the Vessel as required by the ISM and ISPS Codes; |
(ix) | provide the Owners with copies of any and all documents of compliance and safety management certificates as described in Clause 3.2.1(viii) upon issuance; |
(x) | keep or procure that there is kept on board the Vessel at all times: |
(a) | all certificates and documents required from time to time by any applicable law or regulations to enable her to perform the Charter between the Primary Terminals without delay, |
(b) | valid certificates in force as required by the Flag State, |
(c) | any further certificates and documents required from time to time by any applicable law or regulations to enable her to perform the Charter without delay, |
(d) | an ITF certificate or equivalent allowing Vessel’s calls and operations in all ports to which the Vessel is ordered under the Charter where an ITF certificate or equivalent is required, and |
(e) | a copy of all documents of compliance and the original of any safety management certificates as described in Clause 3.2.1(viii); |
(xi) | arrangement of periodic analysis by third parties of the bunker fuel and reporting the results of such analysis to the Owners (the costs being included in the Vessel’s running costs); |
(xii) | noting requirements resulting from safety and any external ship inspections and implementing these insofar as they affect the operation or safety of the Vessel (such implementation to be at the Owners’ expense); |
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(xiii) | implementing safety recommendations issued in terms of all international conventions (at the Owners’ expense); |
(xiv) | arrange, where necessary for the superintendent or other staff of the Managers to visit the Vessel. If the superintendent or other staff of the Managers have reason to spend more than twenty-five (25) days in aggregate in any calendar year (or pro rata for part of a calendar year) visiting the Vessel, their services will be charged out at the rate specified in Clause 7.4 below; |
(xv) | ensure that maritime, safety and cargo custody standards are in accordance with first class international LNG shipping practice and are maintained by the Crew whenever such personnel are serving on board the Vessel; |
(xvi) | arrange and effect payment on behalf of the Owners for the towage of the Vessel when appropriate; |
(xvii) | arrange, maintain, and effect preparation and payment on behalf of the Owners for suitable moorings for the Vessel for lay-up at such locations as may from time to time be mutually agreed relative to the Vessel’s positioning requirements of the Owners; |
(xviii) | handle port disbursement accounts where these are not for the Charterers’ account; |
(xix) | navigate the Vessel, handle all necessary communications, manage all cargo operations on behalf of Owners, and provide for the security and safety of the Vessel, cargo and Crew, all in accordance with first class LNG ship management practice; |
(xx) | ensure that the Vessel is compatible with existing LNG liquefaction terminals, regasification terminals and ship/shore interfaces, at the Primary Terminals and to maintain such compatibility and all necessary certificates and documentation; |
(xxi) | undertake vessel-terminal compatibility studies as requested by Owners and at Owners’ expense; and |
(xxii) | manage and operate the Vessel on behalf of the Owners in any part of the world to first class industry standards for an LNG carrier, provided that the Vessel shall be employed in lawful trades, as the Owners may direct, between good and safe ports and places where she can always be safely afloat, and further provided that the Vessel shall not trade to ports or areas where, at the time in question, there are expected to be hostilities, wars, warlike operations, civil commotions or revolutions, unless the Owners are able to obtain war risks insurance against such eventuality. |
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Managers shall at all times have the right to refuse to carry out any instructions from the Owners or the Charterers to trade or lay up the Vessel if Managers can clearly demonstrate that by doing so, it would contravene any applicable laws and regulations of the Vessel’s flag, the classification society or of the places she trades.
Furthermore, Managers shall not be held to be in breach of this Agreement, should at any time the Vessel fail to conform to its class standards or fail to conform to statutory or international standards, except to the extent that such failures result from the negligence or breach of this Agreement by the Managers.
3.2.2. | Procurement |
Subject to the terms of this Agreement, the Managers shall have discretion to procure all stores, spares, equipment, provisions, oils, fuels and any other goods, materials or services to be supplied to the Vessel by the Managers in performance of their Management Services from whatever source or supplier they may deem appropriate provided that:
(i) | the Managers use all reasonable efforts to achieve the lowest prices available for the appropriate quality of goods or services; |
(ii) | the Managers shall provide Owners with the benefit of all discounts, rebates or other financial incentives provided by any suppliers, and all amounts billed to Owners in connection with all stores, spares, equipment, provisions, oils, fuels and any other goods, materials or services to be supplied to the Vessel shall reflect any such discounts, rebates or financial incentives; and |
(iii) | the Owners reserve the right to require the Managers to procure such goods, materials and services from sources or suppliers they may notify to the Managers from time to time provided that: |
(a) | the Owners shall not unreasonably interfere with the aforementioned Managers’ procurement processes; |
(b) | the Owners may not force the Managers to breach the terms of any existing procurement contract to the extent such contract is consistent with the terms of this Agreement and standard industry practices; and |
(c) | the Owners have due regard to the interests of the Managers in fostering good long-term relationships with suppliers; |
and where the Owners utilize their rights under this Clause 3.2.2, the Managers shall in no circumstances be liable for the quality or pricing of the goods, materials and services so provided.
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3.3. | Accounting, Budgeting, and Reporting |
3.3.1. | The Managers shall: |
(i) | provide an accounting system in respect of the Vessel which meets the reasonable requirements of the Owners, and provide regular accounting services and supply regular accounting reports and records; and |
(ii) | maintain a record of all costs and expenditures incurred as well as data necessary or proper for the settlement of accounts between the parties. |
3.3.2. | The Managers shall present to the Owners annually a budget in respect of the estimated costs of operating the Vessel for the following twelve months in the current reporting form of the Managers, which is acceptable to the Owners (the “Annual Budget” ). The initial Annual Budget is attached hereto at Annex “C,” and shall be for the period from the Effective Date until 31 December 2014, with a full twelve (12) month Annual Budget submitted yearly thereafter, ending on the day immediately preceding the Review Date. Subsequent Annual Budgets shall be prepared by the Managers for approval by the Owners at least two (2) months before each Review Date. |
3.3.3. | The Owners shall indicate to the Managers their acceptance and approval of the Annual Budget within one month of presentation and in the absence of any such indication the Managers shall be entitled to assume that the Owners have accepted the Annual Budget as provided. |
3.3.4. | If after the approval of the Annual Budget pursuant to Clauses 3.3.2 and 3.3.3, the Owners or Managers anticipate material changes in the Operational Costs (or in respect of the initial Annual Budget set out in Annex “C”, if the Managers believe such initial Annual Budget is inaccurate or unworkable), then the Managers shall prepare a supplementary budget reflecting such changes (the “Supplementary Budget” ) for approval by the Owners and the Owners shall indicate their approval or non-approval of a Supplementary Budget within one month of it being presented to them (and in the absence of any such indication, the Managers shall be entitled to assume that the Owners have accepted a Supplementary Budget). Upon approval by the Owners, a Supplementary Budget shall be treated as the Annual Budget for the year in question or the remainder thereof. |
3.3.5. | For the avoidance of doubt, the Managers shall not incur expenditure in respect of the Vessel in excess of the Annual Budget (with due consideration to the fact that expenditure may be phased over varying periods or may fluctuate from month to month, notwithstanding that such expenditure was budgeted for on an annual basis) or incur expenditure that has not been accounted for in any Annual Budget without the prior consent of the Owners (which shall not be unreasonably withheld or delayed). |
3.3.6. | Notwithstanding Clause 3.3.5, the Managers may in each Annual Budget period, as specified in Clause 3.3.2, incur expenditure on behalf of the Owners in respect |
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of items that are not budgeted for in the Annual Budget, or for amounts in excess of the Annual Budget amounts, without the approval of the Owners provided that:
(i) | such expenditure is used only for the proper performance of the Management Services; and |
(ii) | such total expenditure does not exceed five (5) per cent of the total budgeted amount for that Annual Budget period or such other amount that may be agreed by the parties from time to time. |
3.3.7. | The Managers shall: |
(i) | by the fifteenth (15 th ) Working Day of the month provide the Owners with a Vessel Condition Report in respect of the previous month in such form as the Owners (acting reasonably) may require; |
(ii) | by the fifteenth (15 th ) Working Day of each month provide the Owners with a comparison between the budgeted Operational Costs as set out in the Annual Budget and actual Operational Costs in respect of the previous month (in accordance with the form set out in Annex “F’); |
(iii) | by the fifteenth (15 th ) Working Day of each month provide the Owners with a request for funds based upon an estimate of the funding requirements of the Vessel that are required in respect of the next month together with any requests for approval of expenditure pursuant to Clause 3.3.5 and any proposed amendments to the Annual Budget pursuant to Clause 3.3.4; and |
(iv) | by the fifteenth (15th) Working Day of each month provide the Owners with a consolidated report on actual Operational Costs and if requested by the Owners, capital costs, including all expenses in relation to financing of the Vessel, in respect of the previous month. |
3.3.8. | If requested and in such manner as may be required by the Owners, the Managers shall provide the necessary personnel, hardware and software, and other resources necessary to administer on Owners’ behalf and in its name the invoicing and collection of hire payable under the Charter. |
3.4. | Health, Safety, Security, and Environmental Protection |
3.4.1. | The Managers shall operate a management system which shall be approved by the Owners (such approval not to be unreasonably withheld or delayed), and comply and ensure that the Vessel and the Crew comply with all applicable health, safety, security and environmental laws and regulations, and nothing in this Clause 3.4 shall derogate from the obligations of Managers to comply with its statutory responsibilities insofar as they relate to the other Management Services. |
3.4.2. | The Managers shall, in relation to all persons engaged or likely to be engaged in |
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the execution of the Management Services, take such steps as are reasonably practicable to ensure their health and safety.
3.4.3. | The Managers shall make available for inspection by the Owners at all times all registers, records and other documentation concerning health, safety, security (where appropriate) and environmental matters relating to the Management Services. |
3.4.4. | The Managers shall send to the Owners a copy of every notice or other communication received from or sent to any person or body concerning health, safety, security and/or environmental matters relating to the Management Services and shall co-operate with the Owners in respect of all such health, security, safety and/or environmental matters, as may from time to time be requested by the Owners. |
3.4.5. | The Managers shall use all reasonable endeavors to ensure that no oil, or harmful or hazardous substances, of any description, shall be discharged or escape accidentally or otherwise, from the Vessel; and that the Vessel, its Officers and Crew comply with all international, national, and state oil and air pollution laws, conventions or regulations applying in, or to, international waters and the territorial waters of the countries into which the Vessel may trade under the Charter including the provisions of OPA 90 that apply to tank ships. This shall also include adhering to the standards promulgated under OPA 90 as those regulations apply to non-tankships operating within the jurisdiction of the United States whether or not the same strictly apply to the Vessel. |
3.4.6. | The Managers shall not treat, keep or dispose of any waste produced and/or carried by the Managers as a result of the Management Services in a manner likely to cause harm to the health and safety of any person or harm to the environment (as far as the same may be reasonably practical) and shall comply with every statutory duty which is relevant. |
3.4.7. | During the execution of the Management Services, the Managers shall take such steps as are reasonably practicable to avoid (or where avoidance is not possible, to minimize) harm to the environment. |
3.4.8. | The Managers will prepare and obtain all necessary approvals for a SOPEP. The SOPEP will be written in the English language and will be reviewed and updated as required and be maintained with the correct list of coastal state contacts. If required, the Managers will arrange for the translation of the SOPEP into another language. The Managers will also undertake regular training of the Crew in the use of SOPEP including drills to ensure that the SOPEP functions as expected and that contact and information details specified are accurate. |
3.4.9. | The Managers shall prepare a HSSE Report in such form and detail as the Owners (acting reasonably) require, to be submitted to the Owners on the 5th day of the following month. |
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3.5. | Insurance Arrangements |
3.5.1. | The Owners shall arrange insurances in accordance with Clause 6.1. |
3.5.2. | The Managers shall immediately inform and keep the Owners informed of any incident which gives or may give rise to claims or disputes relating to the insurances effected in accordance with Clause 6. |
3.5.3. | The Owners shall or, in their sole discretion instruct the Managers on a case-by-case basis and in consultation with the Owners to, handle insurance, average and salvage claims in connection with the Vessel. Any costs reasonably incurred by the Managers in handling claims in accordance with this Clause shall be paid by or for the account of the Owners. Until notified to the contrary, the Managers shall process all insurance claims relating to the Crew, in consultation with Owners. |
3.6. | Sale or Purchase of the Vessel |
The Managers shall, if requested, provide Owners with technical assistance in connection with any sale of the Vessel. Any costs or out-of-pocket expenses incurred by the Managers in providing such technical assistance shall be paid by or for the account of the Owners. The Owners will, however, be solely responsible for agreeing the terms of any agreement regulating any sale.
3.7. | General Administration |
3.7.1. | The Owners may, in their sole discretion and upon such terms and conditions as the Owners shall specify, instruct the Managers on a case-by-case basis to handle and/or settle all claims relating to the Vessel including but without limitation any claims involving the Charterers. |
3.7.2. | The Managers shall keep the Owners informed regarding any incident of which the Managers become aware which gives or may give rise to claims or disputes involving the Charterers or other third parties. |
3.7.3. | The Owners shall, or in their sole discretion instruct the Managers on a case-by-case basis to, bring or defend actions, suits or proceedings in connection with matters entrusted to the Managers pursuant to this Agreement. |
3.7.4. | Where the Managers are retained to handle and/or settle claims relating to the Vessel pursuant to Clause 3.7.1, the Managers shall be entitled to obtain legal or technical or other outside expert advice in relation to the handling and settlement of such claims and disputes. |
3.7.5. | The Owners shall arrange for the provision of any necessary guarantee bond or other security in connection with any such claims. |
3.7.6. | Any external costs reasonably incurred by the Managers in carrying out their |
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obligations in accordance with this Clause 3.7 shall be paid by or for the account of the Owners provided that the Owners have instructed the Managers in accordance with Clause 3.7.1.
3.8. | Quality Assurance |
3.8.1. | The Managers shall have and maintain a quality assurance/quality management system (the “Quality Assurance & Quality Management System” ). This system shall include on board and on shore operation/ management and shall at the time of delivery, or as reasonably soon thereafter, meet the requirements of ISO-9001-2008 and ISO-14001-2004 or any subsequent addition or substitution approved by the Owners. The Quality Assurance & Quality Management System shall be documented and available to the Owners for approval within three (3) months of execution of this Agreement. The Managers shall supply documentation to the Owners on request confirming the continued maintenance and operation of the Quality Assurance & Quality Management System in good standing throughout the period of this Agreement. |
3.9. | [Reserved] |
4. | MANAGERS’ OBLIGATIONS |
4.1. | The Managers undertake to use their best endeavours to provide the agreed Management Services as agents for and on behalf of the Owners in a timely and efficient manner in accordance with first class international LNG ship management practice and the Operational and Maintenance Protocol set forth on Annex “D” and to protect and promote the interests of the Owners in all matters relating to the provision of the Management Services hereunder provided, however, that the Managers in the performance of their management responsibilities under this Agreement shall be entitled to have regard to their overall responsibility in relation to the Managed Fleet, and in particular, but without prejudice to the generality of the foregoing, the Managers shall be entitled to allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Managers in their absolute discretion consider to be fair and reasonable. |
4.2. | The Managers shall procure that the requirements of the law of the flag of the Vessel are satisfied and the Managers shall in particular be deemed to be the “Company” as defined by the ISM and ISPS Codes, thereby assuming the responsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by these Codes when applicable. The Managers shall comply at all times with the requirements of the ISM, ISPS, and MTSA Codes, and the Managers shall immediately inform Owners if there is any threatened or actual withdrawal of Managers document of compliance or the Vessel’s safety management certificate or ISS (Security Certificate). |
4.3. | In addition to the specific obligations to keep the Owners informed hereunder, the |
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Managers shall keep the Owners informed of all relevant information regarding the Vessel and the performance of the Management Services which the Owners may, acting reasonably, specify from time to time.
4.4. | When the Managers become aware of an Emergency Situation, they shall immediately contact the Owners and keep the Owners informed in respect of such Emergency Situation. |
4.5. | If, in an Emergency Situation, the Managers (or the Master) are required pursuant to this Agreement to solicit an approval from the Owners, but in such circumstances it is not practical to wait for such approval, then notwithstanding any other term in this Agreement, the Managers (or the Master) may take whatever action they may deem necessary to deal with such Emergency Situation. |
5. | OWNERS’ OBLIGATIONS |
5.1. | The Owners shall pay all sums due to the Managers punctually in accordance with the terms of this Agreement. |
5.2. | The Owners shall provide prompt responses to any requests made by the Managers pursuant to this Agreement. |
5.3. | The Owners shall (subject to any confidentiality restrictions) provide the Managers with any relevant information relating to the Charters or Charterers and shall notify the Managers upon a change of Charterers or upon any new Charter in respect of the Vessel. |
5.4. | The Owners shall use reasonable endeavours (and subject to any confidentiality restrictions) to ensure that the Charterers shall keep the Managers informed of the relevant terms of any gas supply contract, charter party, contract of affreightment, contract of insurance and any other document relating to the Vessel and its cargo that the Managers may reasonably require in order to perform their obligations hereunder. |
6. | INSURANCE POLICIES |
6.1. | The Owners shall procure throughout the period of this Agreement that: |
(i) | at the Owners’ expense, the Vessel is insured for usual hull and machinery marine risks (including crew negligence) and war risks in accordance with the first class practice of prudent owners of vessels of a similar type to the Vessel; |
(ii) | at the Owners’ expense, the Vessel is insured against Protection and Indemnity risks (including pollution risks) based upon the Standard Rules of a member of the International Group of P&I Clubs and have arranged for the Managers to be included as named co-assured, and provide the Managers with Certificates of Entry to evidence that such insurances have |
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been effected and confirm renewal within fifteen (15) Working Days of the same;
(iii) | where the Vessel is directed to call at any port within the United States of America and at the Owners’ expense, the Vessel carries a Certificate of Financial Responsibility as required by the United States Offshore Pollution Act 1990; |
(iv) | the Vessel is insured against such other risks (including Freight, Demurrage and Defense) that are appropriate to the Vessel’s trade; |
(v) | the Owners’ Insurances name the Owners and the Managers as co-assureds, with full cover, with the Owners obtaining cover in respect of each of the insurances specified in Clause 6.1 on terms whereby the Owners are liable in respect of premiums or calls arising in connection with the Owners’ Insurances; and |
(vi) | written evidence is provided, to the reasonable satisfaction of the Managers, of compliance by the Owners with their obligations under Clause 6 within a reasonable time of the commencement of the Agreement, and of each renewal date and, if specifically requested, of each payment date of the Owners’ Insurances. |
6.2. | Insofar as it affects the superintendent and other shore staff employed by the Managers in connection with this Agreement, the Managers shall procure and maintain at their own expense appropriate insurance cover with first class insurers in respect of death or injury to such superintendents or shore staff, and such insurance shall comply with all applicable law. |
6.3. | Managers shall name Owners as co-assureds on this insurance cover, and Managers agree to waive all subrogation rights against Owners that might arise under this entire Clause 6. |
7. | MANAGEMENT FEE |
7.1. | Subject to any adjustment in accordance with the provisions of Clause 7.2 the Owners shall pay to the Managers for the provision of Management Services, a monthly management fee of Fourty-Six Thousand Dollars (US$46,000) (the “Management Fee” ) which shall be paid each calendar month in advance by the first Working Day of each applicable month provided that where a payment is due in respect of any part of a month that payment shall be paid on a pro-rata basis, such sums to be paid into the Managers’ Account. All invoices for the Management Fee shall be submitted by the Managers to the Owners in advance on a monthly basis. |
7.2. | If, during any calendar month, the Vessel is in: |
(i) | “deep” lay-up (that is with sea chests sealed off and all system drained |
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down) the Management Fee shall be Three Thousand Five Hundred Dollars (US$3,500) per month and pro rata in respect of any part month; or
(ii) | a partially manned stand-by condition, during a period of lay-up (other than deep lay-up) or during reactivation periods or during any period where the Managers are preparing to take over management of the Vessel from a third party the Management Fee shall be Ten Thousand Dollars (US$10,000) per month and pro rata in respect of any part month. |
7.3. | The Management Fee is exclusive of value added tax and any other existing sales or services tax that may be applicable. The Managers warrant that at the Effective Date, no such taxes are payable in respect of the Management Fee under Greek Law. |
The Management Fee payable to the Managers will be adjusted annually on the first Review Date after the Effective Date and on each Review Date thereafter. The adjustment will be agreed between the Parties in good faith on the basis of general inflation and proof of increases in actual costs incurred by the Managers.
7.4. | In addition to the Management Fee, if the Managers’ superintendent or other staff are reasonably required to spend more than twenty-five (25) days in aggregate visiting the Vessel in any calendar year (or pro-rata for part of a calendar year), the cost of visits in excess of twenty-five (25) days shall be paid by the Owners, into the Managers’ Account, at a rate of One Thousand Dollars (US$1,000.00) per day (or pro rata in respect of any part day on board the Vessel). Notwithstanding the foregoing, all reasonable travelling expenses in connection with reasonably required visits to the Vessel by Managers’ superintendent or other staff (excluding visits in connection with drydocking) shall be part of the Management Fee, irrespective of the duration of such visits. |
7.5. | In the event of this Agreement being terminated by the Owners or the Managers in accordance with the provisions of Clause 17.3 or 17.4, the Management Fee payable to the Managers according to the provisions of Clauses 7.1 and 7.2, shall continue to be payable for a further period of three calendar months as from the termination date. In addition, provided that the Managers provide Crew for the Vessel in accordance with Clause 3.1: |
(i) | the Owners shall continue to pay Crew Support Costs during the said further period of three calendar months; and |
(ii) | the Owners shall pay any reasonable Severance Costs which may materialise provided the Managers have used reasonable endeavours to mitigate such obligations to the Crew. |
7.6. | Unless otherwise agreed in writing all discounts and commissions obtained by the Managers in the course of the management of the Vessel shall be credited to the Owners. |
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7.7. | The Owners shall, in respect of each year of this Agreement, on or around the Review Date, decide whether or not to pay an Incentive Bonus to the Managers for remittance to the Crew of an amount and in the manner described in Annex “H” attached hereto. |
Any Incentive Bonus that the Owners decide to pay shall be paid into the Managers’ Account with fifteen (15) Working Days of the Review Date and the Managers shall remit any such bonus to the Crew. In addition the Owners shall within fifteen (15) Working Days of the Review Date provide a written explanation to the Managers of their decision which sets out in reasonable detail the rationale for making such a decision.
8. | VESSEL EXPENSES |
8.1. | Upon receipt of a request for funds for the Vessel pursuant to Clause 3.3.7 (iii) the Owners shall pay such funds into the Vessel Account, provided that such request is made in respect of items and amounts accounted for in the Annual Budget or made in respect of items or amounts for which the Managers do not require the approval of the Owners pursuant to Clause 3.3.6. |
8.2. | In the event that the Managers request funds from the Owners pursuant to Clause 3.3.7(iii), but the Owners are not obliged to pay such funds pursuant to Clause 8.1, then the Owners may refuse to provide such funds provided that, in such circumstances, the Managers shall not be liable for any losses or damages incurred by the Owners as a result of such refusal and in any event, the Owners shall not unreasonably refuse to pay or delay the payment of such sums. |
8.3. | All sums payable by the Owners in respect of requests made by the Managers pursuant to Clauses 8.1 and 8.2 shall be paid into the Vessel Account by the first Working Day of the month following that month in which such request was made. |
8.4. | The Managers shall open the Vessel Account and communicate the details of the Vessel Account to the Owners prior to the Effective Date. The Vessel Account shall be an account that only contains monies payable into such Vessel Account pursuant to this Agreement. All monies paid into the Vessel Account (including interest, if payable) shall be held on trust for and to the credit of the Owners and the Managers may only utilise funds in the Vessel Account for the proper performance of the Management Services hereunder. The Managers shall provide full details of all transactions in relation to the Vessel Account and shall procure that monthly Vessel Account bank statements are provided to the Owners for each month of this Agreement. |
8.5. | Notwithstanding anything contained in this Agreement, the Managers shall in no circumstances be required to use or commit their own funds to finance the provision of the Management Services. |
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9. | MANAGERS’ RIGHT TO SUB-CONTRACT |
9.1. | The Managers shall have the right to sub-contract any of their obligations in this Agreement, subject to Clause 9.2 below. |
9.2. | The Managers shall obtain the prior written consent of the Owners if they wish to sub-contract any of their obligations under this Agreement for amounts exceeding Fifty Thousand United States Dollars over and beyond the approved Annual Budget. |
9.3. | Notwithstanding any sub-contract the Managers shall remain fully liable for the due performance of their obligations under this Agreement, the Managers shall procure that each sub-contractor engaged pursuant to this Clause 9 shall comply with the requirements of Clause 3.4. |
10. | RESPONSIBILITIES |
10.1. | Force Majeure |
10.1.1. | Neither the Owners, nor the Managers shall be liable for any loss or damage or total or partial failure to perform this Agreement (other than a failure to perform an obligation to pay money) caused wholly or partly by any circumstances or things beyond the reasonable control of the Owners or the Managers, as the case may be, including (without limiting the generality of the foregoing) acts of God, fires, floods, epidemics, quarantine restrictions, wars, terrorism, insurrections, riots, violent demonstrations, criminal offences, acts and omissions of civil or military authority or of usurped power, requisition or hire by any governmental or other competent authority, or embargoes. |
10.1.2. | The party invoking force majeure will advise the other party of the force majeure event at the earliest opportunity and also advise same party of the likely duration of such force majeure situation. |
10.2. | Liability to Owners |
The Managers shall be under no liability to the Owners for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect, (including but not limited to loss of profit arising out of or in connection with detention of or delay to the Vessel) and howsoever arising in the course of performance of the Management Services, unless the same is proved to have resulted from the breach of this Agreement, fraud, gross negligence, or wilful misconduct of the Managers or their employees, or agents or sub-contractors employed by them in connection with the Vessel, in which case (save where loss, damage, delay or expense has resulted from the Managers’ personal act or omission committed with the intent to cause same or recklessly and with knowledge that such loss, damage, delay or expense would probably result) the Managers’ liability for each incident or series of incidents giving rise to a claim or claims shall not exceed a total of twelve (12) times the monthly Management Fee of Forty-Six Thousand Dollars (US$46,000) as adjusted annually pursuant to Clause 7.3 above.
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Notwithstanding anything herein contained in the contrary, the Managers shall not be liable for any of the actions of the Crew, even if such actions are negligent or wilful, except only to the extent that they are shown to have resulted from a failure by the Managers to discharge their obligations under Clauses 3.1 or 3.4, in which case their liability shall be limited in accordance with the terms of this Clause 10.2.
10.3. | Indemnity |
Except to the extent and solely for the amount that the Managers would be liable under Clause 10.2, the Owners hereby undertake to keep the Managers and their employees, agents and sub-contractors indemnified and to hold them harmless against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of the Agreement, and against and in respect of all costs, losses, damages and expenses (including legal costs and expenses on a full indemnity basis) which the Managers may suffer or incur (either directly or indirectly) in the course of the performance of this Agreement.
10.4. | “Himalaya” |
It is hereby expressly agreed that no employee or agent of the Managers (including sub-contractors from time to time employed by the Managers) shall in any circumstances whatsoever be under any liability whatsoever to the Owners for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Clause 10, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Managers or to which the Managers are entitled hereunder shall also be available and shall extend to protect every such employee or agent of the Managers acting as aforesaid and for the purpose of all the foregoing provisions of this Clause 10 the Managers are or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to this Agreement.
11. | DOCUMENTATION |
11.1. | The Managers shall also maintain and cause their agents to maintain and retain in accordance with generally accepted accounting practices, applicable tax requirements and good international shipping practices, all books, accounts and records pertaining to this Agreement, and all records, documents and other materials related to the Managers’ implementation of and compliance with the Quality Assurance & Quality Control System, including vouchers, invoices, |
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receipts, correspondence, copies of original documents and such other documentation as is necessary in order to verify the compensation payable hereunder.
11.2. | The Managers shall make available, upon Owners’ request, all documentation and records relating to the performance of the Management Services, the SMS and/or the Crew which the Owners require in order to demonstrate compliance with the ISM Code, ISPS Code, and STCW 95, or to defend or prosecute a claim against a third party or otherwise. |
11.3. | All Vessel Data is and shall remain the property of the Owners and shall be made available to the Owners by the Managers on the Owners’ request. Upon termination of this Agreement for any reason, the Managers shall promptly provide the Owners with all the Vessel Data, whether onboard the Vessel or otherwise. |
11.4. | The Managers shall retain and properly store all Vessel Data in accordance with first class LNG ship management practice. If, in the Managers’ opinion, certain Vessel Data should be destroyed, then the Managers shall first offer to return that Vessel Data (at the Owners’ expense) to the Owners, and in the event that the Owners decline such offer, the Managers may destroy such Vessel Data. |
12. | DEPLOYMENT OF THE VESSEL |
12.1. | The Managers shall ensure that the Crew of the Vessel shall comply with any Permanent Instructions. |
12.2. | The Owners may change the terms of the Permanent Instructions, or upon the execution of a new Charter replace the existing Permanent Instructions with new Permanent Instructions with the consent of the Managers which shall not be unreasonably withheld or delayed. |
12.3. | In the event that the Managers or the Crew receive instructions from the Charterers, that in the opinion of the Managers, conflict with instructions provided by the Owners or which go beyond the scope of authority of the Charterers (to the extent such scope of authority has been disclosed by the Owners to the Managers), the Managers shall use best endeavours to immediately notify the Owners and the Charterers of the same. In such circumstances, subject to Clause 3.1.2(viii), the Owners’ instructions shall take precedence over the Charterers’ instructions. |
12.4. | Except for the purposes of saving life, the Vessel shall not, unless expressly authorised by the Owners, undertake attempts of salvage. |
12.5. | If: |
(i) | the Vessel undertakes attempts at salvage pursuant to Clause 12.4, or |
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(ii) | the Vessel requests that a third party attempts salvage of the Vessel, then without prejudice to the Master of the Vessel’s overriding right to take whatever action he may deem necessary to preserve life or prevent the loss of the Vessel, all salvage shall be under the terms of the current “Lloyds Open Form No Cure — No Pay” agreement. |
12.6. | Any proceeds arising from salvage of third party property shall be for the benefit of the Owners. |
12.7. | Notwithstanding any other provision of this Agreement, the Managers shall not (and shall procure that the Crew shall not), without the written consent of the Owners, sign any bill of lading on behalf of the Owners. |
13. | AUDITING |
13.1. | The Managers shall prepare the Annual Budget and accounts (as referred to in Clause 3.3.1 above) and shall make the same available for inspection and auditing by the Owners at such times as may be mutually agreed. |
13.2. | The Owners shall have the right to audit the Managers’ records and documentation as set out in Clause 11 above for the purpose of verifying their correctness and completeness at all times on reasonable notice to the Managers. Where staff or auditors of the Owners visit the premises of the Managers for the purpose of carrying out an audit, the Managers shall provide office space and facilities to such staff or auditors at no extra cost to the Owners. |
14. | INSPECTION OF VESSEL |
14.1. | The Owners shall have the right at any time after giving reasonable notice to the Managers to inspect the Vessel for any reason they consider necessary. |
15. | COMPLIANCE WITH LAWS AND REGULATIONS ETC. |
15.1. | The Managers will not do or permit to be done anything which might cause any breach or infringement or the laws and regulations of the Vessel’s flag, the classification society or of the Primary Terminals and other places where she trades. |
16. | DURATION OF THE AGREEMENT |
16.1. | This Agreement is entered into on the date of signing and shall continue until terminated in accordance with Clause 17. |
17. | TERMINATION |
17.1. | If the Managers: |
(i) | fail to meet any material obligation under this Agreement; or |
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(ii) | fail to meet any obligation under this Agreement that has a material adverse effect upon the Owners or the Vessel; |
then the Owners may give notice to the Managers of the default, requiring them to remedy it (if such default is capable of being remedied) as soon as practically possible. In the event that the default is not capable of being remedied or the Managers fail to remedy the default within a reasonable time to the satisfaction of the Owners, the Owners shall be entitled to terminate this Agreement by giving the Managers ninety (90) days’ written notice.
17.2. | The Owners may also terminate this Agreement by giving the Managers ninety (90) days’ written notice in the event that the Managers, in the reasonable opinion of the Owners, fail to manage the Vessel in accordance with first class LNG ship management practice and such failure has not been remedied within a reasonable time after written notice of such failure. |
17.3. | The Managers shall be entitled to terminate the Agreement by notice in writing if: |
(i) | any moneys payable by the Owners to the Managers have not been received into the Managers’ Account within thirty (30) days (excluding Saturdays, Sundays and public holidays) of payment having been requested in writing by the Managers; or |
(ii) | this Agreement or any of the Owners’ rights and/or obligations are assigned to any person or entity without the Managers’ prior written agreement or approval. |
17.4. | This Agreement shall be deemed to be terminated: |
(i) | in the case of the sale of the Vessel (other than a sale or transfer to an Affiliate of the Owners); |
(ii) | if the Vessel becomes a total loss or is declared as a constructive or compromised or arranged total loss or is requisitioned for hire; or |
(iii) | in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of either party (otherwise than of the purpose of a solvent reconstruction or amalgamation) or if a receiver or similar officer is appointed of the whole or a material part of its assets or if it suspends payment, ceases to carry on business or makes any special arrangement or composition with its creditors. |
17.5. | If the Owners elect to provide Officers and, for any reason within their control, the Owners fail to: |
(i) | procure Officers and Ratings supplied by them or on their behalf, complying with the requirements of STCW 95; or |
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(ii) | instruct such officers and ratings to obey all reasonable orders of the Managers’ SMS; |
then the Managers may give notice to the Owners of the default, requiring them to remedy it (if such default is capable of being remedied) as soon as practicably possible. In the event that the default is not capable of being remedied or if the Owners fail to remedy the default within a reasonable time to the satisfaction of the Managers, the Managers shall be entitled to terminate this agreement.
17.6. | [Reserved] |
17.7. | Notwithstanding Clauses 17.1 and 17.2, the Owners shall have the right to terminate this Agreement at any time and for any reason by giving the other party not less than three (3) months’ written notice of their intention to terminate this Agreement. |
17.8. | If the Owners proceed with the employment of, or continue to employ the Vessel in blockade running or in an unlawful trade or on a voyage, which in the reasonable opinion of the Managers, is unduly hazardous, the Managers may give notice to the Owners requiring them to cease to employ the Vessel in such manner as soon as possible. If the Owners fail to comply with such notice within a reasonable time to the satisfaction of the Managers, the Managers shall be entitled to terminate this Agreement with immediate effect by notice in writing. |
17.9. | The termination of this Agreement shall be without prejudice to all rights accrued due between the parties prior to the date of termination. |
18. | MISCELLANEOUS |
18.1. | The confidentiality obligations of the parties are set out in a separate Confidentiality Agreement that is attached for reference in Annex “G”. |
18.2. | A person who is not a party to this Agreement may not enforce, or otherwise have the benefit of, any provision of this Agreement under the Contracts (Rights of Third Parties) Act 1999, but this provision does not affect any right or remedy of a third party which exists or is available apart from that Act. |
18.3. | At the expiry or earlier termination of any existing ship management agreement(s) in relation to the Vessel, Managers shall co-operate in the transfer arrangements to be notified to the Managers by the Owners and shall facilitate the smooth transition of all operations and duties to Managers with the minimum of disruption. |
18.4. | Either party may at any time assign or transfer to an Affiliate its respective rights and obligations under this Agreement provided that they first obtain the written consent of the other party. Such consent shall not be unreasonably withheld, conditioned or delayed and the parties agree to promptly execute any reasonable novation or transfer documentation to give effect to such an assignment or |
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transfer.
19. | LAW AND ARBITRATION |
19.1. | This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause. |
19.2. | The arbitration shall be construed and conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. The language used for such arbitration shall be English and the arbitration shall be conducted in London. |
19.3. | The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. |
19.4. | Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator. |
19.5. | In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. The language used for such arbitration shall be English and the arbitration shall be conducted in London. |
20. | NOTICES AND BANK ACCOUNTS |
20.1. | Any notice to be given by either party to the other party pursuant to this Agreement shall be in writing and shall be effective upon delivery pursuant to Clause 20.2 and shall be sent by fax, registered mail or by personal service to the following addresses: |
for the Owners:
Gas-sixteen Ltd.
Clarendon House
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2 Church Street
Hamilton HM11
Bermuda
Fax. No.: +377 97 97 51 24
Attn: Graham Westgarth
for the Managers:
GasLog LNG Services Ltd.
Piraeus Branch Office
69, Akti Miaouli,
185 37 Piraeus, Greece
Fax No: +30 210 4591247
Attention: Theodoros Katemidis, General Manager
20.2. | A notice is deemed to have been received: |
(i) | if delivered personally, at the time of delivery; |
(ii) | in the case of fax, at the time of transmission; |
(iii) | in the case of delivery of courier, on the date of receipt by the courier of written acknowledgement of such delivery; |
(iv) | in the case of pre-paid first class post, recorded delivery or registered post, on receipt; and |
(v) | if deemed receipt under the previous paragraphs of this sub-clause is not within business hours (meaning 9:00 am to 5:30 pm Monday to Friday (or Sunday to Thursday if the place of receipt is in Egypt) on a day that is not a public holiday in the place of receipt), when business next starts in the place of receipt. |
20.3. | For the purposes of this Agreement, the Managers’ Account currently has the following details: |
[Account details to be provided supplementally]
IN WITNESS whereof the parties have duly signed this Agreement the day and year first above written.
SIGNED for and on behalf
of GAS-sixteen Ltd.
by
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in the presence of
SIGNED for and on behalf
of
GASLOG LNG SERVICES LTD.
by
in the presence of
30 |
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ANNEX “A”
DETAILS OF VESSEL
[OWNERS TO PROVIDE ON OR BEFORE EFFECTIVE DATE]
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ANNEX “B”
DETAILS OF CREW / OFFICERS
RATINGS
[MANAGERS TO PROVIDE AT LEAST 30 DAYS
PRIOR TO EFFECTIVE
DATE]
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ANNEX “C”
INITIAL BUDGET
To be provided in accordance with Clause 3.3.2 at least [one (1)] month prior to the Effective Date and once approved by Owners to be inserted
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ANNEX “D”
OPERATIONAL AND MAINTENANCE PROTOCOL
The provisions of this Operational and Maintenance Protocol (“Protocol”) are integral with the provisions of the Agreement. The Owners agree to provide the manager with the necessary financial resources to comply with the requirements of this Operational and Maintenance Protocol.
The Vessel shall always be operated and maintained in accordance with the first class international standards for LNG vessels. These standards shall include, without limitation, that:
· | The Vessel is always manned, operated and maintained in a safe and prudent manner to minimise the risk of accidents; |
· | the maintenance and operation of the Vessel shall be thorough and proactive and not based merely on the minimum standards required by the Vessel’s flag state and classification society but to the highest standards applicable in the shipping and LNG industry; |
· | the Managers agree to maintain membership in the Society of International Gas Tankers and Terminal Operators Association (SIGTTO) and to abide by all guidelines, recommendations, and training schedules that are applicable to the safe and reliable operation of LNG vessels made by this industry association; |
· | the Managers agree to observe and abide by all guidelines, recommendations, and training standards that are promulgated by the Oil Companies’ International Marine Forum (OCIMF) and are applicable to the safe and reliable operation of LNG vessels made by this industry association; |
· | the Vessel shall be maintained and refurbished and where necessary restored to ensure the safe, reliable, and efficient transportation of LNG for a minimum 40 year trading life. |
Other than for Manager-scheduled maintenance periods of seventy two (72) hours every six (6) months (days which shall be agreed by the Owners), the Owners expect the Vessel to be available for the safe and efficient transportation of LNG for 100% of the year. The Manager shall put in place a robust and comprehensive vessel management system designed to meet this availability objective.
The Managers shall take the necessary steps to promote a culture of safety awareness, compliance with established procedures, and non-conformance reporting to facilitate continuous improvement throughout the organization including all crewmembers onboard the Vessel.
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CREWING
The Managers agree that having a well-trained and qualified vessel crew and shoreside support staff, well versed in LNG vessel operations and management, is the foundation of a safe, reliable, and efficient LNG vessel operation.
· | The Managers agree to adhere to the Training Matrix, and also agree that if the Training Matrix conflicts with less stringent standards contained in this Agreement, the Training Matrix will control. |
· | Managers shall arrange for all Deck Officers, including the Master, to attend Bridge Team Management Training at one of the recognized training centers. This training shall be repeated every five (5) calendar years. |
· | Managers are required to ensure that all Masters have attended a ship handling simulator-training course applicable for the type of vessel in use for LNG transportation. The training shall be repeated at a minimum of every five (5) calendar years. |
· | In addition to the requirements of the Management Agreement, all senior operational positions (Master, Chief Engineer, Chief Mate, and Second Engineers, Cargo Engineer) on board must have a minimum of three (3) years of sea time (time onboard) experience onboard LNG Carriers in any position in the position directly below the senior operational position they will assume. All senior operational positions must receive a minimum of two (2) weeks vessel familiarization and specific operational training, with a training scope appropriate to their position, prior to embarking onboard the Vessel for the first time. Any deviation from this section’s experience requirement must be approved by Owners. |
· | All officers and unlicensed crew on board require, as a minimum, specific training on the hazards and unique operational aspects associated with LNG carriers that meet the requirements of Section A-V/1 paragraphs 1-7 of the STCW 1995 convention. All licensed officers that form part of the cargo transfer watch or carry out operational or maintenance duties and responsibilities directly related to the vessel’s cargo system shall also receive specific training meeting the requirements of Section A-V/1 paragraphs 22-34 of the STCW 1995 convention. The Managers are to document what special LNG ship operations training is provided to licensed and unlicensed crewmembers prior to their employment on the LNG carrier. |
· | All crew are required to be properly qualified and certificated in accordance with the IMO Standards of Training, Certification and Watch keeping for Seafarers (STCW), 1995, as amended, and in compliance with the Training Matrix. |
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· | Managers shall provide to Owners copies of all newly appointed senior officers’ certification and details of experience prior to their embarkation onboard the Vessel. Owners have the right to review and verify the qualifications of all LNG vessel senior officers prior to their embarkation onboard the Vessel. Owners shall be given the opportunity to approve the certificates and experience of all senior officers a reasonable period prior to their initial embarkation onboard the Vessel), and shall have the discretion to reject any such officer if they do not meet the qualification and training requirements agreed between the Managers and Owners. Owners’ approval shall not be unreasonably withheld or delayed. |
· | Procedures shall be put in place in the ship’s Safety Management System clearly documenting who is responsible for the ship’s LNG Cargo System including cargo transfer operations. The responsibilities and interface between the Chief Mate and Cargo Engineer shall be clearly defined. The Managers shall identify and document the qualifications of a Person In Charge (PIC) of the Cargo Transfer Watch that exceed the requirements of Regulation V/1 of the STCW 95 requirements. These qualifications shall be made available to Owners upon request. A training program shall be established and documented for junior officers to allow them to meet the qualifications of the PIC of the Cargo Transfer Watch during periods of steady state operation to allow the Chief Officer and Cargo Engineer to take rest periods if required to meet work hour restrictions. This program shall include some mechanism for competency assessment either on a cargo simulator or under supervised conditions during an actual cargo transfer onboard the Vessel. |
· | The Managers shall establish, as a minimum, the following policies and should ensure that all officers and crew are fully conversant and comply with these policies: |
· | Safety Policy |
· | Health Policy |
· | Environmental Policy |
· | Quality of Service Policy |
· | Operations Policy |
· | Navigation Policy |
· | Maintenance Policy |
· | Drug and Alcohol Policy |
· | The Managers shall ensure that all seafarers undergo a medical examination, which shall include a drug and alcohol test annually. On completion of a satisfactory medical examination a certificate shall be issued which shall remain valid for the period that the seafarer is onboard the Vessel. An OCIMF-compliant drug and alcohol policy, which includes random drug testing, shall be implemented, and tests conducted directly onboard the Vessel or by an outside |
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contractor to deter the use of illegal drugs and controlled substances by crewmembers while onboard the Vessel.
· | The organization employed by the Managers to provide manning to the Vessel shall be engaged through a contract, which shall stipulate the Manager’s minimum competency and experience requirements. |
· | At intervals not exceeding two years the Managers shall ensure that the organization providing the manning of the Vessel is audited by a qualified auditor for compliance with the Managers’ minimum requirements. Copies of the audit report, non-compliances and corrective actions shall be provided to Owners, upon request. |
· | Managers shall implement a system that interrogates and confirms officer’s qualifications and fitness for duty prior to joining the Vessel. |
· | The Managers shall keep a minimum number of officers employed onboard the Vessel during dry-dock overhaul periods for inspection and quality assurance purposes. As a minimum, these people shall include all Licensed Engineering Officers , the Chief Officer and the Captain. |
MAINTENANCE
· | A Master Maintenance Plan shall be developed for the Vessel and approved by Owners’, provided that Owners’ approval does not conflict with the Vessel’s Class or Flag State requirements. The objective of this plan shall be to maintain the safe, reliable, and efficient operation of the Vessel over its projected 40 year life. This plan shall cover the following areas associated with efficient operation and Vessel maintenance and repair: |
1. | Dry-docking interval |
2. | Procedures associated with pre-qualification of repair shipyards |
3. | Hull Roughness measurement and maintenance to an acceptable level |
4. | Anticipated schedule of maintenance, major overhaul, and refurbishment of all vessel critical equipment |
5. | A description of the Preventive Maintenance System covering scheduled maintenance of all vessel equipment |
6. | Inventory Control Procedures and stock of critical spare parts both onboard and ashore |
7. | Procedures associated with pre-qualification of equipment and spare parts vendors |
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8. | Propulsion plant efficiency performance monitoring procedures and corrective action steps |
9. | Condition Monitoring Systems and Condition Monitoring based maintenance |
10. | Means of collecting the necessary date in a structured format to monitor and benchmark equipment reliability performance |
11. | Performing Root Cause Analysis of equipment failures and equipment/systems reliability improvement |
12. | Procedures associated with Equipment Obsolescence |
· | The Preventive Maintenance system shall incorporate the equipment suppliers or makers’ instructions and maintenance recommendations. |
· | All maintenance work carried out on vessel equipment, other than normal routine operational work, shall be carried out using a permit to work system. |
· | Where equipment isolation is required for operational and/or personnel safety or where hot work is involved all work must be carried out under a written procedure under the guidelines of the Safety Management System’s Lockout/Tag out/Isolation or Hot work permit procedures. |
The following is the proposed maintenance cycle that shall be followed with the Vessel. It is based on a 60 month period coinciding with the Vessel’s 5 year special survey requirements. This cycle may be adjusted through mutual agreement between Manager and Owners. The Managers shall notify Owners in writing at least 30 days in advance of the proposed dates for each 2 day Scheduled Maintenance Window and at least 6 months in advance of the proposed dates for dry-docking the Vessel. The Owners are primarily responsible for coordinating the communication and discussion of the scheduling of maintenance cycle events with the vessel’s charterer.
Month | Maintenance Event | |
6 | 48 Hours Scheduled Maintenance Window | |
12 | 48 Hours Scheduled Maintenance Window | |
18 | 48 Hours Scheduled Maintenance Window | |
24 | 48 Hours Scheduled Maintenance Window | |
30 | Minor Drydocking - Intermediate Survey | |
36 | 48 Hours Scheduled Maintenance Window | |
42 | 48 Hours Scheduled Maintenance Window | |
48 | 48 Hours Scheduled Maintenance Window | |
54 | 48 Hours Scheduled Maintenance Window | |
60 | Major Drydocking - 5 Year Special Survey |
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OPERATIONS
· | The Managers shall establish detailed procedures for all critical operations performed onboard the Vessel as part of the Vessel’s Safety Management System. These procedures shall be developed and tailored specifically to the Vessel. Steps shall be taken to familiarize Vessel personnel with these procedures and a robust internal audit program shall be carried out to verify crew compliance with these established procedures. Checklists should be used where appropriate to assist personnel in following procedures and to provide documented evidence of adherence to procedures. Copies of all work instructions and procedures in force shall be on file in the head office facilities of the Manager. The complete Safety Management System shall be made available in hard or electronic copy to the Owners. |
· | Changes to operating procedures must be reviewed by a senior officer onboard and approved by shore based management before the changes are implemented. |
· | The Vessel and crew at all times shall be capable of operating with no venting of cargo boil-off gases to the atmosphere. Any such venting shall immediately be reported to the Owners with a full explanation as to why the venting operation was required and an estimate of venting duration and quantity vented. It is recognized that under rare extreme conditions the cargo tank pressure may approach the P.V. valve release settings. This condition is to be avoided through proper management of cargo during laden voyages and of the heel and spray cooling during ballast voyages, and if necessary to prevent P/V valves from lifting, the Vessel will, when possible, reduce cargo tank pressure below this setting by intentional venting in a controlled manner. |
· | Whenever the vessel is transiting restricted waters the following operating profile shall normally be adhered to unless specific equipment breakdown prevents this: |
· | The Throttle shall be in Bridge Control |
· | The Steering Gear systems shall be fully tested (including all standby pumps) prior to entry into restricted waters |
· | Boilers shall be operated in the Dual Fuel Mode |
· | Two ship service generators shall be on line for redundancy |
· | The main engine shall be placed in “Standby” and the engine room shall be manned if there is a high probability of the vessel maneuvering |
· | All inhibits on any trip (safety shutdown) and alarm system must be approved by the Master or Chief Engineer before being applied. A written procedure is necessary to document the operational conditions that must exist before any trip or alarm may be inhibited and what additional safety measures must be put in |
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place when trips or alarms are inhibited. A daily log of all inhibited trips and alarms shall be displayed on the bridge and in the engine room.
INSPECTIONS
· | The Managers shall arrange on a bi annual basis for a fully accredited OCIMF SIRE inspection of the ship. A copy of the report issued by the independent accredited inspector is to be made immediately available to Owners. Within one week of the inspection report being issued the Managers are required to provide a programme to the charterer to indicate how and when any of the agreed comments are going to be corrected. |
· | The Managers shall arrange for an OCIMF/SIGTTO compliant self-assessment inspection and audit to be carried out onboard the Vessel on an annual basis. This may be carried out as part of the Managers’ internal audit program. Copies of completed annual assessments are to be kept on board available for inspection by Owners upon request. Where the Managers are unable to obtain copies of the OCIMF/SIGTTO inspection guidelines, Managers shall apply their own internal audit/inspection procedures providing that the Manager’s inspection guidelines are subject to review and approval by Owners. |
· | The Managers shall arrange for Owners’ representative to carry out a detailed assessment and operational audit of the Managers’ head office facilities a minimum of once every two (2) years. The inspection will include but not be limited to Company Profile, Management Review, Document Control, Fleet Management, ISM Safety Management System, Corrective Action, Recruitment and Training, Health, Safety and Environmental Protection, Technical Support, Navigation, Safe Mooring, and Emergency Response. |
· | The Managers shall ensure that a Vessel inspection report in accordance with Owners’ format is completed annually. This inspection report is to be completed by attending manager’s superintendents during a twelve month period, ensuring that all items are addressed during that period. Copies of completed reports are to be submitted to Owners annually. The Managers may utilize their own internal inspection format and checklist if Owners’ can review and approve inspection guidelines prior to their use. |
· | Owners, or their designated representatives, will arrange for qualified auditors to carry out annual audits of the Vessel to confirm that the Vessels safety, quality and environmental protection system is functioning effectively. The Managers are to provide corrective actions to any non-conformities identified during the audits within thirty days of receiving the audit report. Confirmation of implementation is to be carried out at the next audit. Items that would normally be considered non-conformities would include, but not be limited to; crew members not properly qualified or certified, deteriorated physical conditions on the Vessel or equipment malfunctions with no documented schedule for repair, lack of documentation control, insufficient |
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spare parts for normal maintenance, poor accuracy of onboard spare parts inventory, and lack of procedures for work being performed.
· | Owners, or their designated representatives, shall arrange for qualified surveyors to carry out inspections and a condition assessment of the Vessel while undergoing a drydock overhaul as necessary to verify proper planning and adherence to the approved Master Maintenance Plan. |
The Managers will implement contingency planning to be activated in the event of any emergency occurring on or to the Vessel and shall ensure that the contingency plan is exercised annually with the participation of Owners. A copy of the Manager’s contingency plan is to be provided to Owners who shall be included in the Emergency Contact Chart and the nominated recipients for amendments.
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ANNEX “E”
PERMANENT INSTRUCTIONS
The Permanent Instructions shall be provided by the Charterers to the Managers on or prior to the Effective Date and shall be a protocol of communication among Charterers, the Vessel Owners and/or the Managers. The protocol of communication will set out, inter alia, who has authority to issue instructions and provide information to the Vessel and its master and who has authority to receive communications and information from the Vessel.
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ANNEX “F”
FORM OF ACCOUNTING SYSTEM
[MANAGERS TO PROVIDE]
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ANNEX “G”
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (“Agreement”) is made and entered into as of the ____ day of _______ , 2014, by and between GAS-sixteen Ltd., a company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda (the “Owners”), and GasLog LNG Services Ltd., a company incorporated in Bermuda and having a branch office at 69 Akti Miaouli, Piraeus GR 18537, Greece (the “Managers”).
Owners and Managers entered into that certain Ship Management Agreement of even date herewith (the “Management Agreement”). In connection with the Management Agreement, it has been necessary and may continue to be necessary for Owners and Managers to exchange or provide access to certain proprietary and/or confidential information. Unless otherwise defined herein, all capitalized terms shall have the meanings assigned thereto in the Management Agreement.
1. Confidential Information. At all times during the term of the Management Agreement and for two years thereafter, Owners and Managers shall keep confidential and shall not, without the prior written consent of the other party, issue any press release in relation to the transactions evidenced by the Management Agreement or the transactions contemplated thereunder, or disclose to any other person, the terms of the Management Agreement, any information provided to party pursuant to or in connection with the Management Agreement, any information connected with the Vessel (both technical or operational) or any other information identified as confidential or which may be protected by copyright, trademark or intellectual property law, or release copies of any such document which discloses any such information. Any and all such information described herein, together with all notes, analyses, compilations, studies, interpretations or other documents or records prepared by a party receiving such information or its Representatives (defined below), or copies thereof, which contain or otherwise reflect such information made available by are hereinafter referred to as the “Confidential Information.” In addition, Confidential Information shall mean any discussions between the parties concerning the Management Agreement or in connection with the Management Agreement, any and all written, printed or other materials, regardless of form, provided by a party concerning the Management Agreement or in connection with the Management Agreement, whether provided prior to or after the execution of this Agreement, and the substance and content thereof, and all information ascertained through the discussions between employees or representatives of the parties concerning the Management Agreement.
2. Exclusions. The term Confidential Information does not include any information which:
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(a) at the time of disclosure is in the public domain or thereafter becomes generally available other than as a result of a disclosure by the receiving party or its Representatives;
(b) is available to such party or its Representatives on a non-confidential basis from a source other than the disclosing party, provided that such source is not bound by a confidentiality agreement with the disclosing party; or,
(c) has been independently acquired or developed by receiving party or its Representatives without violating any of its obligations under this Agreement or the Management Agreement.
3. Permitted Disclosures. Notwithstanding the provisions of Section 1 above, either party shall be entitled to disclose Confidential Information without the consent of the other:
(a) pursuant to applicable law or order of a court of competent jurisdiction or a regulatory agency with jurisdiction, provided such party agrees prior to any such disclosure to provide the other party with prompt written notice of such requirements;
(b) to its directors, officers, employees, agents, representatives, advisors and consultants (“Representatives”), whose assistance in evaluating the Confidential Information is necessary and who are legally obligated to maintain the Confidential Information in confidence; and
(c) to any charterer or subcharterer of the Vessel.
4. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or reenactment thereof save to the extent necessary to give effect to the provisions of this Clause. Any dispute arising under this Agreement shall be resolved pursuant to the arbitration provisions set forth in Article 19 of the Management Agreement.
5. Term. As to the Confidential Information, the obligations of confidentiality and non-disclosure under this Agreement shall terminate two (2) years after the date on which the Management Agreement is terminated. Upon termination of this Agreement, each party shall return all Confidential Information furnished to it hereunder in written or other tangible form, and copies thereof, and destroy all copies of Confidential Information consisting of notes, analyses, compilations, studies, interpretations or documents or records prepared by it, or its Representatives.
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IN WITNESS whereof the parties have duly signed this Agreement the day and year first above written.
SIGNED for and on behalf
of
GAS-SIXTEEN LTD.
by
in the presence of
SIGNED for and on behalf
of
GASLOG LNG SERVICES LTD.
by
in the presence of
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ANNEX “H”
INCENTIVE BONUS PLAN
The Incentive Bonus shall be based on an annual assessment of the Key Performance Indicators (“KPIs”) listed below, as divided in three sections: HSSE, Vessel Performance, and Financial Performance.
There will be an annual assessment of the KPIs in each section, and a total Incentive Bonus of $72,000 may be awarded. The total Incentive Bonus shall be allocated across the three sections in three equal awards of $24,000 per section. Exceeding the noted maximum acceptable , KPI in any section will mean that the $24,000 section award will not be paid for that year.
Where the Bonus Target is met for every KPI within a section then the full section award will be made for that section.
Where the KPIs in a section fall between the Maximum acceptable and the Bonus Target, then the level of award will be assessed by mutual agreement.
Key Performance Indicators (KPIs)
The KPIs below are agreed to be reviewed on an annual basis. These are the initial KPIs and may be adjusted and changed as agreed mutually on review.
KPI | Maximum acceptable | Bonus |
HSSE
Fatality | 0 | 0 | ||
Total Recordable Cases | 1 | 0 | ||
Near miss reports | To be agreed annually | To be agreed annually | ||
Oil Spills to water | 0 | 0 | ||
Venting cargo vapor to atmosphere - unless approved or emergency | 0 | 0 | ||
Major Incidents (collisions, groundings, flooding, fire explosion etc.) | 0 | 0 | ||
TMSA | To be agreed annually based on no improvement from the previous year | To be agreed annually based on stretched improvement from the previous year |
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Vessel Performance
Off hire | 12 hours (assuming 4 days per annum total maintenance window (2 days every 6 months) or any other instances with permission) | No off hire | ||
Vetting | Total deficiencies per inspection 12 low risk - 1 high risk | 5 low risk | ||
Port State Control | No requirements for rectification prior to departure |
Maximum 2 observations (recorded on Equasis) per vessel inspection |
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Fuel consumption (using conversion ) |
Fuel consumption (as measured during quarterly Kyma Performance Trials) equal to that which is indicated in the Gas form C
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5% or more less than that which is indicated in the Gas Form C | ||
Heel management | Requires two hours cool down alongside |
Fully in compliance with voyage orders (e.g. 1 day heel on arrival and at temperature to load or as instructed by voyage)
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Dry dock control - delivery after repair (discounting yard delays) |
2 days delay from initial planned delivery date
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Delivery on time |
Financial Performance
Compliance with annual budget, against declared expenditure, allowing for exchange rate fluctuations $ to € and approved extra items | 0% above approved budget | Below the approved budget (excluding approved extra items) at an amount to be mutually agreed annually | ||
Dry docking budget | 0% above approved budget | Below the approved budget (excluding approved extra items) at an amount to be mutually agreed at the award of the drydock contract |
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ANNEX “I”
PRIMARY TERMINALS
Load | Country | Status | ||
Gladstone | Australia | * 2 | ||
Withnell Bay | Australia | 1 | ||
Pluto | Australia | 1 | ||
Idku | Egypt | 1 | ||
Damietta | Egypt | 1 | ||
Punta Europa | Equatorial Guinea | 1 | ||
Discharge | Country | Status | ||
Bahia Blanca FSRU | Argentina | 1 | ||
Zeebrugge | Belgium | 1 | ||
Pecem | Brazil | 1 | ||
Guanabara Bay | Brazil | 1 | ||
Canaport | Canada | 1 | ||
Mejillones | Chile | 1 | ||
Quintero | Chile | 1 | ||
Dalian | China | 1 | ||
Fujian | China | 1 | ||
Guangdong | China | 1 | ||
Jiangsu | China | 1 | ||
Shanghai | China | 1 | ||
Zhejiang | China | 1 | ||
Zhuhai | China | *2 | ||
Montoir | France | 1 | ||
Revithoussa | Greece | 1 | ||
Dahej | India | 1 | ||
Hazira | India | 1 | ||
Chita | Japan | 1 | ||
Futtsu | Japan | 1 | ||
Himeji | Japan | 1 | ||
Senboku II | Japan | 1 | ||
Kawagoe | Japan | 1 | ||
Sodeshi | Japan | 1 | ||
Niigata | Japan | 1 | ||
Tobata | Japan | 1 | ||
Hitachi | Japan | *2 | ||
Joetsu Thermal Power | Japan | 1 | ||
INPEX Naoetsu | Japan | lA | ||
Negishi | Japan | 1 | ||
Yanai | Japan | 1 | ||
Sodegaura | Japan | 1 | ||
Ohgishima | Japan | 1 | ||
Oita | Japan | 1 | ||
Sakai | Japan | 1 | ||
Load | Country | Status | ||
Bonny Island (Jetty 1,2) | Nigeria | 1 | ||
Snohvit | Norway | *4 | ||
Point Fortin | Trinidad | 1 | ||
Das Island | UAE | 1 | ||
Lake Charles | USA | 1 | ||
Sabine Pass (Cheniere)* | USA | 1 | ||
Discharge | Country | Status | ||
Incheon | Korea | 1 | ||
Pyeongtaek | Korea | 1 | ||
Tongyeong | Korea | 1 | ||
Gwang Yang | Korea | 1 | ||
Mina Al Ahmadi | Kuwait | 1 | ||
Bintulu | Malaysia | 1 | ||
Altamira | Mexico | 1 | ||
Costa Azul | Mexico | 1 | ||
Sines | Portugal | 1 | ||
Ras Laffan | Qatar | 1 | ||
Singapore | Singapore | 1 | ||
Barcelona | Spain | 1 | ||
Bilbao | Spain | 1 | ||
Cartagena | Spain | 1 | ||
Huelva | Spain | 1 | ||
Sagunto | Spain | 1 | ||
Map Ta Phut | Thailand | 1 | ||
Rotterdam | The Netherlands | 1 | ||
Yung-An | Taiwan | 1 | ||
Taichung | Taiwan | 1 | ||
Aliaga | Turkey | 1 | ||
Marmara Ereglisi | Turkey | *3 | ||
Jebel Ali FSRU | UAE | 1 | ||
Elba Island | USA | 1 | ||
Cameron | USA | 1 | ||
Pascagoula | USA | 1 | ||
Freeport | USA | 1 | ||
Isle of Grain | UK | 1 | ||
Dragon | UK | 1 |
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* 1 A - Primary Terminals ~ Pending
Signifies terminals where some terminal data is not complete, but which will be treated as Primary Terminals so long as, in order for the Vessel to be accepted by the terminal, no changes are required to the principal dimensions of the Vessel, including: length, breadth, draft, displacement, location of cargo manifolds and lay-out of cargo manifolds (pipe size, layout of liquid and vapour lines, manifold dimensions, etc). Owners and Charterers to cooperate to complete any missing terminal data and to achieve Terminal acceptance and any minor changes to the Vessel (gangway landing areas/rails, etc.) will be the responsibility of the Owners.
*2 Terminals Under Construction
Signifies terminals that are under construction at the date of signing the Charter party and are not Primary Terminals (“Terminals Under Construction”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Terminals Under Construction are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Terminal Under Construction. Once Owners are reasonably satisfied that a Terminal Under Construction is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Terminal Under Construction has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Terminal Under Construction to the list of Primary Terminals.
*3 Terminals With Compatibility Issues
Signifies terminals which have identified compatibility issues and are not Primary Terminals. However, Owners agree to allow the Vessel to call at such terminals provided: (i) they are reasonably satisfied that there is sufficient compatibility to allow safe navigation, loading and/or discharge; and (ii) the terminal have confirmed to Owners their acceptance of the Vessel to call, and carry out cargo operations at their terminal.
*4 Terminals Pending Further Data
Signifies terminals in respect of which, at the date hereof, there is insufficient information available in order to allow Owners to assess whether the terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge (“Pending Terminals”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Pending Terminals are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Pending Terminals. Once Owners are reasonably satisfied that an Pending Terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Pending Terminal has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Pending Terminals to the list of Primary Terminals.
Exhibit 10.22
Dated , 2014
GAS-SEVENTEEN LTD.
and
GASLOG LNG SERVICES LTD.
AMENDED AND RESTATED
SHIP MANAGEMENT AGREEMENT
in respect of the Vessel, “METHANE JANE ELIZABETH”
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TABLE OF CONTENTS
CLAUSE NO. | PAGE | |
1. | DEFINITIONS AND INTERPRETATION | 1 |
2. | APPOINTMENT OF MANAGERS | 6 |
3. | MANAGEMENT SERVICES | 6 |
4. | MANAGERS’ OBLIGATIONS | 17 |
5. | OWNERS’ OBLIGATIONS | 18 |
6. | INSURANCE POLICIES | 18 |
7. | MANAGEMENT FEE | 19 |
8. | VESSEL EXPENSES | 21 |
9. | MANAGERS’ RIGHT TO SUB-CONTRACT | 21 |
10. | RESPONSIBILITIES | 22 |
11. | DOCUMENTATION | 23 |
12. | DEPLOYMENT OF THE VESSEL | 24 |
13. | AUDITING | 25 |
14. | INSPECTION OF VESSEL | 25 |
15. | COMPLIANCE WITH LAWS AND REGULATIONS ETC. | 25 |
16. | DURATION OF THE AGREEMENT | 25 |
17. | TERMINATION | 25 |
18. | MISCELLANEOUS | 27 |
19. | LAW AND ARBITRATION | 28 |
20. | NOTICES AND BANK ACCOUNTS | 28 |
ANNEX “A”
DETAILS OF VESSEL
ANNEX “B”
DETAILS OF CREW / OFFICERS RATINGS
ANNEX “C”
INITIAL BUDGET
ANNEX “D”
OPERATIONAL AND MAINTENANCE PROTOCOL
ANNEX “E”
PERMANENT INSTRUCTIONS
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ANNEX “F’
FORM OF ACCOUNTING SYSTEM
ANNEX “G”
CONFIDENTIALITY AGREEMENT
ANNEX “H”
INCENTIVE BONUS PLAN
ANNEX “I”
PRIMARY TERMINALS
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THIS SHIP MANAGEMENT AGREEMENT is made the ___th day of ___, 2014
BETWEEN: | |
(1) | GAS-seventeen Ltd., a company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda (the “Owners”) ; |
(2) | GasLog LNG Services Ltd., a company incorporated in Bermuda and having a branch office at 69 Akti Miaouli, Piraeus GR 18537, Greece (the “Managers”) . |
WHEREAS: | |
(A) | On April 10, 2014, Gas-seventeen Ltd. and GasLog Ltd. entered into that certain Ship Management Agreement. |
(B) | The Owners, as of the Effective Date, are the registered owners of the 145,673.085m 3 Liquefied Natural Gas Carrier “METHANE JANE ELIZABETH” (the “Vessel” ) as more particularly described in Annex “A” hereto and wish to engage the Managers to manage and operate the Vessel; |
(B) | The Managers, being fully experienced, qualified and able vessel managers, wish to manage and operate the Vessel subject to and in accordance with the terms set out in this Agreement. |
IT IS AGREED AS FOLLOWS: | |
1. | DEFINITIONS AND INTERPRETATION |
1.1. | Definitions |
In this Agreement save where the context otherwise requires, the following words and expressions shall have the meanings hereby assigned to them: | |
“Affiliate” means any entity which, directly or indirectly, through one or more intermediaries, Controls or is Controlled by, or is under common Control with that party; | |
“Agreement” means this ship management agreement including the Annexes attached hereto as amended from time to time in accordance with the terms hereof; | |
“Annual Budget” shall have the meaning ascribed to it in Clause 3.3.2 below; | |
“Charter” means any future charter entered into between the Owners and any future charterer of the Vessel notified to the Managers pursuant to Clause 5.3; | |
“Charterers” means any future charterers of the Vessel notified to the Managers pursuant to Clause 5.3; |
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“Communication Expenses” means the costs incurred by the Managers in performing the Management Services and for the account of the Owners in respect of all communications between the shore and the Vessel as detailed in the Annual Budget;
“Control” and “Controlled” mean the holding of power to direct or cause the direction of management, policies and decisions of a company, corporation, partnership or other entity including, without limitation, through control by direct or indirect means of not less than fifty per cent (50%) of the voting rights in such company, corporation, partnership or other entity;
“Crew” means the Officers and Ratings and any other individual who has signed Articles on the Vessel and is employed from time to time by the Managers under Managers’ obligation to provide the Management Services;
“Crew Insurances” means insurances against crew risks which shall include, but not be limited to, death, sickness, repatriation , injury, shipwreck and loss of personal effects;
“Crew Support Costs” means all expenses of a general nature which are not particularly referable to any individual vessel for the time being managed by the Managers and which are incurred by the Managers for the purpose of providing efficient and economic Management Services and, without prejudice to the generality of the foregoing, shall include the cost of crew standby pay, training schemes for officers and ratings, cadet training schemes, sick pay, study pay, recruitment and interviews;
“Dollar” or “US$” means the currency of the United States of America;
“EDP Expenses” means the costs of any new computer software or hardware (including licensing, maintenance, installation and training costs) that may be installed or developed, in relation to the Vessel;
“Effective Date” means the date of this Agreement;
“Emergency Situation” means an emergency situation that:
(i) | involves a threat to human life; | |
(ii) | involves a risk of loss of the Vessel or its cargo or of serious damage to the Vessel; | |
(iii) | involves a risk of the Vessel causing serious environmental damage; | |
(iv) | involves a risk of the Vessel being stolen, impounded or seized; or | |
(v) | involves a security or safety risk to the Vessel, such as but not limited to terrorism, piracy, etc. |
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“Flag Administration / State” shall mean such state or registry as the Owners shall from time to time specify;
“HSSE Report” means a report on the health, safety, security and environmental status of the Vessel (together with relevant statistics) and including details of any specific health, safety, security and/or environmental incidents prepared in accordance with Clause 3.4.9;
“Incentive Bonus” means the bonus payable by the Owners to the Managers in accordance with Clause 7.7;
“ISM Code” means the International Ship Management Code for the Safe Operation of Ships and for Pollution Prevention as adopted by the International Maritime Organisation (IMO) by resolution A.741(18) as amended from time to time;
“ISPS Code” means the International Ship and Port Facility Security Code adopted by the International Maritime Organization Assembly as the same may have been or may be amended or supplemented from time to time;
“Maintenance Schedule” means a schedule referred to in Clause 3.2.1(iii) detailing the maintenance required for the Vessel for the period from delivery to the next dry-docking of the Vessel thereafter for each subsequent 30 month period to coincide with Classification Society Intermediate Survey;
“Managed Fleet” means all vessels owned, leased, or chartered by Owners or Owners’ Affiliates and managed by Managers pursuant to a ship management agreement or similar arrangement;
“Management Fee” means the fee payable by the Owners to the Managers in consideration of the Management Services, as specified in Clauses 7.1 to 7.3 and as adjusted pursuant to Clause 7.4;
“Management Services” means the services specified in Clause 3;
“Managers’ Account” means the bank account in the name of the Managers as specified in Clause 20.3, or such other bank account of the Managers as may be notified to the Owners from time to time;
“MTSA Code” means the Maritime Transportation Security Act as enacted by the United States of America as the same may have been amended or supplemented from time to time;
“Officers” means the Master and the officers (including, but not limited to, the Senior Officers) of the Vessel, whose numbers, rank and nationality are currently specified in Annex “B” attached hereto, as updated from time to time;
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“OPA 90” means the Oil Pollution Act of 1990 as enacted by the United States of America as the same may have been amended or supplemented from time to time;
“Operational and Maintenance Protocol” means the protocol set forth on Annex “D” attached hereto;
“Operational Costs” means costs and expenses incurred by the Managers on behalf of the Owners to operate and maintain the Vessel including Communication Expenses and EDP Expenses;
“Owners’ Insurances” means the insurance policies to be procured by the Owners in respect of the Vessel and as described in Clause 6.1(i), (ii), (iii), and (iv);
“Permanent Instructions” means the instructions relating to the operational procedures for communications between the Owners, Charterers and the Crew as currently specified in Annex “E” attached hereto which may be amended pursuant to Clause 12.2;
“Quality Assurance & Quality Management System” shall have the meaning ascribed to it in Clause 3.8.1;
“Ratings” means the ratings of the Vessel, whose numbers, rank and nationality are currently specified in Annex “B” as updated from time to time;
“Review Date” means January 1;
“Senior Officer” means the following positions or roles on the Vessel:
(i) | the Master; | |
(ii) | the Chief Engineer; | |
(iii) | the Chief Officer; | |
(iv) | the Second Engineer; or | |
(v) | any other person whose rank or role on the vessel is required and designated as Senior Officer by the Flag Administration |
“Severance Costs” means the costs which the Managers as employers of the Crew are legally obliged to pay, and actually do pay, to or in respect of the Crew as a result of the early termination of any employment contract for service on the Vessel;
“ SMS ” means a safety management system which complies with all laws, rules and regulations, and with all the codes, guidelines and standards recommended by the International Maritime Organization (including without limitation, the ISM
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Code), any relevant flag state and the classification society and approved by Owners, which may from time to time be applicable to the Vessel and/or the Owners and/or the Managers, and which is otherwise appropriate having regard to the Managers’ obligations under this Agreement;
“SOPEP” means the shipboard oil pollution emergency plan in the form approved by the Marine Environment Protection Committee of the International Maritime Organization pursuant to the requirements of Regulations 25 of Annex H of the International Convention of the Protection of Pollution from Ships, 1973, as modified by the Protocol of 1989 relating thereto, as amended (MARPOL 73/78);
“STCW 95” means the International Convention on Standards of Training, Certification and Watch-keeping for Seafarers, 1978, as amended in 1995 or any subsequent amendment thereto;
“Supplementary Budget” shall have the meaning ascribed to it in Clause 3.3.4 below;
“Training Matrix” means the most updated Training Matrix as mutually agreed between the parties, as amended, supplemented or updated from time to time;
“Vessel Account” means a bank account in the name of the Managers opened and operated in accordance with Clause 8.4, the details of which shall be notified to the Owners from time to time;
“Vessel Condition Report” means a report detailing the physical condition, the progress of the Maintenance Schedule and the performance of the Vessel;
“Vessel Data” means all records, invoices, logs, certificates and performance and maintenance data relating to the Vessel and all correspondence and documentation generated, collected or compiled during the provision of the Management Services by either former managers of the Vessel and given to the Managers, or by the Managers, to enable the Owners to effectively operate, manage or sell the Vessel, but excluding the Managers’ internal correspondence and any correspondence (other than invoices) between the Managers and their suppliers;
“Working Day” means a day when most banks are open for business in London, New York, Athens, and country of location of relevant bank accounts of Owners.
1.2. | Interpretation |
1.2.1. | “Owners”, “Managers” and “Charterers” include their respective successors and assigns. |
1.2.2. | Clause headings are inserted for convenience and shall be ignored in construing this Agreement. |
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1.2.3. | Unless the context otherwise requires, words denoting the singular number include the plural number and vice versa. |
1.2.4. | References to clauses and annexes are to Clauses and Annexes of this Agreement except where otherwise expressly stated. |
1.2.5. | Reference to any document includes the same as varied, supplemented or replaced from time to time. |
1.2.6. | References to any enactment include any re-enactments, amendments and extensions thereof. |
2. | APPOINTMENT OF MANAGERS |
2.1. | From the Effective Date and continuing, unless and until terminated as provided herein, the Owners hereby appoint the Managers and the Managers hereby agree to act as managers of the Vessel. |
2.2. | Subject to the terms and conditions contained herein, during the period of this Agreement, the Managers shall carry out the Management Services as agents for and on behalf of the Owners. The Managers shall have authority to take such actions as they may from time to time consider necessary to enable them to perform their duties and obligations as set out in this Agreement in accordance with first class LNG ship management practice within the limits of authority delegated to them hereunder. |
3. | MANAGEMENT SERVICES |
3.1. | Crew Management |
3.1.1. | The Managers shall provide suitably and adequately qualified Crew for the Vessel in accordance with any requirements of the Owners, as described in the Operational and Maintenance Protocol set forth on Annex “D”, and the provisions of the STCW 95 and the requirements of this Agreement. |
3.1.2. | The Managers shall be responsible for: |
(i) | selecting, with Owners’ approval, which may be expressed from time to time in the form of standing instructions to the Managers for specific experience and qualification criteria pertaining to the Crew, including but not limited to the Training Matrix, and engaging the Crew (subject to the provisions of Clause 3.1.6 below) for the Vessel including payroll arrangements, pension administration, and insurances for the Crew other than those mentioned in Clause 6; | |
(ii) | ensuring at all times the availability and supply of an adequate complement of Crew (including Master, Officers and Ratings complying with Annex “B”) relative to the particular operational status and size of the |
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Vessel; | ||
(iii) | ensuring that the applicable requirements of the law of the flag of the Vessel are satisfied in respect of manning levels, rank, qualification and certification of the Crew and employment regulations (including those standards set forth by the International Transport Workers’ Federation (ITF)) pertaining to Crew’s tax, payroll, social insurance, welfare, discipline and other applicable requirements; | |
(iv) | ensuring that all members of the Crew have passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical certificates issued in accordance with appropriate flag state requirements. In the absence of applicable Flag State requirements the medical certificate shall be dated not more than three months prior to the respective Crew member leaving their country of domicile and maintained for the duration of his service on board the Vessel; | |
(v) | ensuring that the Crew shall have a command of the English language of a sufficient standard to enable them to perform their duties safely; | |
(vi) | arranging transportation of the Crew, including repatriation, at Owners’ cost, unless otherwise arranged by Owners; | |
(vii) | providing continuing training of the Crew and supervising their efficiency and competence, consistent with Owners’ requirements but in any event never less than the applicable international or Flag State standard for LNG vessels; | |
(viii) | whenever the Vessel is operational, issuing instructions to the Master in accordance with the requirements of the Owners or Charterers, to trade along the most geographically direct, economical and safe route (except for any justifiable deviation allowed under English common law or the Hague Visby Rules and including all deviations that may be necessary in an Emergency Situation) and ensuring the Vessel is worked at a fuel-efficient speed consistent both with port arrival instructions given by the Owners and/or Charterers and with sea conditions; | |
(ix) | issuing instructions to the Master to keep full and correct log books and furnishing the Owners with true and accurate copies of such log books when required; | |
(x) | conducting union negotiations (if applicable); | |
(xi) | operating a drug and alcohol policy, prepared by the Managers and approved by the Owners (such approval not to be unreasonably withheld or delayed), which includes, as a minimum, the principles set forth in the “Guidelines for the Control of Drugs and Alcohol Aboard Ship” of the Oil |
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Companies International Marine Forum dated June 1995 (and in an amendments or successors thereto); | ||
(xii) | ensuring that the Crew and any other person on board the Vessel proceeding to sea shall be insured for the Crew Insurances with a first class insurance company, underwriter or protection and indemnity association (the “Crew Insurances”); | |
(xiii) | ensuring that all premiums or calls in respect of the Crew Insurances are paid promptly by their due date; and | |
(xiv) | ensuring that the Crew Insurances shall name the Owners as co-assured (unless advised by the Owners to the contrary). |
3.1.3. | The Managers shall appoint a superintendent (ship manager) to be responsible for the day to day operation, maintenance and repair of the Vessel, the cost of which shall, subject to Clause 7.4, be included in the Management Fee. Should the Owners have reason to be dissatisfied with the superintendent so appointed, they shall raise their complaint with the Managers. The Managers shall investigate any such complaint promptly and, should the complaint prove to be well founded, the Managers shall replace such superintendent at no extra cost to the Owners. |
3.1.4. | The Managers shall institute onboard and shall ensure onboard compliance with a uniform standard of dress amongst the crew and officers, and uniform credentialing or identification of all Crew and Officers. |
3.1.5. | Should the Owners have any reason to be dissatisfied with any of the Crew, they shall raise their complaint with the Managers. The Managers shall investigate the complaint promptly and, should the complaint be well founded, the Managers shall replace the Crew member in question and undertake changes in the appointment of the Crew as the Owners may reasonably require. |
3.1.6. | The Managers shall employ the Crew in their name and for their own account and, for the avoidance of doubt, the Managers do not have authority to conclude or enter into contracts of employment with the Crew for and on behalf of the Owners and shall indemnify and hold harmless the Owners against all actions, proceedings, claims, demands or liabilities whatsoever and howsoever arising from the Managers’ breach of this Clause 3.1.6 or in relation to any disputes relating to Crew contracts of employment. |
3.1.7. | Except as allowed in clause 3.1.2(i), the Managers may not appoint any Senior Officers without the prior approval of the Owners (which shall not be unreasonably withheld or delayed), except that in the event that a shortage of crew would be likely to result under the terms of the Charter: |
(i) | in the Vessel going off hire under its Charter; or | |
(ii) | an Emergency Situation; |
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and in such circumstances it is not practical for the Managers to wait for Owners’ approval, the Managers may make such temporary appointments as they deem necessary; however, the Vessel’s manning shall always remain in compliance with the regulations of the Flag State’s minimum manning requirements. Officers CV and accomplished Training Matrix should be provided to the Owners for reviewing prior promotion or assignment to a Senior Officer position.
The Owners reserve the right to interview and approve all Senior Officers candidates.
3.2. | Operational and Technical Management |
3.2.1. | The Managers shall provide operational and technical management of the Vessel which includes, but is not limited to, the following functions: |
(i) | provision of competent personnel with suitable experience of the LNG industry to supervise the maintenance and general efficiency of the Vessel in line with the Training Matrix and the requirements of the Charter; | |
(ii) | all maintenance and work for the Vessel so as to ensure that the Vessel complies with all applicable laws including but not limited to IMO, MARPOL and SOLAS (and including, for the avoidance of doubt, all the provisions of the ISM Code), regulations and/or other requirements of the flag of the Vessel and of the Primary Terminals and other places where she trades, all applicable international conventions, all applicable regulations and/or requirements of any terminals or facilities in such port(s) or place(s) where the Vessel may load or discharge, and all requirements and recommendations of the Vessel’s classification society applicable to a Vessel carrying LNG worldwide within the limits of the Charter; | |
(iii) | preparing the Maintenance Schedule and regular updates on request (such updates to commence at delivery of the Vessel from the shipyard, and then each year on or around the anniversary upon which the Vessel was classified by its classification society) for approval by the Owners (such approval not to be unreasonably withheld or delayed); | |
(iv) | arrangement and supervision of dry dockings, repairs, alterations and the upkeep of the Vessel in accordance with first class LNG ship management practice provided that the Owners shall allocate sufficient funds and approve the relevant Annual Budgets and Supplementary Budgets to ensure that Managers can incur the necessary expenditure to ensure that the Vessel will comply with the law of the flag of the Vessel and of the places where she trades, and all requirements and recommendations of the classification society; | |
(v) | investigating and reporting to Owners any technical faults or problems material to the performance of the Vessel and arranging for their repair in |
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consultation with the Owners; | ||
(vi) | arrange for the victualing and storing of the Vessel appropriate to the declared operational status of the Vessel and place and effect payment for contracts for lubricating oil, paints and all consumable materials where they are not for the Charterers’ account, together with any other contracts that may be agreed with the Owners from time to time in accordance with Clause 3.2.2; | |
(vii) | appointment of surveyors and technical consultants as the Managers may consider from time to time be necessary; | |
(viii) | development, implementation of and maintenance of a SMS and obtaining and maintaining valid certificates evidencing compliance with this Clause, including without limitation, a valid document of compliance in relation to itself and valid safety management certificates in respect of the Vessel as required by the ISM and ISPS Codes; | |
(ix) | provide the Owners with copies of any and all documents of compliance and safety management certificates as described in Clause 3.2.1(viii) upon issuance; | |
(x) | keep or procure that there is kept on board the Vessel at all times: |
(a) | all certificates and documents required from time to time by any applicable law or regulations to enable her to perform the Charter between the Primary Terminals without delay, | |
(b) | valid certificates in force as required by the Flag State, | |
(c) | any further certificates and documents required from time to time by any applicable law or regulations to enable her to perform the Charter without delay, | |
(d) | an ITF certificate or equivalent allowing Vessel’s calls and operations in all ports to which the Vessel is ordered under the Charter where an ITF certificate or equivalent is required, and | |
(e) | a copy of all documents of compliance and the original of any safety management certificates as described in Clause 3.2.1(viii); |
(xi) | arrangement of periodic analysis by third parties of the bunker fuel and reporting the results of such analysis to the Owners (the costs being included in the Vessel’s running costs); | |
(xii) | noting requirements resulting from safety and any external ship inspections and implementing these insofar as they affect the operation or safety of the Vessel (such implementation to be at the Owners’ expense); |
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(xiii) | implementing safety recommendations issued in terms of all international conventions (at the Owners’ expense); | |
(xiv) | arrange, where necessary for the superintendent or other staff of the Managers to visit the Vessel. If the superintendent or other staff of the Managers have reason to spend more than twenty-five (25) days in aggregate in any calendar year (or pro rata for part of a calendar year) visiting the Vessel, their services will be charged out at the rate specified in Clause 7.4 below; | |
(xv) | ensure that maritime, safety and cargo custody standards are in accordance with first class international LNG shipping practice and are maintained by the Crew whenever such personnel are serving on board the Vessel; | |
(xvi) | arrange and effect payment on behalf of the Owners for the towage of the Vessel when appropriate; | |
(xvii) | arrange, maintain, and effect preparation and payment on behalf of the Owners for suitable moorings for the Vessel for lay-up at such locations as may from time to time be mutually agreed relative to the Vessel’s positioning requirements of the Owners; | |
(xviii) | handle port disbursement accounts where these are not for the Charterers’ account; | |
(xix) | navigate the Vessel, handle all necessary communications, manage all cargo operations on behalf of Owners, and provide for the security and safety of the Vessel, cargo and Crew, all in accordance with first class LNG ship management practice; | |
(xx) | ensure that the Vessel is compatible with existing LNG liquefaction terminals, regasification terminals and ship/shore interfaces, at the Primary Terminals and to maintain such compatibility and all necessary certificates and documentation; | |
(xxi) | undertake vessel-terminal compatibility studies as requested by Owners and at Owners’ expense; and | |
(xxii) | manage and operate the Vessel on behalf of the Owners in any part of the world to first class industry standards for an LNG carrier, provided that the Vessel shall be employed in lawful trades, as the Owners may direct, between good and safe ports and places where she can always be safely afloat, and further provided that the Vessel shall not trade to ports or areas where, at the time in question, there are expected to be hostilities, wars, warlike operations, civil commotions or revolutions, unless the Owners are able to obtain war risks insurance against such eventuality. |
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Managers shall at all times have the right to refuse to carry out any instructions from the Owners or the Charterers to trade or lay up the Vessel if Managers can clearly demonstrate that by doing so, it would contravene any applicable laws and regulations of the Vessel’s flag, the classification society or of the places she trades.
Furthermore, Managers shall not be held to be in breach of this Agreement, should at any time the Vessel fail to conform to its class standards or fail to conform to statutory or international standards, except to the extent that such failures result from the negligence or breach of this Agreement by the Managers.
3.2.2. | Procurement |
Subject to the terms of this Agreement, the Managers shall have discretion to procure all stores, spares, equipment, provisions, oils, fuels and any other goods, materials or services to be supplied to the Vessel by the Managers in performance of their Management Services from whatever source or supplier they may deem appropriate provided that:
(i) | the Managers use all reasonable efforts to achieve the lowest prices available for the appropriate quality of goods or services; | |
(ii) | the Managers shall provide Owners with the benefit of all discounts, rebates or other financial incentives provided by any suppliers, and all amounts billed to Owners in connection with all stores, spares, equipment, provisions, oils, fuels and any other goods, materials or services to be supplied to the Vessel shall reflect any such discounts, rebates or financial incentives; and | |
(iii) | the Owners reserve the right to require the Managers to procure such goods, materials and services from sources or suppliers they may notify to the Managers from time to time provided that: |
(a) | the Owners shall not unreasonably interfere with the aforementioned Managers’ procurement processes; | |
(b) | the Owners may not force the Managers to breach the terms of any existing procurement contract to the extent such contract is consistent with the terms of this Agreement and standard industry practices; and | |
(c) | the Owners have due regard to the interests of the Managers in fostering good long-term relationships with suppliers; |
and where the Owners utilize their rights under this Clause 3.2.2, the Managers shall in no circumstances be liable for the quality or pricing of the goods, materials and services so provided.
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3.3. | Accounting, Budgeting, and Reporting |
3.3.1. | The Managers shall: |
(i) | provide an accounting system in respect of the Vessel which meets the reasonable requirements of the Owners, and provide regular accounting services and supply regular accounting reports and records; and | |
(ii) | maintain a record of all costs and expenditures incurred as well as data necessary or proper for the settlement of accounts between the parties. |
3.3.2. | The Managers shall present to the Owners annually a budget in respect of the estimated costs of operating the Vessel for the following twelve months in the current reporting form of the Managers, which is acceptable to the Owners (the “Annual Budget” ). The initial Annual Budget is attached hereto at Annex “C,” and shall be for the period from the Effective Date until 31 December 2014, with a full twelve (12) month Annual Budget submitted yearly thereafter, ending on the day immediately preceding the Review Date. Subsequent Annual Budgets shall be prepared by the Managers for approval by the Owners at least two (2) months before each Review Date. |
3.3.3. | The Owners shall indicate to the Managers their acceptance and approval of the Annual Budget within one month of presentation and in the absence of any such indication the Managers shall be entitled to assume that the Owners have accepted the Annual Budget as provided. |
3.3.4. | If after the approval of the Annual Budget pursuant to Clauses 3.3.2 and 3.3.3, the Owners or Managers anticipate material changes in the Operational Costs (or in respect of the initial Annual Budget set out in Annex “C”, if the Managers believe such initial Annual Budget is inaccurate or unworkable), then the Managers shall prepare a supplementary budget reflecting such changes (the “Supplementary Budget” ) for approval by the Owners and the Owners shall indicate their approval or non-approval of a Supplementary Budget within one month of it being presented to them (and in the absence of any such indication, the Managers shall be entitled to assume that the Owners have accepted a Supplementary Budget). Upon approval by the Owners, a Supplementary Budget shall be treated as the Annual Budget for the year in question or the remainder thereof. |
3.3.5. | For the avoidance of doubt, the Managers shall not incur expenditure in respect of the Vessel in excess of the Annual Budget (with due consideration to the fact that expenditure may be phased over varying periods or may fluctuate from month to month, notwithstanding that such expenditure was budgeted for on an annual basis) or incur expenditure that has not been accounted for in any Annual Budget without the prior consent of the Owners (which shall not be unreasonably withheld or delayed). |
3.3.6. | Notwithstanding Clause 3.3.5, the Managers may in each Annual Budget period, as specified in Clause 3.3.2, incur expenditure on behalf of the Owners in respect |
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of items that are not budgeted for in the Annual Budget, or for amounts in excess of the Annual Budget amounts, without the approval of the Owners provided that:
(i) | such expenditure is used only for the proper performance of the Management Services; and | |
(ii) | such total expenditure does not exceed five (5) per cent of the total budgeted amount for that Annual Budget period or such other amount that may be agreed by the parties from time to time. |
3.3.7. | The Managers shall: |
(i) | by the fifteenth (15 th ) Working Day of the month provide the Owners with a Vessel Condition Report in respect of the previous month in such form as the Owners (acting reasonably) may require; | |
(ii) | by the fifteenth (15 th ) Working Day of each month provide the Owners with a comparison between the budgeted Operational Costs as set out in the Annual Budget and actual Operational Costs in respect of the previous month (in accordance with the form set out in Annex “F’); | |
(iii) | by the fifteenth (15 th ) Working Day of each month provide the Owners with a request for funds based upon an estimate of the funding requirements of the Vessel that are required in respect of the next month together with any requests for approval of expenditure pursuant to Clause 3.3.5 and any proposed amendments to the Annual Budget pursuant to Clause 3.3.4; and | |
(iv) | by the fifteenth (15th) Working Day of each month provide the Owners with a consolidated report on actual Operational Costs and if requested by the Owners, capital costs, including all expenses in relation to financing of the Vessel, in respect of the previous month. |
3.3.8. | If requested and in such manner as may be required by the Owners, the Managers shall provide the necessary personnel, hardware and software, and other resources necessary to administer on Owners’ behalf and in its name the invoicing and collection of hire payable under the Charter. |
3.4. | Health, Safety, Security, and Environmental Protection |
3.4.1. | The Managers shall operate a management system which shall be approved by the Owners (such approval not to be unreasonably withheld or delayed), and comply and ensure that the Vessel and the Crew comply with all applicable health, safety, security and environmental laws and regulations, and nothing in this Clause 3.4 shall derogate from the obligations of Managers to comply with its statutory responsibilities insofar as they relate to the other Management Services. |
3.4.2. | The Managers shall, in relation to all persons engaged or likely to be engaged in |
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the execution of the Management Services, take such steps as are reasonably practicable to ensure their health and safety. | |
3.4.3. | The Managers shall make available for inspection by the Owners at all times all registers, records and other documentation concerning health, safety, security (where appropriate) and environmental matters relating to the Management Services. |
3.4.4. | The Managers shall send to the Owners a copy of every notice or other communication received from or sent to any person or body concerning health, safety, security and/or environmental matters relating to the Management Services and shall co-operate with the Owners in respect of all such health, security, safety and/or environmental matters, as may from time to time be requested by the Owners. |
3.4.5. | The Managers shall use all reasonable endeavors to ensure that no oil, or harmful or hazardous substances, of any description, shall be discharged or escape accidentally or otherwise, from the Vessel; and that the Vessel, its Officers and Crew comply with all international, national, and state oil and air pollution laws, conventions or regulations applying in, or to, international waters and the territorial waters of the countries into which the Vessel may trade under the Charter including the provisions of OPA 90 that apply to tank ships. This shall also include adhering to the standards promulgated under OPA 90 as those regulations apply to non-tankships operating within the jurisdiction of the United States whether or not the same strictly apply to the Vessel. |
3.4.6. | The Managers shall not treat, keep or dispose of any waste produced and/or carried by the Managers as a result of the Management Services in a manner likely to cause harm to the health and safety of any person or harm to the environment (as far as the same may be reasonably practical) and shall comply with every statutory duty which is relevant. |
3.4.7. | During the execution of the Management Services, the Managers shall take such steps as are reasonably practicable to avoid (or where avoidance is not possible, to minimize) harm to the environment. |
3.4.8. | The Managers will prepare and obtain all necessary approvals for a SOPEP. The SOPEP will be written in the English language and will be reviewed and updated as required and be maintained with the correct list of coastal state contacts. If required, the Managers will arrange for the translation of the SOPEP into another language. The Managers will also undertake regular training of the Crew in the use of SOPEP including drills to ensure that the SOPEP functions as expected and that contact and information details specified are accurate. |
3.4.9. | The Managers shall prepare a HSSE Report in such form and detail as the Owners (acting reasonably) require, to be submitted to the Owners on the 5th day of the following month. |
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3.5. | Insurance Arrangements |
3.5.1. | The Owners shall arrange insurances in accordance with Clause 6.1. |
3.5.2. | The Managers shall immediately inform and keep the Owners informed of any incident which gives or may give rise to claims or disputes relating to the insurances effected in accordance with Clause 6. |
3.5.3. | The Owners shall or, in their sole discretion instruct the Managers on a case-by-case basis and in consultation with the Owners to, handle insurance, average and salvage claims in connection with the Vessel. Any costs reasonably incurred by the Managers in handling claims in accordance with this Clause shall be paid by or for the account of the Owners. Until notified to the contrary, the Managers shall process all insurance claims relating to the Crew, in consultation with Owners. |
3.6. | Sale or Purchase of the Vessel |
The Managers shall, if requested, provide Owners with technical assistance in connection with any sale of the Vessel. Any costs or out-of-pocket expenses incurred by the Managers in providing such technical assistance shall be paid by or for the account of the Owners. The Owners will, however, be solely responsible for agreeing the terms of any agreement regulating any sale. | |
3.7. | General Administration |
3.7.1. | The Owners may, in their sole discretion and upon such terms and conditions as the Owners shall specify, instruct the Managers on a case-by-case basis to handle and/or settle all claims relating to the Vessel including but without limitation any claims involving the Charterers. |
3.7.2. | The Managers shall keep the Owners informed regarding any incident of which the Managers become aware which gives or may give rise to claims or disputes involving the Charterers or other third parties. |
3.7.3. | The Owners shall, or in their sole discretion instruct the Managers on a case-by-case basis to, bring or defend actions, suits or proceedings in connection with matters entrusted to the Managers pursuant to this Agreement. |
3.7.4. | Where the Managers are retained to handle and/or settle claims relating to the Vessel pursuant to Clause 3.7.1, the Managers shall be entitled to obtain legal or technical or other outside expert advice in relation to the handling and settlement of such claims and disputes. |
3.7.5. | The Owners shall arrange for the provision of any necessary guarantee bond or other security in connection with any such claims. |
3.7.6. | Any external costs reasonably incurred by the Managers in carrying out their |
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obligations in accordance with this Clause 3.7 shall be paid by or for the account of the Owners provided that the Owners have instructed the Managers in accordance with Clause 3.7.1. | |
3.8. | Quality Assurance |
3.8.1. | The Managers shall have and maintain a quality assurance/quality management system (the “Quality Assurance & Quality Management System” ). This system shall include on board and on shore operation/ management and shall at the time of delivery, or as reasonably soon thereafter, meet the requirements of ISO-9001-2008 and ISO-14001-2004 or any subsequent addition or substitution approved by the Owners. The Quality Assurance & Quality Management System shall be documented and available to the Owners for approval within three (3) months of execution of this Agreement. The Managers shall supply documentation to the Owners on request confirming the continued maintenance and operation of the Quality Assurance & Quality Management System in good standing throughout the period of this Agreement. |
3.9. | [Reserved] |
4. | MANAGERS’ OBLIGATIONS |
4.1. | The Managers undertake to use their best endeavours to provide the agreed Management Services as agents for and on behalf of the Owners in a timely and efficient manner in accordance with first class international LNG ship management practice and the Operational and Maintenance Protocol set forth on Annex “D” and to protect and promote the interests of the Owners in all matters relating to the provision of the Management Services hereunder provided, however, that the Managers in the performance of their management responsibilities under this Agreement shall be entitled to have regard to their overall responsibility in relation to the Managed Fleet, and in particular, but without prejudice to the generality of the foregoing, the Managers shall be entitled to allocate available supplies, manpower and services in such manner as in the prevailing circumstances the Managers in their absolute discretion consider to be fair and reasonable. |
4.2. | The Managers shall procure that the requirements of the law of the flag of the Vessel are satisfied and the Managers shall in particular be deemed to be the “Company” as defined by the ISM and ISPS Codes, thereby assuming the responsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by these Codes when applicable. The Managers shall comply at all times with the requirements of the ISM, ISPS, and MTSA Codes, and the Managers shall immediately inform Owners if there is any threatened or actual withdrawal of Managers document of compliance or the Vessel’s safety management certificate or ISS (Security Certificate). |
4.3. | In addition to the specific obligations to keep the Owners informed hereunder, the |
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Managers shall keep the Owners informed of all relevant information regarding the Vessel and the performance of the Management Services which the Owners may, acting reasonably, specify from time to time. | |
4.4. | When the Managers become aware of an Emergency Situation, they shall immediately contact the Owners and keep the Owners informed in respect of such Emergency Situation. |
4.5. | If, in an Emergency Situation, the Managers (or the Master) are required pursuant to this Agreement to solicit an approval from the Owners, but in such circumstances it is not practical to wait for such approval, then notwithstanding any other term in this Agreement, the Managers (or the Master) may take whatever action they may deem necessary to deal with such Emergency Situation. |
5. | OWNERS’ OBLIGATIONS |
5.1. | The Owners shall pay all sums due to the Managers punctually in accordance with the terms of this Agreement. |
5.2. | The Owners shall provide prompt responses to any requests made by the Managers pursuant to this Agreement. |
5.3. | The Owners shall (subject to any confidentiality restrictions) provide the Managers with any relevant information relating to the Charters or Charterers and shall notify the Managers upon a change of Charterers or upon any new Charter in respect of the Vessel. |
5.4. | The Owners shall use reasonable endeavours (and subject to any confidentiality restrictions) to ensure that the Charterers shall keep the Managers informed of the relevant terms of any gas supply contract, charter party, contract of affreightment, contract of insurance and any other document relating to the Vessel and its cargo that the Managers may reasonably require in order to perform their obligations hereunder. |
6. | INSURANCE POLICIES |
6.1. | The Owners shall procure throughout the period of this Agreement that: |
(i) | at the Owners’ expense, the Vessel is insured for usual hull and machinery marine risks (including crew negligence) and war risks in accordance with the first class practice of prudent owners of vessels of a similar type to the Vessel; | |
(ii) | at the Owners’ expense, the Vessel is insured against Protection and Indemnity risks (including pollution risks) based upon the Standard Rules of a member of the International Group of P&I Clubs and have arranged for the Managers to be included as named co-assured, and provide the Managers with Certificates of Entry to evidence that such insurances have | |
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been effected and confirm renewal within fifteen (15) Working Days of the same; | ||
(iii) | where the Vessel is directed to call at any port within the United States of America and at the Owners’ expense, the Vessel carries a Certificate of Financial Responsibility as required by the United States Offshore Pollution Act 1990; | |
(iv) | the Vessel is insured against such other risks (including Freight, Demurrage and Defense) that are appropriate to the Vessel’s trade; | |
(v) | the Owners’ Insurances name the Owners and the Managers as co-assureds, with full cover, with the Owners obtaining cover in respect of each of the insurances specified in Clause 6.1 on terms whereby the Owners are liable in respect of premiums or calls arising in connection with the Owners’ Insurances; and | |
(vi) | written evidence is provided, to the reasonable satisfaction of the Managers, of compliance by the Owners with their obligations under Clause 6 within a reasonable time of the commencement of the Agreement, and of each renewal date and, if specifically requested, of each payment date of the Owners’ Insurances. |
6.2. | Insofar as it affects the superintendent and other shore staff employed by the Managers in connection with this Agreement, the Managers shall procure and maintain at their own expense appropriate insurance cover with first class insurers in respect of death or injury to such superintendents or shore staff, and such insurance shall comply with all applicable law. |
6.3. | Managers shall name Owners as co-assureds on this insurance cover, and Managers agree to waive all subrogation rights against Owners that might arise under this entire Clause 6. |
7. | MANAGEMENT FEE |
7.1. | Subject to any adjustment in accordance with the provisions of Clause 7.2 the Owners shall pay to the Managers for the provision of Management Services, a monthly management fee of Fourty-Six Thousand Dollars (US$46,000) (the “Management Fee” ) which shall be paid each calendar month in advance by the first Working Day of each applicable month provided that where a payment is due in respect of any part of a month that payment shall be paid on a pro-rata basis, such sums to be paid into the Managers’ Account. All invoices for the Management Fee shall be submitted by the Managers to the Owners in advance on a monthly basis. |
7.2. | If, during any calendar month, the Vessel is in: |
(i) | “deep” lay-up (that is with sea chests sealed off and all system drained |
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down) the Management Fee shall be Three Thousand Five Hundred Dollars (US$3,500) per month and pro rata in respect of any part month; or | ||
(ii) | a partially manned stand-by condition, during a period of lay-up (other than deep lay-up) or during reactivation periods or during any period where the Managers are preparing to take over management of the Vessel from a third party the Management Fee shall be Ten Thousand Dollars (US$10,000) per month and pro rata in respect of any part month. |
7.3. | The Management Fee is exclusive of value added tax and any other existing sales or services tax that may be applicable. The Managers warrant that at the Effective Date, no such taxes are payable in respect of the Management Fee under Greek Law. |
The Management Fee payable to the Managers will be adjusted annually on the first Review Date after the Effective Date and on each Review Date thereafter. The adjustment will be agreed between the Parties in good faith on the basis of general inflation and proof of increases in actual costs incurred by the Managers.
7.4. | In addition to the Management Fee, if the Managers’ superintendent or other staff are reasonably required to spend more than twenty-five (25) days in aggregate visiting the Vessel in any calendar year (or pro-rata for part of a calendar year), the cost of visits in excess of twenty-five (25) days shall be paid by the Owners, into the Managers’ Account, at a rate of One Thousand Dollars (US$1,000.00) per day (or pro rata in respect of any part day on board the Vessel). Notwithstanding the foregoing, all reasonable travelling expenses in connection with reasonably required visits to the Vessel by Managers’ superintendent or other staff (excluding visits in connection with drydocking) shall be part of the Management Fee, irrespective of the duration of such visits. |
7.5. | In the event of this Agreement being terminated by the Owners or the Managers in accordance with the provisions of Clause 17.3 or 17.4, the Management Fee payable to the Managers according to the provisions of Clauses 7.1 and 7.2, shall continue to be payable for a further period of three calendar months as from the termination date. In addition, provided that the Managers provide Crew for the Vessel in accordance with Clause 3.1: |
(i) | the Owners shall continue to pay Crew Support Costs during the said further period of three calendar months; and | |
(ii) | the Owners shall pay any reasonable Severance Costs which may materialise provided the Managers have used reasonable endeavours to mitigate such obligations to the Crew. |
7.6. | Unless otherwise agreed in writing all discounts and commissions obtained by the Managers in the course of the management of the Vessel shall be credited to the Owners. |
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7.7. | The Owners shall, in respect of each year of this Agreement, on or around the Review Date, decide whether or not to pay an Incentive Bonus to the Managers for remittance to the Crew of an amount and in the manner described in Annex “H” attached hereto. |
Any Incentive Bonus that the Owners decide to pay shall be paid into the Managers’ Account with fifteen (15) Working Days of the Review Date and the Managers shall remit any such bonus to the Crew. In addition the Owners shall within fifteen (15) Working Days of the Review Date provide a written explanation to the Managers of their decision which sets out in reasonable detail the rationale for making such a decision. | |
8. | VESSEL EXPENSES |
8.1. | Upon receipt of a request for funds for the Vessel pursuant to Clause 3.3.7 (iii) the Owners shall pay such funds into the Vessel Account, provided that such request is made in respect of items and amounts accounted for in the Annual Budget or made in respect of items or amounts for which the Managers do not require the approval of the Owners pursuant to Clause 3.3.6. |
8.2. | In the event that the Managers request funds from the Owners pursuant to Clause 3.3.7(iii), but the Owners are not obliged to pay such funds pursuant to Clause 8.1, then the Owners may refuse to provide such funds provided that, in such circumstances, the Managers shall not be liable for any losses or damages incurred by the Owners as a result of such refusal and in any event, the Owners shall not unreasonably refuse to pay or delay the payment of such sums. |
8.3. | All sums payable by the Owners in respect of requests made by the Managers pursuant to Clauses 8.1 and 8.2 shall be paid into the Vessel Account by the first Working Day of the month following that month in which such request was made. |
8.4. | The Managers shall open the Vessel Account and communicate the details of the Vessel Account to the Owners prior to the Effective Date. The Vessel Account shall be an account that only contains monies payable into such Vessel Account pursuant to this Agreement. All monies paid into the Vessel Account (including interest, if payable) shall be held on trust for and to the credit of the Owners and the Managers may only utilise funds in the Vessel Account for the proper performance of the Management Services hereunder. The Managers shall provide full details of all transactions in relation to the Vessel Account and shall procure that monthly Vessel Account bank statements are provided to the Owners for each month of this Agreement. |
8.5. | Notwithstanding anything contained in this Agreement, the Managers shall in no circumstances be required to use or commit their own funds to finance the provision of the Management Services. |
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9. | MANAGERS’ RIGHT TO SUB-CONTRACT |
9.1. | The Managers shall have the right to sub-contract any of their obligations in this Agreement, subject to Clause 9.2 below. |
9.2. | The Managers shall obtain the prior written consent of the Owners if they wish to sub-contract any of their obligations under this Agreement for amounts exceeding Fifty Thousand United States Dollars over and beyond the approved Annual Budget. |
9.3. | Notwithstanding any sub-contract the Managers shall remain fully liable for the due performance of their obligations under this Agreement, the Managers shall procure that each sub-contractor engaged pursuant to this Clause 9 shall comply with the requirements of Clause 3.4. |
10. | RESPONSIBILITIES |
10.1. | Force Majeure |
10.1.1. | Neither the Owners, nor the Managers shall be liable for any loss or damage or total or partial failure to perform this Agreement (other than a failure to perform an obligation to pay money) caused wholly or partly by any circumstances or things beyond the reasonable control of the Owners or the Managers, as the case may be, including (without limiting the generality of the foregoing) acts of God, fires, floods, epidemics, quarantine restrictions, wars, terrorism, insurrections, riots, violent demonstrations, criminal offences, acts and omissions of civil or military authority or of usurped power, requisition or hire by any governmental or other competent authority, or embargoes. |
10.1.2. | The party invoking force majeure will advise the other party of the force majeure event at the earliest opportunity and also advise same party of the likely duration of such force majeure situation. |
10.2. | Liability to Owners |
The Managers shall be under no liability to the Owners for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect, (including but not limited to loss of profit arising out of or in connection with detention of or delay to the Vessel) and howsoever arising in the course of performance of the Management Services, unless the same is proved to have resulted from the breach of this Agreement, fraud, gross negligence, or wilful misconduct of the Managers or their employees, or agents or sub-contractors employed by them in connection with the Vessel, in which case (save where loss, damage, delay or expense has resulted from the Managers’ personal act or omission committed with the intent to cause same or recklessly and with knowledge that such loss, damage, delay or expense would probably result) the Managers’ liability for each incident or series of incidents giving rise to a claim or claims shall not exceed a total of twelve (12) times the monthly Management Fee of Forty-Six Thousand Dollars (US$46,000) as adjusted annually pursuant to Clause 7.3 above. |
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Notwithstanding anything herein contained in the contrary, the Managers shall not be liable for any of the actions of the Crew, even if such actions are negligent or wilful, except only to the extent that they are shown to have resulted from a failure by the Managers to discharge their obligations under Clauses 3.1 or 3.4, in which case their liability shall be limited in accordance with the terms of this Clause 10.2. | |
10.3. | Indemnity |
Except to the extent and solely for the amount that the Managers would be liable under Clause 10.2, the Owners hereby undertake to keep the Managers and their employees, agents and sub-contractors indemnified and to hold them harmless against all actions, proceedings, claims, demands or liabilities whatsoever or howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of the Agreement, and against and in respect of all costs, losses, damages and expenses (including legal costs and expenses on a full indemnity basis) which the Managers may suffer or incur (either directly or indirectly) in the course of the performance of this Agreement. | |
10.4. | “Himalaya” |
It is hereby expressly agreed that no employee or agent of the Managers (including sub-contractors from time to time employed by the Managers) shall in any circumstances whatsoever be under any liability whatsoever to the Owners for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Clause 10, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Managers or to which the Managers are entitled hereunder shall also be available and shall extend to protect every such employee or agent of the Managers acting as aforesaid and for the purpose of all the foregoing provisions of this Clause 10 the Managers are or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to this Agreement. | |
11. | DOCUMENTATION |
11.1. | The Managers shall also maintain and cause their agents to maintain and retain in accordance with generally accepted accounting practices, applicable tax requirements and good international shipping practices, all books, accounts and records pertaining to this Agreement, and all records, documents and other materials related to the Managers’ implementation of and compliance with the Quality Assurance & Quality Control System, including vouchers, invoices, |
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receipts, correspondence, copies of original documents and such other documentation as is necessary in order to verify the compensation payable hereunder. | |
11.2. | The Managers shall make available, upon Owners’ request, all documentation and records relating to the performance of the Management Services, the SMS and/or the Crew which the Owners require in order to demonstrate compliance with the ISM Code, ISPS Code, and STCW 95, or to defend or prosecute a claim against a third party or otherwise. |
11.3. | All Vessel Data is and shall remain the property of the Owners and shall be made available to the Owners by the Managers on the Owners’ request. Upon termination of this Agreement for any reason, the Managers shall promptly provide the Owners with all the Vessel Data, whether onboard the Vessel or otherwise. |
11.4. | The Managers shall retain and properly store all Vessel Data in accordance with first class LNG ship management practice. If, in the Managers’ opinion, certain Vessel Data should be destroyed, then the Managers shall first offer to return that Vessel Data (at the Owners’ expense) to the Owners, and in the event that the Owners decline such offer, the Managers may destroy such Vessel Data. |
12. | DEPLOYMENT OF THE VESSEL |
12.1. | The Managers shall ensure that the Crew of the Vessel shall comply with any Permanent Instructions. |
12.2. | The Owners may change the terms of the Permanent Instructions, or upon the execution of a new Charter replace the existing Permanent Instructions with new Permanent Instructions with the consent of the Managers which shall not be unreasonably withheld or delayed. |
12.3. | In the event that the Managers or the Crew receive instructions from the Charterers, that in the opinion of the Managers, conflict with instructions provided by the Owners or which go beyond the scope of authority of the Charterers (to the extent such scope of authority has been disclosed by the Owners to the Managers), the Managers shall use best endeavours to immediately notify the Owners and the Charterers of the same. In such circumstances, subject to Clause 3.1.2(viii), the Owners’ instructions shall take precedence over the Charterers’ instructions. |
12.4. | Except for the purposes of saving life, the Vessel shall not, unless expressly authorised by the Owners, undertake attempts of salvage. |
12.5. | If: |
(i) | the Vessel undertakes attempts at salvage pursuant to Clause 12.4, or |
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(ii) | the Vessel requests that a third party attempts salvage of the Vessel, then without prejudice to the Master of the Vessel’s overriding right to take whatever action he may deem necessary to preserve life or prevent the loss of the Vessel, all salvage shall be under the terms of the current “Lloyds Open Form No Cure — No Pay” agreement. |
12.6. | Any proceeds arising from salvage of third party property shall be for the benefit of the Owners. |
12.7. | Notwithstanding any other provision of this Agreement, the Managers shall not (and shall procure that the Crew shall not), without the written consent of the Owners, sign any bill of lading on behalf of the Owners. |
13. | AUDITING |
13.1. | The Managers shall prepare the Annual Budget and accounts (as referred to in Clause 3.3.1 above) and shall make the same available for inspection and auditing by the Owners at such times as may be mutually agreed. |
13.2. | The Owners shall have the right to audit the Managers’ records and documentation as set out in Clause 11 above for the purpose of verifying their correctness and completeness at all times on reasonable notice to the Managers. Where staff or auditors of the Owners visit the premises of the Managers for the purpose of carrying out an audit, the Managers shall provide office space and facilities to such staff or auditors at no extra cost to the Owners. |
14. | INSPECTION OF VESSEL |
14.1. | The Owners shall have the right at any time after giving reasonable notice to the Managers to inspect the Vessel for any reason they consider necessary. |
15. | COMPLIANCE WITH LAWS AND REGULATIONS ETC. |
15.1. | The Managers will not do or permit to be done anything which might cause any breach or infringement or the laws and regulations of the Vessel’s flag, the classification society or of the Primary Terminals and other places where she trades. |
16. | DURATION OF THE AGREEMENT |
16.1. | This Agreement is entered into on the date of signing and shall continue until terminated in accordance with Clause 17. |
17. | TERMINATION |
17.1. | If the Managers: |
(i) | fail to meet any material obligation under this Agreement; or |
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(ii) | fail to meet any obligation under this Agreement that has a material adverse effect upon the Owners or the Vessel; |
then the Owners may give notice to the Managers of the default, requiring them to remedy it (if such default is capable of being remedied) as soon as practically possible. In the event that the default is not capable of being remedied or the Managers fail to remedy the default within a reasonable time to the satisfaction of the Owners, the Owners shall be entitled to terminate this Agreement by giving the Managers ninety (90) days’ written notice. | |
17.2. | The Owners may also terminate this Agreement by giving the Managers ninety (90) days’ written notice in the event that the Managers, in the reasonable opinion of the Owners, fail to manage the Vessel in accordance with first class LNG ship management practice and such failure has not been remedied within a reasonable time after written notice of such failure. |
17.3. | The Managers shall be entitled to terminate the Agreement by notice in writing if: |
(i) | any moneys payable by the Owners to the Managers have not been received into the Managers’ Account within thirty (30) days (excluding Saturdays, Sundays and public holidays) of payment having been requested in writing by the Managers; or | |
(ii) | this Agreement or any of the Owners’ rights and/or obligations are assigned to any person or entity without the Managers’ prior written agreement or approval. |
17.4. | This Agreement shall be deemed to be terminated: |
(i) | in the case of the sale of the Vessel (other than a sale or transfer to an Affiliate of the Owners); | |
(ii) | if the Vessel becomes a total loss or is declared as a constructive or compromised or arranged total loss or is requisitioned for hire; or | |
(iii) | in the event of an order being made or resolution passed for the winding up, dissolution, liquidation or bankruptcy of either party (otherwise than of the purpose of a solvent reconstruction or amalgamation) or if a receiver or similar officer is appointed of the whole or a material part of its assets or if it suspends payment, ceases to carry on business or makes any special arrangement or composition with its creditors. |
17.5. | If the Owners elect to provide Officers and, for any reason within their control, the Owners fail to: |
(i) | procure Officers and Ratings supplied by them or on their behalf, complying with the requirements of STCW 95; or |
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(ii) | instruct such officers and ratings to obey all reasonable orders of the Managers’ SMS; |
then the Managers may give notice to the Owners of the default, requiring them to remedy it (if such default is capable of being remedied) as soon as practicably possible. In the event that the default is not capable of being remedied or if the Owners fail to remedy the default within a reasonable time to the satisfaction of the Managers, the Managers shall be entitled to terminate this agreement. | |
17.6. | [Reserved] |
17.7. | Notwithstanding Clauses 17.1 and 17.2, the Owners shall have the right to terminate this Agreement at any time and for any reason by giving the other party not less than three (3) months’ written notice of their intention to terminate this Agreement. |
17.8. | If the Owners proceed with the employment of, or continue to employ the Vessel in blockade running or in an unlawful trade or on a voyage, which in the reasonable opinion of the Managers, is unduly hazardous, the Managers may give notice to the Owners requiring them to cease to employ the Vessel in such manner as soon as possible. If the Owners fail to comply with such notice within a reasonable time to the satisfaction of the Managers, the Managers shall be entitled to terminate this Agreement with immediate effect by notice in writing. |
17.9. | The termination of this Agreement shall be without prejudice to all rights accrued due between the parties prior to the date of termination. |
18. | MISCELLANEOUS |
18.1. | The confidentiality obligations of the parties are set out in a separate Confidentiality Agreement that is attached for reference in Annex “G”. |
18.2. | A person who is not a party to this Agreement may not enforce, or otherwise have the benefit of, any provision of this Agreement under the Contracts (Rights of Third Parties) Act 1999, but this provision does not affect any right or remedy of a third party which exists or is available apart from that Act. |
18.3. | At the expiry or earlier termination of any existing ship management agreement(s) in relation to the Vessel, Managers shall co-operate in the transfer arrangements to be notified to the Managers by the Owners and shall facilitate the smooth transition of all operations and duties to Managers with the minimum of disruption. |
18.4. | Either party may at any time assign or transfer to an Affiliate its respective rights and obligations under this Agreement provided that they first obtain the written consent of the other party. Such consent shall not be unreasonably withheld, conditioned or delayed and the parties agree to promptly execute any reasonable novation or transfer documentation to give effect to such an assignment or |
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transfer. | |
19. | LAW AND ARBITRATION |
19.1. | This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause. |
19.2. | The arbitration shall be construed and conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. The language used for such arbitration shall be English and the arbitration shall be conducted in London. |
19.3. | The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement. |
19.4. | Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator. |
19.5. | In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or such other sum as the parties may agree) the arbitration shall be conducted in accordance with the LMAA Small Claims Procedure current at the time when the arbitration proceedings are commenced. The language used for such arbitration shall be English and the arbitration shall be conducted in London. |
20. | NOTICES AND BANK ACCOUNTS |
20.1. | Any notice to be given by either party to the other party pursuant to this Agreement shall be in writing and shall be effective upon delivery pursuant to Clause 20.2 and shall be sent by fax, registered mail or by personal service to the following addresses: |
for the Owners:
Gas-seventeen Ltd.
Clarendon House
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2 Church Street
Hamilton HM11
Bermuda
Fax. No.: +377 97 97 51 24
Attn: Graham Westgarth
for the Managers:
GasLog LNG Services Ltd.
Piraeus Branch Office
69, Akti Miaouli,
185 37 Piraeus, Greece
Fax No: +30 210 4591247
Attention: Theodoros Katemidis, General Manager
20.2. | A notice is deemed to have been received: |
(i) | if delivered personally, at the time of delivery; | |
(ii) | in the case of fax, at the time of transmission; | |
(iii) | in the case of delivery of courier, on the date of receipt by the courier of written acknowledgement of such delivery; | |
(iv) | in the case of pre-paid first class post, recorded delivery or registered post, on receipt; and | |
(v) | if deemed receipt under the previous paragraphs of this sub-clause is not within business hours (meaning 9:00 am to 5:30 pm Monday to Friday (or Sunday to Thursday if the place of receipt is in Egypt) on a day that is not a public holiday in the place of receipt), when business next starts in the place of receipt. |
20.3. | For the purposes of this Agreement, the Managers’ Account currently has the following details: |
[Account details to be provided supplementally]
IN WITNESS whereof the parties have duly signed this Agreement the day and year first above written.
SIGNED for and on behalf
of GAS-seventeen Ltd.
by
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in the presence of
SIGNED for and on behalf
of
GASLOG LNG SERVICES LTD.
by
in the presence of
30 |
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ANNEX “A”
DETAILS OF VESSEL
[OWNERS TO PROVIDE ON OR BEFORE EFFECTIVE DATE]
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ANNEX “B”
DETAILS OF CREW / OFFICERS
RATINGS
[MANAGERS TO PROVIDE AT LEAST 30 DAYS
PRIOR TO EFFECTIVE
DATE]
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ANNEX “C”
INITIAL BUDGET
To be provided in accordance with Clause 3.3.2 at least [one (1)] month prior to the Effective Date and once approved by Owners to be inserted
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ANNEX “D”
OPERATIONAL AND MAINTENANCE PROTOCOL
The provisions of this Operational and Maintenance Protocol (“Protocol”) are integral with the provisions of the Agreement. The Owners agree to provide the manager with the necessary financial resources to comply with the requirements of this Operational and Maintenance Protocol.
The Vessel shall always be operated and maintained in accordance with the first class international standards for LNG vessels. These standards shall include, without limitation, that:
· | The Vessel is always manned, operated and maintained in a safe and prudent manner to minimise the risk of accidents; | |
· | the maintenance and operation of the Vessel shall be thorough and proactive and not based merely on the minimum standards required by the Vessel’s flag state and classification society but to the highest standards applicable in the shipping and LNG industry; | |
· | the Managers agree to maintain membership in the Society of International Gas Tankers and Terminal Operators Association (SIGTTO) and to abide by all guidelines, recommendations, and training schedules that are applicable to the safe and reliable operation of LNG vessels made by this industry association; | |
· | the Managers agree to observe and abide by all guidelines, recommendations, and training standards that are promulgated by the Oil Companies’ International Marine Forum (OCIMF) and are applicable to the safe and reliable operation of LNG vessels made by this industry association; | |
· | the Vessel shall be maintained and refurbished and where necessary restored to ensure the safe, reliable, and efficient transportation of LNG for a minimum 40 year trading life. |
Other than for Manager-scheduled maintenance periods of seventy two (72) hours every six (6) months (days which shall be agreed by the Owners), the Owners expect the Vessel to be available for the safe and efficient transportation of LNG for 100% of the year. The Manager shall put in place a robust and comprehensive vessel management system designed to meet this availability objective.
The Managers shall take the necessary steps to promote a culture of safety awareness, compliance with established procedures, and non-conformance reporting to facilitate continuous improvement throughout the organization including all crewmembers onboard the Vessel.
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CREWING
The Managers agree that having a well-trained and qualified vessel crew and shoreside support staff, well versed in LNG vessel operations and management, is the foundation of a safe, reliable, and efficient LNG vessel operation.
· | The Managers agree to adhere to the Training Matrix, and also agree that if the Training Matrix conflicts with less stringent standards contained in this Agreement, the Training Matrix will control. | |
· | Managers shall arrange for all Deck Officers, including the Master, to attend Bridge Team Management Training at one of the recognized training centers. This training shall be repeated every five (5) calendar years. | |
· | Managers are required to ensure that all Masters have attended a ship handling simulator-training course applicable for the type of vessel in use for LNG transportation. The training shall be repeated at a minimum of every five (5) calendar years. | |
· | In addition to the requirements of the Management Agreement, all senior operational positions (Master, Chief Engineer, Chief Mate, and Second Engineers, Cargo Engineer) on board must have a minimum of three (3) years of sea time (time onboard) experience onboard LNG Carriers in any position in the position directly below the senior operational position they will assume. All senior operational positions must receive a minimum of two (2) weeks vessel familiarization and specific operational training, with a training scope appropriate to their position, prior to embarking onboard the Vessel for the first time. Any deviation from this section’s experience requirement must be approved by Owners. | |
· | All officers and unlicensed crew on board require, as a minimum, specific training on the hazards and unique operational aspects associated with LNG carriers that meet the requirements of Section A-V/1 paragraphs 1-7 of the STCW 1995 convention. All licensed officers that form part of the cargo transfer watch or carry out operational or maintenance duties and responsibilities directly related to the vessel’s cargo system shall also receive specific training meeting the requirements of Section A-V/1 paragraphs 22-34 of the STCW 1995 convention. The Managers are to document what special LNG ship operations training is provided to licensed and unlicensed crewmembers prior to their employment on the LNG carrier. | |
· | All crew are required to be properly qualified and certificated in accordance with the IMO Standards of Training, Certification and Watch keeping for Seafarers (STCW), 1995, as amended, and in compliance with the Training Matrix. |
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· | Managers shall provide to Owners copies of all newly appointed senior officers’ certification and details of experience prior to their embarkation onboard the Vessel. Owners have the right to review and verify the qualifications of all LNG vessel senior officers prior to their embarkation onboard the Vessel. Owners shall be given the opportunity to approve the certificates and experience of all senior officers a reasonable period prior to their initial embarkation onboard the Vessel), and shall have the discretion to reject any such officer if they do not meet the qualification and training requirements agreed between the Managers and Owners. Owners’ approval shall not be unreasonably withheld or delayed. | |
· | Procedures shall be put in place in the ship’s Safety Management System clearly documenting who is responsible for the ship’s LNG Cargo System including cargo transfer operations. The responsibilities and interface between the Chief Mate and Cargo Engineer shall be clearly defined. The Managers shall identify and document the qualifications of a Person In Charge (PIC) of the Cargo Transfer Watch that exceed the requirements of Regulation V/1 of the STCW 95 requirements. These qualifications shall be made available to Owners upon request. A training program shall be established and documented for junior officers to allow them to meet the qualifications of the PIC of the Cargo Transfer Watch during periods of steady state operation to allow the Chief Officer and Cargo Engineer to take rest periods if required to meet work hour restrictions. This program shall include some mechanism for competency assessment either on a cargo simulator or under supervised conditions during an actual cargo transfer onboard the Vessel. | |
· | The Managers shall establish, as a minimum, the following policies and should ensure that all officers and crew are fully conversant and comply with these policies: |
· | Safety Policy | |
· | Health Policy | |
· | Environmental Policy | |
· | Quality of Service Policy | |
· | Operations Policy | |
· | Navigation Policy | |
· | Maintenance Policy | |
· | Drug and Alcohol Policy |
· | The Managers shall ensure that all seafarers undergo a medical examination, which shall include a drug and alcohol test annually. On completion of a satisfactory medical examination a certificate shall be issued which shall remain valid for the period that the seafarer is onboard the Vessel. An OCIMF-compliant drug and alcohol policy, which includes random drug testing, shall be implemented, and tests conducted directly onboard the Vessel or by an outside |
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contractor to deter the use of illegal drugs and controlled substances by crewmembers while onboard the Vessel. | ||
· | The organization employed by the Managers to provide manning to the Vessel shall be engaged through a contract, which shall stipulate the Manager’s minimum competency and experience requirements. | |
· | At intervals not exceeding two years the Managers shall ensure that the organization providing the manning of the Vessel is audited by a qualified auditor for compliance with the Managers’ minimum requirements. Copies of the audit report, non-compliances and corrective actions shall be provided to Owners, upon request. | |
· | Managers shall implement a system that interrogates and confirms officer’s qualifications and fitness for duty prior to joining the Vessel. | |
· | The Managers shall keep a minimum number of officers employed onboard the Vessel during dry-dock overhaul periods for inspection and quality assurance purposes. As a minimum, these people shall include all Licensed Engineering Officers , the Chief Officer and the Captain. |
MAINTENANCE
· | A Master Maintenance Plan shall be developed for the Vessel and approved by Owners’, provided that Owners’ approval does not conflict with the Vessel’s Class or Flag State requirements. The objective of this plan shall be to maintain the safe, reliable, and efficient operation of the Vessel over its projected 40 year life. This plan shall cover the following areas associated with efficient operation and Vessel maintenance and repair: |
1. | Dry-docking interval | |
2. | Procedures associated with pre-qualification of repair shipyards | |
3. | Hull Roughness measurement and maintenance to an acceptable level | |
4. | Anticipated schedule of maintenance, major overhaul, and refurbishment of all vessel critical equipment | |
5. | A description of the Preventive Maintenance System covering scheduled maintenance of all vessel equipment | |
6. | Inventory Control Procedures and stock of critical spare parts both onboard and ashore | |
7. | Procedures associated with pre-qualification of equipment and spare parts vendors |
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8. | Propulsion plant efficiency performance monitoring procedures and corrective action steps | |
9. | Condition Monitoring Systems and Condition Monitoring based maintenance | |
10. | Means of collecting the necessary date in a structured format to monitor and benchmark equipment reliability performance | |
11. | Performing Root Cause Analysis of equipment failures and equipment/systems reliability improvement | |
12. | Procedures associated with Equipment Obsolescence |
· | The Preventive Maintenance system shall incorporate the equipment suppliers or makers’ instructions and maintenance recommendations. | |
· | All maintenance work carried out on vessel equipment, other than normal routine operational work, shall be carried out using a permit to work system. | |
· | Where equipment isolation is required for operational and/or personnel safety or where hot work is involved all work must be carried out under a written procedure under the guidelines of the Safety Management System’s Lockout/Tag out/Isolation or Hot work permit procedures. |
The following is the proposed maintenance cycle that shall be followed with the Vessel. It is based on a 60 month period coinciding with the Vessel’s 5 year special survey requirements. This cycle may be adjusted through mutual agreement between Manager and Owners. The Managers shall notify Owners in writing at least 30 days in advance of the proposed dates for each 2 day Scheduled Maintenance Window and at least 6 months in advance of the proposed dates for dry-docking the Vessel. The Owners are primarily responsible for coordinating the communication and discussion of the scheduling of maintenance cycle events with the vessel’s charterer.
Month | Maintenance Event | |
6 | 48 Hours Scheduled Maintenance Window | |
12 | 48 Hours Scheduled Maintenance Window | |
18 | 48 Hours Scheduled Maintenance Window | |
24 | 48 Hours Scheduled Maintenance Window | |
30 | Minor Drydocking – Intermediate Survey | |
36 | 48 Hours Scheduled Maintenance Window | |
42 | 48 Hours Scheduled Maintenance Window | |
48 | 48 Hours Scheduled Maintenance Window | |
54 | 48 Hours Scheduled Maintenance Window | |
60 | Major Drydocking – 5 Year Special Survey |
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OPERATIONS
· | The Managers shall establish detailed procedures for all critical operations performed onboard the Vessel as part of the Vessel’s Safety Management System. These procedures shall be developed and tailored specifically to the Vessel. Steps shall be taken to familiarize Vessel personnel with these procedures and a robust internal audit program shall be carried out to verify crew compliance with these established procedures. Checklists should be used where appropriate to assist personnel in following procedures and to provide documented evidence of adherence to procedures. Copies of all work instructions and procedures in force shall be on file in the head office facilities of the Manager. The complete Safety Management System shall be made available in hard or electronic copy to the Owners. | |
· | Changes to operating procedures must be reviewed by a senior officer onboard and approved by shore based management before the changes are implemented. | |
· | The Vessel and crew at all times shall be capable of operating with no venting of cargo boil-off gases to the atmosphere. Any such venting shall immediately be reported to the Owners with a full explanation as to why the venting operation was required and an estimate of venting duration and quantity vented. It is recognized that under rare extreme conditions the cargo tank pressure may approach the P.V. valve release settings. This condition is to be avoided through proper management of cargo during laden voyages and of the heel and spray cooling during ballast voyages, and if necessary to prevent P/V valves from lifting, the Vessel will, when possible, reduce cargo tank pressure below this setting by intentional venting in a controlled manner. | |
· | Whenever the vessel is transiting restricted waters the following operating profile shall normally be adhered to unless specific equipment breakdown prevents this: |
· | The Throttle shall be in Bridge Control | |
· | The Steering Gear systems shall be fully tested (including all standby pumps) prior to entry into restricted waters | |
· | Boilers shall be operated in the Dual Fuel Mode | |
· | Two ship service generators shall be on line for redundancy | |
· | The main engine shall be placed in “Standby” and the engine room shall be manned if there is a high probability of the vessel maneuvering |
· | All inhibits on any trip (safety shutdown) and alarm system must be approved by the Master or Chief Engineer before being applied. A written procedure is necessary to document the operational conditions that must exist before any trip or alarm may be inhibited and what additional safety measures must be put in |
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place when trips or alarms are inhibited. A daily log of all inhibited trips and alarms shall be displayed on the bridge and in the engine room.
INSPECTIONS
· | The Managers shall arrange on a bi annual basis for a fully accredited OCIMF SIRE inspection of the ship. A copy of the report issued by the independent accredited inspector is to be made immediately available to Owners. Within one week of the inspection report being issued the Managers are required to provide a programme to the charterer to indicate how and when any of the agreed comments are going to be corrected. | |
· | The Managers shall arrange for an OCIMF/SIGTTO compliant self-assessment inspection and audit to be carried out onboard the Vessel on an annual basis. This may be carried out as part of the Managers’ internal audit program. Copies of completed annual assessments are to be kept on board available for inspection by Owners upon request. Where the Managers are unable to obtain copies of the OCIMF/SIGTTO inspection guidelines, Managers shall apply their own internal audit/inspection procedures providing that the Manager’s inspection guidelines are subject to review and approval by Owners. | |
· | The Managers shall arrange for Owners’ representative to carry out a detailed assessment and operational audit of the Managers’ head office facilities a minimum of once every two (2) years. The inspection will include but not be limited to Company Profile, Management Review, Document Control, Fleet Management, ISM Safety Management System, Corrective Action, Recruitment and Training, Health, Safety and Environmental Protection, Technical Support, Navigation, Safe Mooring, and Emergency Response. | |
· | The Managers shall ensure that a Vessel inspection report in accordance with Owners’ format is completed annually. This inspection report is to be completed by attending manager’s superintendents during a twelve month period, ensuring that all items are addressed during that period. Copies of completed reports are to be submitted to Owners annually. The Managers may utilize their own internal inspection format and checklist if Owners can review and approve inspection guidelines prior to their use. | |
· | Owners, or their designated representatives, will arrange for qualified auditors to carry out annual audits of the Vessel to confirm that the Vessels safety, quality and environmental protection system is functioning effectively. The Managers are to provide corrective actions to any non-conformities identified during the audits within thirty days of receiving the audit report. Confirmation of implementation is to be carried out at the next audit. Items that would normally be considered non-conformities would include, but not be limited to; crew members not properly qualified or certified, deteriorated physical conditions on the Vessel or equipment malfunctions with no documented schedule for repair, lack of documentation control, insufficient |
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spare parts for normal maintenance, poor accuracy of onboard spare parts inventory, and lack of procedures for work being performed. | ||
· | Owners, or their designated representatives, shall arrange for qualified surveyors to carry out inspections and a condition assessment of the Vessel while undergoing a drydock overhaul as necessary to verify proper planning and adherence to the approved Master Maintenance Plan. |
The Managers will implement contingency planning to be activated in the event of any emergency occurring on or to the Vessel and shall ensure that the contingency plan is exercised annually with the participation of Owners. A copy of the Manager’s contingency plan is to be provided to Owners who shall be included in the Emergency Contact Chart and the nominated recipients for amendments.
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ANNEX “E”
PERMANENT INSTRUCTIONS
The Permanent Instructions shall be provided by the Charterers to the Managers on or prior to the Effective Date and shall be a protocol of communication among Charterers, the Vessel Owners and/or the Managers. The protocol of communication will set out, inter alia, who has authority to issue instructions and provide information to the Vessel and its master and who has authority to receive communications and information from the Vessel.
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ANNEX “F”
FORM OF ACCOUNTING SYSTEM
[MANAGERS TO PROVIDE]
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ANNEX “G”
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (“Agreement”) is made and entered into as of the day of , 2014, by and between GAS-seventeen Ltd., a company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda (the “Owners”), and GasLog LNG Services Ltd., a company incorporated in Bermuda and having a branch office at 69 Akti Miaouli, Piraeus GR 18537, Greece (the “Managers”).
Owners and Managers entered into that certain Ship Management Agreement of even date herewith (the “Management Agreement”). In connection with the Management Agreement, it has been necessary and may continue to be necessary for Owners and Managers to exchange or provide access to certain proprietary and/or confidential information. Unless otherwise defined herein, all capitalized terms shall have the meanings assigned thereto in the Management Agreement.
1. Confidential Information. At all times during the term of the Management Agreement and for two years thereafter, Owners and Managers shall keep confidential and shall not, without the prior written consent of the other party, issue any press release in relation to the transactions evidenced by the Management Agreement or the transactions contemplated thereunder, or disclose to any other person, the terms of the Management Agreement, any information provided to party pursuant to or in connection with the Management Agreement, any information connected with the Vessel (both technical or operational) or any other information identified as confidential or which may be protected by copyright, trademark or intellectual property law, or release copies of any such document which discloses any such information. Any and all such information described herein, together with all notes, analyses, compilations, studies, interpretations or other documents or records prepared by a party receiving such information or its Representatives (defined below), or copies thereof, which contain or otherwise reflect such information made available by are hereinafter referred to as the “Confidential Information.” In addition, Confidential Information shall mean any discussions between the parties concerning the Management Agreement or in connection with the Management Agreement, any and all written, printed or other materials, regardless of form, provided by a party concerning the Management Agreement or in connection with the Management Agreement, whether provided prior to or after the execution of this Agreement, and the substance and content thereof, and all information ascertained through the discussions between employees or representatives of the parties concerning the Management Agreement.
2. Exclusions. The term Confidential Information does not include any information which:
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(a) at the time of disclosure is in the public domain or thereafter becomes generally available other than as a result of a disclosure by the receiving party or its Representatives;
(b) is available to such party or its Representatives on a non-confidential basis from a source other than the disclosing party, provided that such source is not bound by a confidentiality agreement with the disclosing party; or,
(c) has been independently acquired or developed by receiving party or its Representatives without violating any of its obligations under this Agreement or the Management Agreement.
3. Permitted Disclosures. Notwithstanding the provisions of Section 1 above, either party shall be entitled to disclose Confidential Information without the consent of the other:
(a) pursuant to applicable law or order of a court of competent jurisdiction or a regulatory agency with jurisdiction, provided such party agrees prior to any such disclosure to provide the other party with prompt written notice of such requirements;
(b) to its directors, officers, employees, agents, representatives, advisors and consultants (“Representatives”), whose assistance in evaluating the Confidential Information is necessary and who are legally obligated to maintain the Confidential Information in confidence; and
(c) to any charterer or subcharterer of the Vessel.
4. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or reenactment thereof save to the extent necessary to give effect to the provisions of this Clause. Any dispute arising under this Agreement shall be resolved pursuant to the arbitration provisions set forth in Article 19 of the Management Agreement.
5. Term. As to the Confidential Information, the obligations of confidentiality and non-disclosure under this Agreement shall terminate two (2) years after the date on which the Management Agreement is terminated. Upon termination of this Agreement, each party shall return all Confidential Information furnished to it hereunder in written or other tangible form, and copies thereof, and destroy all copies of Confidential Information consisting of notes, analyses, compilations, studies, interpretations or documents or records prepared by it, or its Representatives.
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IN WITNESS whereof the parties have duly signed this Agreement the day and year first above written.
SIGNED for and on behalf
of
GAS-SEVENTEEN LTD.
by
in the presence of
SIGNED for and on behalf
of
GASLOG LNG SERVICES LTD.
by
in the presence of
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ANNEX “H”
INCENTIVE BONUS PLAN
The Incentive Bonus shall be based on an annual assessment of the Key Performance Indicators (“KPIs”) listed below, as divided in three sections: HSSE, Vessel Performance, and Financial Performance.
There will be an annual assessment of the KPIs in each section, and a total Incentive Bonus of $72,000 may be awarded. The total Incentive Bonus shall be allocated across the three sections in three equal awards of $24,000 per section. Exceeding the noted maximum acceptable , KPI in any section will mean that the $24,000 section award will not be paid for that year.
Where the Bonus Target is met for every KPI within a section then the full section award will be made for that section.
Where the KPIs in a section fall between the Maximum acceptable and the Bonus Target, then the level of award will be assessed by mutual agreement.
Key Performance Indicators (KPIs)
The KPIs below are agreed to be reviewed on an annual basis. These are the initial KPIs and may be adjusted and changed as agreed mutually on review.
KPI | Maximum acceptable | Bonus | ||
HSSE | ||||
Fatality | 0 | 0 | ||
Total Recordable Cases | 1 | 0 | ||
Near miss reports | To be agreed annually | To be agreed annually | ||
Oil Spills to water | 0 | 0 | ||
Venting cargo vapor to atmosphere - unless approved or emergency | 0 | 0 | ||
Major Incidents (collisions, groundings, flooding, fire explosion etc.) | 0 | 0 | ||
TMSA | To be agreed annually based on no improvement from the previous year | To be agreed annually based on stretched improvement from the previous year |
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Vessel Performance
Off hire | 12 hours (assuming 4 days per annum total maintenance window (2 days every 6 months) or any other instances with permission) | No off hire |
Vetting | Total deficiencies per inspection 12 low risk – 1 high risk | 5 low risk |
Port State Control | No requirements for rectification prior to departure |
Maximum 2 observations (recorded on Equasis) per vessel inspection |
Fuel consumption (using conversion ) |
Fuel consumption (as measured during quarterly Kyma Performance Trials) equal to that which is indicated in the Gas form C |
5% or more less than that which is indicated in the Gas Form C |
Heel management | Requires two hours cool down alongside |
Fully in compliance with voyage orders (e.g. 1 day heel on arrival and at temperature to load or as instructed by voyage) |
Dry dock control - delivery after repair (discounting yard delays) |
2 days delay from initial planned delivery date |
Delivery on time |
Financial Performance
Compliance with annual budget, against declared expenditure, allowing for exchange rate fluctuations $ to € and approved extra items | 0% above approved budget | Below the approved budget (excluding approved extra items) at an amount to be mutually agreed annually |
Dry docking budget | 0% above approved budget | Below the approved budget (excluding approved extra items) at an amount to be mutually agreed at the award of the drydock contract |
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ANNEX “I”
PRIMARY TERMINALS
Load | Country | Status | ||
Gladstone | Australia | * 2 | ||
Withnell Bay | Australia | 1 | ||
Pluto | Australia | 1 | ||
Idku | Egypt | 1 | ||
Damietta | Egypt | 1 | ||
Punta Europa | Equatorial Guinea | 1 | ||
Discharge | Country | Status | ||
Bahia Blanca FSRU | Argentina | 1 | ||
Zeebrugge | Belgium | 1 | ||
Pecem | Brazil | 1 | ||
Guanabara Bay | Brazil | 1 | ||
Canaport | Canada | 1 | ||
Mejillones | Chile | 1 | ||
Quintero | Chile | 1 | ||
Dalian | China | 1 | ||
Fujian | China | 1 | ||
Guangdong | China | 1 | ||
Jiangsu | China | 1 | ||
Shanghai | China | 1 | ||
Zhejiang | China | 1 | ||
Zhuhai | China | *2 | ||
Montoir | France | 1 | ||
Revithoussa | Greece | 1 | ||
Dahej | India | 1 | ||
Hazira | India | 1 | ||
Chita | Japan | 1 | ||
Futtsu | Japan | 1 | ||
Himeji | Japan | 1 | ||
Senboku II | Japan | I | ||
Kawagoe | Japan | 1 | ||
Sodeshi | Japan | 1 | ||
Niigata | Japan | 1 | ||
Tobata | Japan | 1 | ||
Hitachi | Japan | *2 | ||
Joetsu Thermal Power | Japan | 1 | ||
INPEX Naoetsu | Japan | lA | ||
Negishi | Japan | 1 | ||
Yanai | Japan | 1 | ||
Sodegaura | Japan | 1 | ||
Ohgishima | Japan | 1 | ||
Oita | Japan | 1 | ||
Sakai | Japan | 1 | ||
Load | Country | Status | ||
Bonny Island (Jetty 1,2) | Nigeria | 1 | ||
Snohvit | Norway | *4 | ||
Point Fortin | Trinidad | 1 | ||
Das Island | UAE | 1 | ||
Lake Charles | USA | 1 | ||
Sabine Pass (Cheniere)* | USA | 1 | ||
Discharge | Country | Status | ||
Incheon | Korea | 1 | ||
Pyeongtaek | Korea | 1 | ||
Tongyeong | Korea | 1 | ||
Gwang Yang | Korea | 1 | ||
Mina Al Ahmadi | Kuwait | 1 | ||
Bintulu | Malaysia | 1 | ||
Altamira | Mexico | 1 | ||
Costa Azul | Mexico | 1 | ||
Sines | Portugal | 1 | ||
Ras Laffan | Qatar | 1 | ||
Singapore | Singapore | 1 | ||
Barcelona | Spain | 1 | ||
Bilbao | Spain | 1 | ||
Cartagena | Spain | 1 | ||
Huelva | Spain | 1 | ||
Sagunto | Spain | 1 | ||
Map Ta Phut | Thailand | 1 | ||
Rotterdam | The Netherlands | 1 | ||
Yung-An | Taiwan | 1 | ||
Taichung | Taiwan | 1 | ||
Aliaga | Turkey | 1 | ||
Marmara Ereglisi | Turkey | *3 | ||
Jebel Ali FSRU | UAE | 1 | ||
Elba Island | USA | 1 | ||
Cameron | USA | 1 | ||
Pascagoula | USA | 1 | ||
Freeport | USA | 1 | ||
Isle of Grain | UK | 1 | ||
Dragon | UK | 1 |
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* 1 A - Primary Terminals ~ Pending
Signifies terminals where some terminal data is not complete, but which will be treated as Primary Terminals so long as, in order for the Vessel to be accepted by the terminal, no changes are required to the principal dimensions of the Vessel, including: length, breadth, draft, displacement, location of cargo manifolds and lay-out of cargo manifolds (pipe size, layout of liquid and vapour lines, manifold dimensions, etc). Owners and Charterers to cooperate to complete any missing terminal data and to achieve Terminal acceptance and any minor changes to the Vessel (gangway landing areas/rails, etc.) will be the responsibility of the Owners.
*2 Terminals Under Construction
Signifies terminals that are under construction at the date of signing the Charter party and are not Primary Terminals (“Terminals Under Construction”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Terminals Under Construction are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Terminal Under Construction. Once Owners are reasonably satisfied that a Terminal Under Construction is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Terminal Under Construction has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Terminal Under Construction to the list of Primary Terminals.
*3 Terminals With Compatibility Issues
Signifies terminals which have identified compatibility issues and are not Primary Terminals. However, Owners agree to allow the Vessel to call at such terminals provided: (i) they are reasonably satisfied that there is sufficient compatibility to allow safe navigation , loading and/or discharge; and (ii) the terminal have confirmed to Owners their acceptance of the Vessel to call, and carry out cargo operations at their terminal.
*4 Terminals Pending Further Data
Signifies terminals in respect of which, at the date hereof, there is insufficient information available in order to allow Owners to assess whether the terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge (“Pending Terminals”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Pending Terminals are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Pending Terminals. Once Owners are reasonably satisfied that an Pending Terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Pending Terminal has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Pending Terminals to the list of Primary Terminals.
Exhibit 10.23
Private and Confidential
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS (*****).
LNG TIME CHARTER PARTY
BETWEEN
GAS-sixteen Ltd.
AND
METHANE SERVICES LIMITED
4 - April- 2014
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TABLE OF CONTENTS
1. | Description and Condition of Vessel | 5 | |
2. | Shipboard Personnel and their Duties | 8 | |
3. | Duty to Maintain | 9 | |
4. | Trading Limits and Safe Places | 10 | |
5. | Bunkers and LNG Heel at Delivery and Redelivery | 12 | |
6. | Grade of Bunkers | 13 | |
7. | Period, Delivery, Redelivery, Laydays and Cancelling | 13 | |
8. | Owners to Provide | 15 | |
9. | Charterers to Provide | 15 | |
10. | Rate of Hire | 16 | |
11. | Payment of Hire | 16 | |
12. | Space Available to Charterers | 17 | |
13. | Instructions and Logs | 18 | |
14. | Bills of Lading | 18 | |
15. | Conduct of Vessel’s Personnel | 20 | |
16. | LNG Retention/Supply for Operational Purposes | 20 | |
17. | Pilots and Tugs | 22 | |
18. | Super-Numeraries | 22 | |
19. | Sub-letting/Assignment/Novation | 22 | |
20. | Final Voyage | 23 | |
21. | Loss of Vessel | 23 | |
22. | Off-hire | 24 | |
23. | Ship to Ship Transfers and FPSO/FSRU Cargo Operations | 28 | |
24. | Periodical Dry-dock | 29 | |
25. | Ship Inspection | 30 | |
26. | Key Vessel Performance Criteria | 31 | |
27. | Salvage | 32 | |
28. | Lien | 32 | |
29. | Exceptions | 33 | |
30. | Injurious Cargoes | 34 |
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31. | Disbursements | 34 | |
32. | Laying-up | 34 | |
33. | Requisition | 34 | |
34. | Outbreak of War | 34 | |
35. | Additional War Expenses | 35 | |
36. | War Risks | 35 | |
37. | Piracy | 36 | |
38. | Both to Blame Collision Clause | 37 | |
39. | New Jason Clause | 38 | |
40. | Clause Paramount | 39 | |
41. | Insurance/ITOPF | 39 | |
42. | Export Restrictions | 40 | |
43. | Business Principles | 40 | |
44. | Drugs and Alcohol | 41 | |
45. | Pollution and Emergency Response | 41 | |
46. | ISPS Code/USMTSA 2002 | 42 | |
47. | Law and Litigation | 43 | |
48. | Confidentiality | 43 | |
49. | Construction | 43 | |
50. | Notices | 44 | |
51. | Invoices | 45 | |
52. | Ship Contact details | 45 | |
53. | Definitions | 46 | |
54. | Claim Validity Period | 47 | |
55. | Eligibility & Compliance | 47 | |
56. | Vapour Pressure | 49 | |
57. | Cargo Transfer Inspection and System Calibration | 49 | |
58. | Vessel Data | 51 | |
59. | Third Party Vetting Information | 51 | |
60. | Taxes | 51 | |
61. | U.S. Compliance | 51 | |
62. | Compliance with the Bribery Act, 2010 (England and Wales) and the US Foreign Corrupt Practices Act (FCPA) | 51 | |
63. | Owners’ Defaults | 55 | |
64. | Charterers’ Defaults | 56 | |
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65. | Quiet Enjoyment | 57 | |
66. | Rights of Third Parties | 58 | |
67. | Consequential Losses | 58 | |
68. | Health, Safety, Security, Environment Reporting Requirements | 58 | |
69. | Ballast Water Treatment (BWT) System | 59 | |
70. | Counterparts | 59 | |
APPENDIX A – Terminal Compatibility List | 61 | ||
APPENDIX B – Gas Form C for the Vessel | 63 | ||
APPENDIX C – Detailed Performance Criteria | 69 | ||
APPENDIX E – BG Business Principles | 79 | ||
APPENDIX F – Norwegian Sale Form | 84 | ||
APPENDIX G – Letter of Quiet Enjoyment | 85 |
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IT IS THIS DAY AGREED between GAS-sixteen Ltd., an exempted company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, RG6 1PT, Bermuda (hereinafter referred to as “Owners”), being owners of the good Liquefied Natural Gas Carrier called “Methane Rita Andrea” (hereinafter referred to as “the Vessel”) described as per Clause 1 hereof and METHANE SERVICES LIMITED, a company incorporated under the laws of England and Wales and having its registered office at 100 Thames Valley Park Drive, Reading, Berkshire RG6 1PT, United Kingdom (hereinafter referred to as “Charterers”):
1. | Description and Condition of Vessel |
At the date of delivery of the Vessel under this charter and throughout the charter period:
(a) | she shall be classed by a classification society (“Classification Society”), which is a member of the International Association of Classification Societies; |
(b) | if she is fifteen years old or over she shall obtain and maintain a LNG Condition Assessment Programme (“CAP”) of not less than / worse than two (2); |
(c) | she shall be in every way fit to load, carry, discharge and measure Liquefied Natural Gas (“LNG”); |
(d) | she shall be tight, staunch, strong, in good order and condition, and in every way fit for the service, with her machinery, boilers, hull and other equipment (including but not limited to hull stress calculator, radar, computers and computer systems) in a good and efficient state; |
(e) | her tanks, valves and pipelines shall be liquid and gas tight; she shall have a working inert gas system and nitrogen generator with officers and crew experienced in the operation of both; |
(f) | she shall be in every way fitted for burning fuels, in accordance with the grades specified in Clause 6 hereof: |
(i) | at sea, fuel oil or marine diesel oil in any proportion with LNG Boil-Off or 100% LNG Boil-Off for main propulsion (allowing the use of diesel oil for pilot). When transiting and manoeuvring in restricted waters only dual fuel mode is permitted; Owners and Charterers will discuss in good faith future operational process changes to allow 100% boil-off during transiting and manoeuvring (provided it can be demonstrated to be safe and reliable for the proposed operating modes); and heavy fuel oil, marine diesel oil and marine gas oil for auxiliaries; |
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(ii) | in port, fuel oil or marine diesel oil in boilers; and fuel oil or marine diesel oil in any proportion with LNG Boil-Off or 100% LNG Boil-Off (however always using a minimal amount of diesel oil for pilot purposes) for power generation; |
(iii) | in all cases able to comply with all national and international emissions compliance regulations applicable to Charterers’ required trading routes in force at the keel laying date for a minimum of six (6) days at the Service Speed without burning LNG; although Charterers shall allow Owners to take advantage of all relevant national and international waivers that exist related to the year of construction for future changes in regulations. |
(iv) | in all cases able to maintain continuous safe operation of the vessel and all auxiliary equipment during switchover between different types of fuel in any consumer. |
(g) | she shall have all her instrumentation calibrated and certified in accordance with the requirements of the Vessel’s Classification Society; |
(h) | she shall have her cargo measuring equipment calibrated by a recognised calibration company as referenced in Clause 57 hereof and certified in accordance with the requirements of the Vessel’s Classification Society; |
(i) | she shall have her inter-barrier and insulation spaces prepared and performing as per international regulations, and her containment system design conditions |
(j) | she shall comply with the regulations in force so as to enable her, if her size permits, to pass through the Suez Canal and Panama Canal by day and night without delay; |
(k) | she shall have on board all certificates, documents and equipment required from time to time by any applicable law to enable her to perform the charter service without delay. For the avoidance of doubt this will include, but will not be limited to, the Vessel’s Certificate of Financial Responsibility; |
(l) | she shall comply with the description in the LNG Gas Form C appended hereto as Appendix B, provided however that if there is any conflict between the provisions of this Form C and any other provision, including this Clause 1, of this charter such other provisions shall govern; |
(m) | her ownership structure, flag, registry, Classification Society and management company shall not be changed without prior approval of Charterers, which shall not be unreasonably withheld |
(n) | Owners shall complete, on board the Vessel, the daily template from Charterers’ voyage management system. |
(o) | Owners shall operate: |
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(i) | a Safety Management System (“SMS”) that shall comply as a minimum with the following regulations and/or industry standards, plus any additions, modifications or subsequent versions thereof: International Safety Management Code (“ISM Code”) for the Safe Operation of Ships and for Pollution Prevention, International Ship and Port Security Code (“ISPS”), International Convention for the Prevention of Pollution From Ships, 1973 as modified by the Protocol of 1978 (“MARPOL”), International Convention for Safety of Life at Sea, 1974 (“SOLAS”), International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1995 (“STCW”), best practice recommendations from the Tanker Management Self Assessment (“TMSA”), the International Safety Guide for Oil Tankers and Terminals (“ISGOTT”), Society of International Gas Tanker and Terminal Operators (“SIGTTO”) and the Code Of Safe Working Practices (“COSWOP”); |
(ii) | a documented safe working procedures system within the SMS to address the Health Safety Security and Environment (“HSSE”) risks specific to the scope of work set out in this charter party and the management of controls to eliminate, reduce or mitigate these risks as low as reasonably practicable. Owners’ operations shall be certified, as a minimum to ISO:9001:2008; |
(iii) | a documented environmental management system to protect environmental resources by applying best available techniques to minimise or, where possible, eliminate any direct or indirect impact from operations; Owners shall meet the requirements of ISO 14001:2004 or demonstrate that plans are in place to obtain this certification within the next twelve (12) months from the charter start date. |
(iv) | Owners shall operate a Ship Energy Efficiency Management Plan (SEEMP), in accordance with IMO MEPC.l/Circ.683, to continuously improve the efficiency of ship operations. |
(v) | a documented accident/incident reporting system compliant with flag state requirements. |
(p) | Owners shall arrange at their expense for a Ship Inspection Report (SIRE) inspection to be carried out at intervals of six months plus or minus thirty days, subject to Vessel’s trading pattern and availability of surveyors. Upon delivery, Vessel shall have a SIRE report, if this is not possible then a non operational inspection will be permitted provided a further vetting inspection is carried out at the first available opportunity and is conducted during cargo operations. |
(q) | Owners shall ensure that all crew are provided an orientation training programme for the Vessel with training relevant under the SMS. Owners shall ensure that all subcontractors visiting the Vessel shall receive a briefing or information on the parts of the SMS |
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relevant to their visit and comply with the Owners’ HSSE policies and procedures during the visit.
(r) | Owners shall take all necessary precautions and measures specific for piracy deterrence in piracy prone areas of the world. This shall include using reference material and industry guidelines such as OCIMF Best management Practices (BMP). |
2. | Shipboard Personnel and their Duties |
(a) | At the date of delivery of the Vessel under this Charter and throughout the charter period: |
(i) | she shall have a full and efficient complement of master, officers and crew for a Vessel of her tonnage, who shall in any event be not less than the number required by the laws of the flag state and who shall be trained to operate the Vessel and her equipment competently and safely; |
(ii) | all shipboard personnel shall hold valid certificates of competence in accordance with the requirements of the law of the flag state; |
(iii) | all shipboard personnel shall be trained in accordance with Appendix D and the relevant provisions of the International Convention on Standards of Training, Certification and Watchkeeping (STCW) for Seafarers, 1995 or any additions, modifications or subsequent versions thereof. Shipboard personnel shall be trained under a system certified to the SIGTTO “LNG Shipping Suggested Competency Standards 2005” or subsequent versions thereof. |
(iv) | there shall be on board sufficient personnel with a good working knowledge of the English language to enable cargo operations at loading and discharging places to be carried out efficiently and safely and to enable communications between the Vessel and those loading the Vessel or accepting discharge therefrom to be carried out quickly and efficiently; |
(v) | the terms of employment of the Vessel’s staff and crew shall always remain acceptable to the International Transport Worker’s Federation and the Vessel shall at all times carry a Blue Card; |
(vi) | the Vessel shall always operate with safe manning levels that comply with STCW and with the work hour limits set out by the International Labour Organisation (ILO) including the Maritime Labour Convention 2006 (MLC) as designated in Appendix D. The Vessel shall maintain a STCW record of deviation hours for all officers and crew aboard the Vessel and provide this record to the Charterers upon request. If Charterers express concern with the STCW deviation hours, Charterers and Owners shall discuss and agree to a mitigation plan that shall ensure the Vessel can comply with the requisite STCW rest hours. |
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(vii) | Charterers shall have the right to review the qualifications of the Master, Chief Officer, Chief Engineer, Second Engineer, Electrical Engineer, Electronics Officer, and the Gas Engineer. Charterers shall also have the right to interview these officers, at Charterers’ cost. |
(viii) | the Vessel’s officers shall comply with the requirements set out in Appendix D. |
(b) | Owners guarantee that throughout the charter service the master shall with the Vessel’s officers and crew, unless otherwise ordered by Charterers: |
(i) | prosecute all voyages with the utmost despatch; |
(ii) | render all customary assistance; and |
(iii) | load and discharge cargo as rapidly as possible when required by Charterers or their agents to do so, by night or by day, but always in accordance with the laws of the place of loading or discharging (as the case may be) and in each case in accordance with any applicable laws of the flag state and within the safe capabilities of the Vessel and crew. |
(c) | Owners shall at all times have responsibility for the proper stowage of the cargo and shall keep a strict account of all cargo loaded, Boil-Off, commencement and termination of forced cargo vaporisation and cargo discharged. |
3. | Duty to Maintain |
(a) | Throughout the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 29 hereof) requires steps to be taken to maintain or restore the conditions stipulated in Clauses 1 and 2(a), exercise due diligence so to maintain or restore the Vessel. |
(b) | If at any time whilst the Vessel is on hire under this Charter the Vessel fails to comply with the requirements of Clauses 1, 2(a) or 12 then hire shall be reduced to the extent necessary to indemnify Charterers for such failure. If and to the extent that such failure affects the time taken by the Vessel to perform any services under this Charter, hire shall be reduced by an amount equal to the value, calculated at the rate of hire, of the time so lost. Any reduction of hire under this sub-Clause (b) shall be without prejudice to any other remedy available to Charterers, but where such reduction of hire is in respect of time lost; such time shall be excluded from any calculation under Clause 26 and Appendix C. |
(c) | If Owners are in breach of their obligations under Clause 3(a), Charterers may so notify Owners in writing and if, after the expiry of ***** following the receipt by Owners of |
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any such notice, Owners have failed to demonstrate to Charterers reasonable satisfaction the exercise of due diligence as required in Clause 3(a), the Vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence.
(d) | Owners shall advise Charterers immediately, in writing, should the Vessel fail an inspection by, but not limited to, a governmental and/or port state authority, and/or terminal and/or major charterers of similar tonnage. Owners shall simultaneously advise Charterers of their proposed course of action to remedy the defects, which have caused the failure of such inspection. |
(e) | If, in Charterers reasonably held view: |
(i) | failure of an inspection, or, |
(ii) | any finding of an inspection, |
referred to in Clause 3 (d), prevents normal commercial operations then Charterers shall have the option to place the Vessel off-hire from the date and time that the Vessel fails such inspection, or becomes commercially inoperable, and the Vessel shall remain off hire until the earlier of the date and time that the Vessel passes a re-inspection by the same organisation, or until the date and time that Owners and Charterers mutually agree that the Vessel is in a condition to pass such re-inspection or until the date and time that the Vessel becomes commercially operable, which shall be in a position no less favourable to Charterers than at which she went off-hire. Owners shall provide Charterers with full details of their plans to remedy the cause of the failure or finding and the period within which this remedy will be completed.
(f) | Furthermore, at any time while the Vessel is off-hire for a continued period of ***** under this Clause 3 (with the exception of Clause 3(e)(ii)), Charterers have the option to terminate this Charter by giving notice in writing with effect from the date on which such notice of termination is received by Owners or from any later date stated in such notice. This sub-Clause (f) is without prejudice to any rights of Charterers or obligations of Owners under this Charter or otherwise (including without limitation Charterers’ rights under Clause 22 and 63 hereof). |
(g) | In the event that during this charter the Vessel undergoes modifications related to the LSGO conversion of the current Kawasaki main boilers, as per the agreement between GasLog and Wartsila dated 14 August 2012 as instructed by BG, the Vessel shall remain on-hire for all such work related to this (including commissioning time), and all costs of such modifications shall be reimbursed by Charterer. |
4. | Trading Limits and Safe Places |
(a) | The Vessel shall be used for the purpose of carrying all lawful merchandise (subject always to Clause 30) including in particular, LNG, in any part of the world as Charterers |
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shall direct, subject to the limits of the current British Institute Warranties and any subsequent amendments thereof. Notwithstanding the foregoing, but subject to Clause 36, Charterers may order the Vessel beyond such limits provided that Owners consent thereto (such consent not to be unreasonably withheld) and that Charterers pay for any insurance premium required by the Vessel’s underwriters as a consequence of such order.
(b) | Charterers shall use due diligence to ensure that the Vessel is only employed between and at safe places (which expression when used in this Charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, bunker barges and other locations including locations at sea, subject to rights and obligations under Clause 23) where she can safely lie always afloat. Notwithstanding anything contained in this or any other Clause of this Charter, Charterers do not warrant the safety of any place to which they order the Vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid. Subject as above, the Vessel shall be loaded and discharged at any places as Charterers may direct. |
(c) | Owners warrant that the Vessel is compatible with the LNG Terminals listed in Appendix A for berthing, unberthing, loading and discharging LNG cargo without modification to the Vessel. In the event that such modification to the Vessel becomes necessary as a result of changes in international regulations, national law or standards and/or are required by the Vessel’s Classification Society or flag state, the cost of such modification shall be for Owners’ account, and the Vessel shall be off-hire for the time required to effect such modifications unless this can be achieved without affecting the performance of the Vessel under this Charter. |
(d) | If Charterers request, Owners shall agree to perform compatibility studies of terminals not listed as Primary Terminals in Appendix A hereof. Costs of routine communications and documentation support, such as submission of Gas Form C, Optimoor® studies and other data requests shall be for Charterers’ account. Required travel by Owners’ representative to the terminal as specifically requested and approved by Charterers shall be for Charterers’ account. If following such compatibility studies, Owners deem a terminal compatible; such terminal shall be added to the Primary Terminals list in Appendix A. |
(e) | If Charterers direct the Vessel to any LNG loading or receiving facilities other than the LNG Terminals listed in Appendix A, Charterers shall give notice to Owners sufficiently in advance thereof so as to enable Owners to comply with environmental, fire prevention, health, safety and other similar regulations, including but not limited to compatibility studies of those terminals, applicable at such other place including any alteration in ship design. The reasonable cost and the necessary time taken to comply with such regulations, necessary, solely, to allow the Vessel to load or discharge at such other place, shall be for Charterers account. Charterers shall reimburse such costs to Owners against presentation to Charterers of appropriate invoices and supporting vouchers, except insofar as Owners are otherwise obliged to bear such costs in accordance with this Charter. For purposes of this sub Clause 4(d), should an alteration in ship design be required, Charterers and Owners shall discuss in good faith the requirement and its |
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impact on the Vessel, with the aim of ensuring that Owners are not penalized by lower performance, reduced residual value, or similar.
(f) | In the event that at any time during the term of this Charter, Charterers request and Owners agree that upgrading works shall be carried out to the Vessel which constitute an alteration on the Vessel from that prevailing at the time of Delivery, the cost of such upgrading shall be agreed between Owners and Charterers. For the avoidance of doubt, if a “Change of Law” requires the Vessel to be modified in order for the Vessel to continue to operate in accordance with Clause 4 and this Charter, the cost of such modification shall be for Owners’ account. For the purpose of this sub Clause (f), “Change of Law” shall be defined as any law, statute, act, ordinance, rule, regulation, requirement or order of any international or national government or regulatory agency that comes into effect after the date of execution of this Charter. |
(g) | Notwithstanding the above, the Vessel shall not be required to force ice or to follow icebreakers. |
(h) | The Vessel shall not trade in breach of UN or other relevant sanctions. |
5. | Bunkers and LNG Heel at Delivery and Redelivery |
(a) | Upon delivery, Charterers shall retain ownership of all HFO, gas oil and diesel on board. Original supplier invoices must be provided by Charterers to Owners. For the avoidance of doubt, any LNG on board the Vessel upon delivery, was and remains the property of Charterers. |
(b) | The Vessel shall be redelivered to Owners with its cargo tanks under natural gas vapours unless Owners declare the option to retain up to 3,000m3 of LNG heel at last discharge. Such option shall be declared no later than five (5) days prior to the loading of the final cargo and will be priced at the LNG Price. |
(c) | Upon redelivery, Owners shall purchase all HFO, gas oil and diesel on board at the documented cost of each. Original supplier invoices must be provided by Charterers to Owners. |
(d) | Throughout the Charter (and upon delivery and redelivery) the Vessel shall operate with at least a quantity of bunkers or Fuel Oil Equivalent, as defined in Clause 53, and a quantity of diesel oil and nitrogen (if nitrogen is applicable) on board sufficient to prosecute safely each voyage or reach the nearest safe bunker port. The above amount shall be in addition to a safety reserve of fuel oil, which would enable the Vessel to steam at the Service speed defined in this Charter for a total of five days. |
(e) | Notwithstanding anything contained in this Charter all bunkers and LNG Heel on board the Vessel shall, throughout the duration of this Charter, remain the property of Charterers or |
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their nominee and can only be purchased on the terms specified in the Charter at the end of the charter period or, if earlier, at the termination of the Charter. |
(f) | The Master shall provide an on-hire and off-hire certificate containing the Remaining On Board (ROB) quantities for LNG, HFO, gas oil and diesel oil upon both delivery and redelivery of the Vessel. Owners or Charterers may choose to use an independent surveyor to verify ROB quantities at their own cost, however, in any dispute, the surveyor numbers shall prevail. |
6. | Grade of Bunkers |
(a) | Charterers shall supply fuel oil whose properties comply at a minimum with those set out in ISO Standard 8217:2005 tor RMH380 and diesel oil as per ISO 8217:2005 DMB (with any subsequent amendments thereto) and marine gas oil as per ISO 8217:2005 DMX (with any subsequent amendments thereto). If Owners require the Vessel to be supplied with more expensive bunkers they shall be liable for the extra cost thereof. |
(b) | Should Charterers trade the Vessel into a Emissions Control Area (“ECA”) as defined in Annex VI of MARPOL, then the Charterers shall either supply low sulphur fuel oil of a quality which the Vessel can use and which will satisfy the ECA requirements or allow forced vaporisation of cargo for fuel, sufficient for the Vessel’s need while in the restricted area, and the Owners shall provide segregated storage for the low sulphur fuel oil. If Owners are unable to provide segregated bunker tanks, then Owners shall reimburse Charterers for the additional cost of purchasing low sulphur fuel oil which is consumed outside of a ECA zone. |
(c) | Owners and Charterers can request the other party to provide bunker survey data to verify the quality of the bunkers on board. This request can be made at any time during the charter period or the Claim Validity Period. |
7. | Period, Delivery, Redelivery, Laydays and Cancelling |
a) | Owners agree to let and Charterers agree to hire the Vessel commencing from the time and date of delivery to Charterers as provided in Clause 7(b) until time and date of redelivery to Owners as provided in Clause 7(c) |
b) | The Vessel shall be delivered by Owners to Charterers immediately after delivery of the Vessel to the Owners pursuant to the Memorandum of Agreement between the Owners and Brazil Shipping II Limited as appended hereto in Appendix F. |
c) | The Vessel shall be chartered for a period of six (6) years plus up to ***** at Charterers’ option (“Firm Charter Period”) commencing on delivery of the Vessel in accordance with Clause 7 (b). |
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d) | Subject to Clause 7(e), the Charterers shall have the right to extend the Firm Charter Period by one (1) additional period of either three (3) years or five (5) years (an “Option Charter Period”) plus or minus up to ***** at Charterers’ option. |
e) | Provided that the equivalent Option Charter Period has only been exercised under one of the following: |
i. | the time charter agreement between the Charterer and the registered owner of the [m.v. “Methane Jane Elizabeth” IMO number 9307190 dated the date hereof; or |
ii. | the time charter agreement between the Charterer and the registered owner of the [m.v. “Methane Lydon Volney” IMO number 9307205 dated the date hereof. |
the Charterers shall have the right to exercise one of the two Option Charter Periods in respect of the Vessel. If none of the above referenced time charters have had an Option Charter Period declared, then the Option Charter Period for the Vessel under this contract shall be known as the “Vessel 1 Option Charter Period”. If one of the above referenced time charters has had an Option Charter Period declared, then an Option Charter Period declared under this contract shall be known as the “Vessel 2 Option Charter Period”. For avoidance of doubt, Option Charter Periods cannot be declared simultaneously.
If Owners have proposed and/or secured the Vessel for employment which is not possible if the Option Charter Period is declared for this Vessel, both parties shall discuss the situation in good faith, with the understanding that Charterer could declare Option Charter Period on a sister vessel in lieu thereof.
(g) | The ‘plus or minus’ days must be declared by Charterers no later than ***** in advance of the expiration of the relevant Option Charter Period if exercised. |
(h) | If exercised, Charterers shall declare the Vessel 1 Option Charter Period option no later than 17:00 hours London time, ***** before the termination of the Firm Charter Period. |
(i) | If exercised, Charterers shall declare the Vessel 2 Option Charter Period option no later than 17:00 hours London time, ***** before the termination of the Firm Charter Period. |
(j) | Charterers shall redeliver the Vessel at the pilot boarding station outbound at last discharge port or at one safe anchorage Gibraltar or Singapore at Charterers’ option, such option to be declared ***** before loading of the last cargo. In the event that redelivery takes place DLOP last discharge port and not at either Gibraltar or Singapore, Charterers shall pay Owners a lump sum Ballast Bonus payment equivalent to the notional ballast voyage calculated for hire, fuel, and war risk or piracy routing and costs to return the vessel from the last discharge port to either Gibraltar (if last discharge occurs West of Suez) or Singapore (if last discharge takes place East of Suez). |
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Hire and fuel consumption shall be calculated basis Service Speed. For the purpose of calculating the notional ballast leg, distances shall be used on Dataloy Distance Tables as found on www.dataloy.com
(k) | Charterers shall provide 30, 25, 15, 7, 5, 4, 3, 2, 1 days’ notice of redelivery. |
(l) | Any time during which the Vessel is off-hire under this Charter may be added to the charter period in Charterers’ option up to the total amount of time spent off-hire. In such cases the rate of hire will be that prevailing at the time the Vessel would, but for the provisions of this Clause, have been redelivered. Charterers shall exercise this option no later than ***** before the date on which the Charter would otherwise terminate. Any periods of off-hire occurring after the time and date on which Charterers have declared their option may be added to the charter period as long as Charterers have declared that they will be so added within ***** of the end of the relevant period of off-hire. |
8. | Owners to Provide |
Owners undertake to provide and to pay for all provisions, wages (including but not limited to all overtime payments), and shipping and discharging fees and all other expenses of the master, officers and crew; also, except as provided in Clauses 4, 9(c) and 35 hereof, for all insurance on the Vessel, for all deck, cabin and engine-room stores, lubricating oil, and for water; for all dry- docking, overhaul, maintenance and repairs to the Vessel; and for all fumigation expenses and de-rat certificates. Owners’ obligations under this Clause 8 extend to all liabilities for taxes, customs or import duties arising at any time during the performance of this Charter in relation to the personal effects of the master, officers and crew, and in relation to the stores, provisions and other matters aforesaid which Owners are to provide and pay for and Owners shall refund to Charterers any sums Charterers or their agents may have paid or been compelled to pay in respect of any such liability. Any amounts allowable in general average for wages and provisions and stores shall be credited to Charterers insofar as such amounts are in respect of a period when the Vessel is on-hire.
9. | Charterers to Provide |
(a) | Charterers shall provide and pay for all fuel (which includes fuel consumed for the production of nitrogen and all Boil-Off gas, which in accordance with Charterers instructions is to be used as fuel) which must be supplied from a bunker supplier who applies the standards required by a first class operator, towage and pilotage and shall pay agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues and all charges other than those payable by Owners in accordance with Clause 8 hereof, provided that all charges for the said items shall be for Owners’ account when |
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such items are consumed, employed or incurred for Owners’ purposes or while the Vessel is off-hire (unless such items reasonably relate to any service given or distance made good and taken into account under Clause 22); and provided further that any fuel used in connection with a general average sacrifice or expenditure shall be paid for by Owners.
(b) | In respect of bunkers consumed for Owners’ purposes these will be charged on each occasion by Charterers at the Fuel Price. |
(c) | If the trading limits of this charter include ports in the United States of America and/or its protectorates then Charterers shall reimburse Owners for port specific charges relating to additional premiums charged by providers of oil pollution cover, when incurred by the Vessel calling at ports in the United States of America and/or its protectorates in accordance with Charterers’ orders. |
10. | Rate of Hire |
(a) | Charterers shall pay for the use and hire of the Vessel to the Owners at the rate of ***** per day or pro rata for any day thereof for the Firm Period. |
(b) | Charterers shall pay for the use and hire of the Vessel to the Owners at the rate of ***** per day or pro rata for any day thereof during the Vessel Option Period. |
(c) | Charter hire shall commence from the time and date of delivery of the Vessel to Charterers until the time and date of redelivery to Owners. |
11. | Payment of Hire |
(a) | Subject to Clause 3 (c) and 3 (e) and any other relevant provision herein, payment of hire shall be made in immediately available funds in United States Dollars to the account stipulated below: |
Bank: *****
SWIFT: *****
Account Number: *****
IBAN: *****
Account Name: *****
Currency: USD
Corresponding bank in USD: ***** – SWIFT: *****
(b) | Owners shall invoice Charterers monthly in advance for the payment of hire and Charterers shall pay the invoice in immediately available funds by the later of the following: |
(i) | eight (8) Banking Days after receipt of invoice; or |
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(ii) | the last Banking Day prior to the start of the initial hire period or subsequent hire month. |
(c) | Payment of hire shall be made in immediately available funds, less: |
(i) | any hire paid which Charterers reasonably estimate to relate to off-hire periods, and; |
(ii) any amounts disbursed on Owners’ behalf, any advances and commission thereon, and charges which are for Owners’ account pursuant to any provision hereof, and;
(iii) | any amounts due or reasonably estimated to become due to Charterers under Clause 3 (b), 16 or 26 and Appendix C hereof, |
any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained. Charterers shall not be responsible for any delay or error by Owners’ bank in crediting Owners’ account provided that Charterers have made proper and timely payment.
In default of such proper and timely payment:
(i) | Owners shall notify Charterers of such default and Charterers shall within ***** of receipt of such notice pay to Owners the amount due, including interest, failing which Owners may withdraw and/or terminate the Vessel from the service of Charterers without prejudice to any other rights Owners may have under this Charter or otherwise. The period of ***** shall be extended by any period during which the Charterers are prevented from making payment by the Office of Foreign Asset Control in the United States of America (OFAC) and |
(ii) | interest on any amount due but not paid on the due date shall accrue from the day after that date up to and including the day when payment is made, at a rate per annum which shall be ***** per annum above LIBOR (as in effect on the day when such sum was originally due), or, if no such interest rate is published on that day, the interest rate published on the next preceding day on which such a rate was so published, computed on the basis of a 360 day year of twelve 30-day months, compounded semi-annually. |
12. | Space Available to Charterers |
The whole reach, burthen and decks (but no more than she can reasonably stow and safely carry) on the Vessel and any passenger accommodation (including Owners’ suite) shall be at Charterers’ disposal, reserving only proper and sufficient space for the Vessel’s master, officers, crew, tackle, apparel, furniture, provisions and stores, provided that the weight of stores on board
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shall not, unless specially agreed, exceed 250 tonnes (excluding fresh water) at any time during the charter period.
13. | Instructions and Logs |
Charterers shall from time to time give the master all requisite instructions and sailing directions, and the master shall keep a full and correct log of the voyage or voyages, which Charterers or their agents may inspect as required. The master shall when required furnish Charterers or their agents with a true copy of such log and with properly completed loading and discharging port sheets and voyage reports for each voyage and other returns as Charterers may require. Charterers shall be entitled to take copies at Owners’ expense of any such documents, which are not provided by the master.
A controlled copy of Charterers’ Instructions will be placed on board the Vessel. The instructions in this document shall be followed by the crew. If the Vessel or crew cannot comply with such Instructions, immediate notification is required in accordance with Clause 50. In the event of any conflict between the Instructions and this Charter, the Charter shall prevail.
Owners shall be responsible for any time, cost, delay or loss associated with Vessel deviating from Charterers’ voyage instructions, including loading any cargo quantity in excess or short of voyage orders provided such time, cost delay or loss is due to Owners’ fault and negligence. If a discrepancy arises at a loading terminal, the Master shall notify Charterers immediately and in any event before loading to clarify the situation. Owners shall be responsible for any consequences or additional expenses arising from Owners’ non-compliance with this Clause.
14. | Bills of Lading |
(a) | The master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the Vessel, agency and other arrangements, and shall sign Bills of Lading as Charterers or their agents may direct (subject always to Clauses 36 (a) and 41) without prejudice to this Charter. Charterers hereby indemnify Owners against all consequences or liabilities that may arise: |
(i) | from signing Bills of Lading in accordance with the directions of Charterers or their agents, to the extent that the terms of such Bills of Lading fail to conform to the requirements of this Charter, provided, however, that no further indemnity beyond that expressed in this Clause 14 or elsewhere in this Charter shall be implied against Charterers; |
(ii) | from any irregularities in papers supplied by Charterers or their agents. |
(b) | If Charterers by telex, facsimile or other form of written communication that specifically refers to this Clause request Owners to discharge a quantity of cargo either without Bills |
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of Lading and/or at a discharge place other than that named in a Bill of Lading and/or that is different from the Bill of Lading quantity, then Owners shall discharge such cargo in accordance with Charterers’ instructions in consideration of receiving the following indemnity, which shall be deemed to be given by Charterers on each and every such occasion and which is limited in value to 200% of the CIF value of the cargo carried on board:
(i) | Charterers shall indemnify Owners and Owners’ servants and agents in respect of any liability loss or damage of whatsoever nature (including legal costs as between attorney or solicitor and client and associated expenses) which Owners may sustain by reason of delivering such cargo in accordance with Charterers’ request. |
(ii) | If any proceeding is commenced against Owners or any of Owners’ servants or agents in connection with the Vessel having delivered cargo in accordance with such request, Charterers shall provide Owners or any of Owners’ servants or agents from time to time on demand with sufficient funds to defend the said proceedings. |
(iii) | If the Vessel or any other vessel or property belonging to Owners should be arrested or detained, or if the arrest or detention thereof should be threatened, by reason of discharge in accordance with Charterers’ instruction as aforesaid, Charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such Vessel or property and Charterers shall indemnify Owners in respect of any loss, damage or expenses caused by such arrest or detention whether or not same may be justified. |
(iv) | Charterers shall, if called upon to do so at any time while such cargo is in Charterers’ possession, custody or control, redeliver the same to Owners. |
(v) | As soon as all original Bills of Lading for the above cargo which: a) name as discharge port the place where delivery actually occurred and, b) in the case of a negotiable bill of lading, entitle, either by consignment or endorsement, the party to whom the cargo was released to take delivery of said cargo, arrived and/or come into Charterers’ possession, Charterers shall produce and deliver the same to Owners whereupon Charterers liability hereunder shall cease. |
Provided however, if Charterers have not received all such original Bills of Lading by 24.00 hours on the day thirty-six (36) calendar months after the date of discharge, that this indemnity shall terminate at that time unless before that time Charterers have received from Owners’ written notice that
aaa) Some person is making a claim, in connection with Owners delivering cargo pursuant to Charterers’ request or,
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bbb) Legal proceedings have been commenced against Owners and/or carriers and/or Charterers and/or any of their respective servants or agents and/or the Vessel for the same reason.
When Charterers have received such a notice, then this indemnity shall continue in force until such claim or legal proceedings are settled. Termination of this indemnity shall not prejudice any legal rights a party may have outside this indemnity.
(vi) | Owners shall promptly notify Charterers if any person (other than a person to whom Charterers ordered cargo to be delivered) claims to be entitled to such cargo and/or if the Vessel or any other property belonging to Owners is arrested by reason of any such discharge of cargo. |
(vii) | This indemnity shall be governed and construed in accordance with English law and each and any dispute arising out of or in connection with this indemnity shall be subject to the jurisdiction of the High Court of Justice of England. |
(c) | Owners warrant that the Master will comply with orders to carry and discharge against one or more duly endorsed Bills of Lading from a set of original negotiable Bills of Lading should Charterers so require. Once delivery has been completed against one bill of lading, the others are to stand void. |
15. | Conduct of Vessel’s Personnel |
If Charterers complain of the conduct of the master or any of the officers or crew, Owners shall immediately investigate the complaint. If the complaint proves to be well founded, Owners shall, without delay, make a change in the appointments and Owners shall in any event communicate the result of their investigations to Charterers as soon as possible.
16. | LNG Retention/Supply for Operational Purposes |
a) | Unless Charterers stipulate otherwise, Owners shall retain on board the Vessel following completion of discharge sufficient LNG Heel (which will be agreed with Charterers) to enable the Vessel to arrive at the next load port in a cold and ready to load condition and to remain in that condition for not less than twenty-four (24) hours. |
b) | ***** shall provide and pay for LNG required for cooling the Vessel’s cargo tanks and other handling systems to the temperatures necessary to commence loading only in the following circumstances: |
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(i) | in the event that the quantity of LNG Heel retained on board pursuant to Clause 16 (a) is not sufficient to enable the Vessel to arrive at the next loading port in a cold and ready to load condition unless such insufficiency is the result of a direct act or omission on the part of Owners or fault of the Vessel; |
(ii) | when LNG is required by reason of: |
(aa) | strikes, quarantine restrictions, seizure under legal process, restraint of labour, none of which arise in connection with the Vessel or crew; or |
(bb) | an act of God, act of war, lock outs, riots, piracy, civil commotions, restraint of princes, rulers or people; |
(iii) | when LNG is required by reason of any Restricted Period as defined in Appendix C Article 2 (e) (i) to (viii), or by reason of Charterers changing the SAT, or by reason of Charterers ordering the Vessel to proceed at any speed other than the Service Speed; |
(iv) | upon return of the Vessel to the first load port after any lay-up ordered by Charterers pursuant to Clause 32, after any underwater cleaning ordered under B Article 11 (a), or after the Vessel has been withdrawn from service at the request or convenience of Charterers as a result of which the Vessel has been warmed up and/or gas freed; |
(v) | where the LNG is required and caused directly by Charterers’ breach of this Charter. |
(vi) | where the loading of the Vessel has been delayed by forces beyond Owners’ control. |
(vii) | following Periodical Dry-docking under Clause 24. |
(c) | ***** shall pay for LNG required for gassing up and cooling down the Vessel’s cargo tanks at the LNG Price: |
(i) | following periods of off-hire and such off-hire has solely caused the need to cool down. If the off-hire event is partially responsible for the requirement to gas up and/or cool down, both parties shall mutually discuss the allocation of costs; |
(ii) | following requisition under Clause 33; |
(iii) | where the LNG is required and directly caused by Owners’ breach of this Charter. |
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Quantities required for gas up and cool down shall be in accordance to the cool down tables that shall be provided by Owners to Charterers upon request.
In all cases where Owners are required to pay for LNG required for cooling hereunder, the LNG shall nevertheless be supplied by Charterers who shall be entitled to deduct the cost from the next payment of hire due to Owners at the LNG Price.
17. | Pilots and Tugs |
Owners hereby indemnify Charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in any way whatsoever from the employment of pilots or tugboats, who although employed by Charterers shall be deemed to be the servants of and in the service of Owners and under their instructions (even if such pilots or tugboat personnel are in fact the servants of Charterers their agents or any affiliated company); provided, however, that the foregoing indemnity shall not exceed the amount to which Owners would have been entitled to limit their liability if they had themselves employed such pilots or tugboats. The Master shall have the right to reject pilots, stevedores or similar contractors and tugs which in Master’s reasonable opinion are below industry standard.
18. | Super-Numeraries |
Charterers may send up to two representatives in the Vessel’s available accommodation upon any voyage made under this Charter, Owners providing provisions and all requisites as supplied to officers, except alcohol.
Charterers shall pay at the rate of United States Dollars 15 (fifteen) per day for each representative while on board the Vessel.
Owners shall ensure that all supernumeraries are provided an orientation training programme to the Vessel with training relevant under the SMS.
19. | Sub-letting/Assignment/Novation |
(a) | Charterers may sub-let the Vessel, but shall always remain responsible to Owners for due fulfilment of this Charter. |
(b) | Additionally Owners and Charterers may assign or novate this Charter to any of their affiliates who have comparable credit worthiness and competence, with the benefit of |
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parent company guarantees, subject to the consent of the other party , such consent not to be unreasonably withheld.
(c) | For the avoidance of doubt, neither party hereto shall transfer its rights or obligations by sale, assignment, novation or other disposition to a non-affiliate. |
(d) | In the event that Owners are desirous of transferring its rights, obligations, title and/or interest in the Vessel to an entity as part of a lease structure or to a bank or financial institution in respect of Owners’ financing and mortgaging of the Vessel, Owners shall seek Charterers’ consent. Such consent shall not be unreasonably withheld provided that Owners obtain from their financiers a Letter of Quiet Enjoyment in accordance with the provisions of Clause 65 hereof. In any case, Charterers shall respond to Owners request in ten (10) business days. Should response not be provided within the ten (10) business days period, Charterers shall be deemed to have given their consent. Notwithstanding anything in this sub Clause 19(d); Owners shall be fully obligated to provide a crew that is in accordance with all terms under this Charter. |
20. | Final Voyage |
If when a payment of hire is due hereunder Charterers reasonably expect to redeliver the Vessel before the next payment of hire would fall due, the hire to be paid shall be assessed on Charterers’ reasonable estimate of the time necessary to complete Charterers’ programme up to redelivery, and from which estimate Charterers may deduct amounts due or reasonably expected to become due for:
(a) | disbursements on Owners behalf or charges for Owners’ account pursuant to any provision hereof, and |
(b) | bunkers and LNG Heel on board at redelivery pursuant to Clause 5, |
Promptly, and in any event not later than thirty (30) days after redelivery any overpayment shall be refunded by Owners or any underpayment made good by Charterers.
Notwithstanding the provisions of Clause 7, if at the time this charter would otherwise terminate in accordance with Clause 3 the Vessel is on a ballast voyage to a port of redelivery or is upon a laden voyage, Charterers shall continue to have the use of the Vessel at the same rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to complete such laden voyage at service speed and return to a port of redelivery as provided by this Charter, as the case may be.
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21. | Loss of Vessel |
Should the Vessel be lost, this Charter shall terminate and hire shall cease at noon on the day of her loss; should the Vessel be a constructive total loss, this Charter shall terminate and hire shall cease at noon on the day on which the Vessel’s underwriters agree that the Vessel is a constructive total loss; should the Vessel be missing, this Charter shall terminate and hire shall cease at noon on the day on which she was last heard of. Any hire paid in advance and not earned shall be returned to Charterers and Owners shall reimburse Charterers for the value of the estimated quantity of bunkers on board at the time of termination, at the price paid by Charterers at the last bunkering port.
22. | Off-hire |
(a) | On each and every occasion that there is loss of time or when the Vessel is unavailable to Charterers (whether by way of interruption in the Vessel’s service or, from reduction in the Vessel’s performance, or in any other manner whatsoever): |
(i) | due to deficiency of personnel or stores; repairs; gas-freeing for repairs; time in and waiting to enter dry-dock for repairs; breakdown (whether partial or total) of machinery, boilers or other parts of the Vessel or her equipment (including without limitation tank coatings); overhaul, maintenance or survey; collision, stranding, accident or damage to the Vessel; or any other cause whatsoever preventing the efficient working of the Vessel; and such loss or unavailability continues for more than six (6) consecutive hours if resulting from interruption in the Vessel’s service) or cumulates to more than six (6) hours (if resulting from partial loss of service); or |
(ii) | due to industrial action, refusal to sail, breach of orders or neglect of duty on the part of the master, officers or crew; or |
(iii) | for the purpose of obtaining medical advice or treatment for or landing any sick or injured person (other than a Charterers’ representative carried under Clause 18 hereof) or for the purpose of landing the body of any person (other than a Charterers’ representative), and such loss continues for more than six (6) consecutive hours; or |
(iv) | due to any delay in quarantine arising from the master, officers or crew having had communication with the shore at any infected area without the written consent or instructions of Charterers or their agents, or to any detention by customs or other authorities caused by smuggling or other infraction of local law on the part of the master, officers, or crew; or |
(v) | due to detention of the Vessel by authorities at home or abroad attributable to legal action against or breach of regulations by the Vessel, the Owners (unless brought about by the act or neglect of Charterers); or |
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(vi) | due to pre-docking and repair procedure including warming, gas freeing and inerting post arrival at the dry-dock port; or |
(vii) | due to scheduled dry-docking and maintenance, maintaining, overhauling, repairing or dry-docking the Vessel and submitting her for survey; waiting for any of the aforesaid purposes; and whilst at, any port or place for any of the aforesaid purposes; or |
(viii) | due to post-docking or repair procedure including inerting, if such inerting is undertaken prior to sailing from the dry-dock port, gassing and cooling in excess of that undertaken for normal loading; or |
(ix) | due to any other circumstances where the Vessel is off-hire under this Charter; or |
(x) | due to late arrival for allocated opening for canal transit when such late arrival is due to Owners’ negligence or Vessel breakdown |
then without prejudice to Charterers’ rights under Clause 3 or to any other rights of Charterers hereunder, or otherwise, the Vessel shall be off-hire from the commencement of such loss of time until she is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced; provided, however, that any service given or distance made good by the Vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire.
(b) | If the Vessel fails to proceed at any Guaranteed Speed (as defined in Appendix C Article 2 (a) (iv)) pursuant to Clause 26 and Appendix C, and such failure arises wholly or partly from any of the causes set out in Clause 22(a) above, then the following provisions shall apply: |
(i) | if the Vessel is unable to maintain a speed of at least 85% of the Guaranteed Speed under Clause 26 in wind and sea state not exceeding Beaufort force 5, Charterers shall have the option to place the Vessel off-hire but any distance made good by the Vessel whilst off-hire shall be taken into account in accordance with Clause 22(a); |
(ii) | except where Charterers have placed the Vessel off-hire pursuant to Clause 22(b)(i), failure of the Vessel to proceed at any Guaranteed Speed shall be dealt with under Clause 26 and Appendix C and the Vessel will not be off-hire under Clause 22. |
(c) | Further and without prejudice to the foregoing, in the event of the Vessel deviating (which expression includes without limitation putting back, or putting into any port other than that to which she is bound under the instructions of Charterers) for any cause or purpose mentioned in Clause 22 (a), the Vessel shall be off-hire from the commencement of such deviation until the time when she is again ready and in an efficient state to |
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resume her service from a position not less favourable to Charterers than that at which the deviation commenced, provided, however, that any service given or distance made good by the Vessel whilst so off-hire shall be taken into account in assessing the amount to be deducted from hire. If the Vessel, for any cause or purpose mentioned in Clause 22 (a), puts into any port other than the port to which she is bound on the instructions of Charterers, the port charges, pilotage and other expenses at such port shall be borne by Owners. Should the Vessel be driven into any port or anchorage by stress of weather hire shall continue to be due and payable during any time lost thereby.
(d) | If the Vessel’s flag state becomes engaged in hostilities, and Charterers in consequence of such hostilities find it commercially impracticable to employ the Vessel and have given Owners’ written notice thereof then from the date of receipt by Owners of such notice until the termination of such commercial impracticability the Vessel shall be off-hire and Owners shall have the right to employ the Vessel on their own account. |
(e) | Time during which the Vessel is off-hire under this Charter shall count as part of the charter period except where Charterers declare their option to add off-hire periods under Clause 4 (b). |
(f) | All references to “time” in this Charter party shall be references to local time except where otherwise stated. |
(g) | (i) | If as a consequence of any cause or purpose mentioned in this Clause 22 or in Clause 16 (c), the Vessel presents for loading with tank temperatures other than that which would otherwise allow bulk loading to commence within 1/2 (half) an hour after cooling of the loading arms, any time lost as a consequence thereof, including without limitation any time lost in additional cooling of tanks prior to loading shall count as off-hire and the cost of any LNG supplied for such additional cooling shall be paid for by Owners at the LNG Price. |
(ii) | If any LNG is lost as Boil-Off during periods of off-hire, Owners shall reimburse Charterers for the LNG lost at the LNG Price, less any Boil-off consumed in distance made good during the off-hire period by Owners. |
Where accurate measurement of LNG lost as Boil-Off during any such off-hire period is impossible for whatever reason, the LNG lost as Boil-Off shall be assumed to have occurred at a constant rate equal to that obtained by measurement between official gaugings of the cargo in question in accordance with Appendix C Article 8 (b). Where, due to the off-hire occurring during a ballast passage, all LNG Heel is lost as Boil-Off prior to the Vessel next commencing to load, such Boil-Off shall be deemed to have occurred at a constant rate equal to that which occurred during the Vessel’s last previous ballast voyage.
(h) | If the cargo capacity of the Vessel is reduced for any reasons, Charterers shall have the option of putting the Vessel off-hire or using the Vessel, in which case hire shall be reduced pro rata to the reduction in the Vessel’s cargo capacity from the commencement |
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of loading at the loading port until the Vessel is again ready to load at the next loading port without such reduction in capacity. Notwithstanding the option granted to Charterers by the foregoing and subject to Charterers’ need for transportation, Charterers may agree (such agreement not to be unreasonably withheld) to allow Owners to repair the tanks of the Vessel at the earliest opportunity.
(i) | The Vessel shall additionally be off-hire as provided in this Clause 22 whenever there is loss of time: |
(i) | as a result of a boycott arising in connection with the business of Owners, the terms or conditions of employment of Owners’ servants, or employment, trades, or cargoes of the Vessel other than under this Charter; |
(ii) | due to restraint or interference in the Vessel’s operation by any governmental authority in connection with the ownership, registration, or obligations of Owners or the Vessel, or stowaways, or in connection with smuggling or other prohibited activities, unless such restraint or interference involves a cargo carried under this Charter, or Charterers themselves, or the shippers or receivers of such a cargo; or |
(iii) | due to strikes, labour boycotts or any other discrimination/difficulties against the Vessel because of Owners and/or their affiliates’ previous trade and/or the ownership and/or flag and/or officers and crew and/or officers and crews’ employment conditions; |
and all losses, damages and expenses directly or indirectly incurred thereby (including bunkers consumed) shall be for Owners’ account.
(j) | In the event that the Vessel is off-hire for any reason other than in connection with periodical dry-docking pursuant to Clause 24 for any period in excess of ninety (90) consecutive days or exceeding ninety (90) days in any period of three hundred and sixty five (365) days, Charterers shall have the option to terminate this Charter by giving notice in writing with effect from any date stated in such notice provided that the Vessel is free of cargo (other than LNG Heel) at such date. If the Vessel is not free of cargo (other than LNG Heel) at such date then the notice shall be deemed to be effective on the next date that the Vessel is free of cargo (other than LNG Heel). This Clause 22(j) is without prejudice to any other rights or obligations of Owners or Charterers under this Charter. For the purposes of this Clause 22(j), in the event of partial loss of service, the period of off-hire shall be the total period during which the Vessel is not fully efficient rather than the resulting loss of time. |
(k) | Notwithstanding any other provision of this Charter, the Charterers shall not be precluded, prevented or estopped from relying on, enforcing and enjoying the full benefit of any provision of this Charter concerning the condition or performance of the Vessel, including but not limited to any provision resulting in the Vessel being placed off-hire, by virtue of the fact that a breach or triggering of such provision occurred directly or indirectly as a result of the status or condition of the Vessel prior to delivery to the Charterers. |
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23. | Ship to Ship Transfers and FPSO/FSRU Cargo Operations |
(a) | Subject to the provisions of Clause 23 (b), Owners shall allow a transhipment of the cargo to another ship or floating storage re-gasification unit (FSRU) or loading from an LNG floating production storage and offloading unit (LNG-FPSO) to be carried out, provided that a suitably documented formalised risk assessment is carried out, identifying potential hazards, probability and consequences and all risks identified can be mitigated adequately to the reasonable satisfaction of Charterers and Owners. |
(b) | Subject to Clause 23(a), such cargo operation shall be carried out in accordance with the recommendations set out in the latest version of ICS/OCIMF Ship-to-Ship Transfer Guide (Liquefied Gases), and SIGTTO’s “Considerations for Planning a Ship-to-Ship Transfer of LNG” as amended from time to time. Owners shall permit, at Charterers’ expense, personnel nominated by Charterers to attend any pre operation risk assessment workshops and to attend on board, subject to Clause 18, to observe in the transhipment operation although such operation shall always be the responsibility of Owners. All expenses incurred for the Ship-to-Ship Transfer shall be for the Charterers’ account, except insofar as Owners are otherwise obliged to bear such costs in accordance with this Charter. |
(c) | Any transfer operations (herein also referred to as “lighterage”) to another ship, FSRU, or FPSO, and any extra equipment required for such, will be for Charterers’ account. All time including shifting time, if any, from the Vessel’s arrival and tendering notice of readiness at lighterage position until disconnection of hoses upon completion of lighterage operation or the removal /unloading of all fendering, hoses and other lighterage equipment (whichever is the later), to count as time on hire. All and any time during which the lighterage operation is discontinued due to breakdown of the Vessel’s equipment and/or operational inefficiency arising as a direct consequence of the additional requirements on the Vessel by the need to conduct such lightering operation, shall not count as off hire. All time and cost used and incurred for steaming/mooring, at Charterers request, from the Vessel’s arrival at the originally agreed lighterage location, shall count as time on hire. All port expenses, if any, incurred as a consequence of such lighterage operation always to be for Charterers’ account. If Owners are obliged to extend their existing insurance policies to cover lighterage operations, Charterers shall reimburse Owners for additional premium incurred, provided that Charterers are given prior notification (if possible) of the additional amount involved. Charterers must obtain permission from proper authorities to perform lighterage operation and all expenses in this connection shall be for Charterers’ account. |
(d) | The loading or discharge at FSRUs, FPSOs, and to another ship shall be subject to Clause 23 and shall, for the avoidance of doubt, always be at the sole discretion of the Master and if at any time the loading or discharge operations are, or become unsafe then he/she may discontinue such operations. |
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24. | Periodical Dry-dock |
(a) | Owners shall dry-dock the Vessel at least once in any five year period for the purposes of maintaining the Vessel’s underwater area, undergo cargo tank inspection and to effect equipment overhaul, scheduled maintenance, other necessary repairs, and re-certification, so that the Vessel is fit in every way for service under this Charter. Provided that Owners can demonstrate to Charterers satisfaction that a performing five year coating system has been applied to the hull and that an Impressed Current Cathodic Protection system and a Marine Growth Prevention System are installed and intermediate dockings will be permitted to be carried out afloat. If Owners elect to apply a five (5) year dry-docking cycle, they shall provide to Charterers a detailed master maintenance plan clearly showing how they will overhaul and maintain all critical equipment. |
Owners shall give Charterers approximately twelve (12) months’ notice of any intended non-emergency dry-docking and the proposed locations for the Dry-dock, together with the reasons for such dry-docking.
(b) | Owners and Charterers shall work together to find the most optimal economic location for the dry-docking for both parties. The costs for different dry-dock locations shall be disclosed by Owners. If Charterers incur costs in delivering the Vessel to a cheaper dry-dock location versus one that falls outside the Vessel’s actual trade route, Owners and Charterers shall mutually agree an equitable economic solution. Owners and Charterers shall agree the actual date that the Vessel will be required to enter the dry-dock port ninety (90) days prior to such date. |
(c) | In addition to any technical superintendent, the Owners shall supply a superintendent whose primary function is HSSE, to attend dry-docking periods. The suitability of the HSSE superintendent shall be agreed by the Owners and Charterers. |
(d) | Charterers shall have the right to review the dry docking specifications and programme and, at Charterers’ costs, shall have the right to send up to two personnel to witness the dry docking |
(e) | In the event of dry docking, the Vessel shall be off-hire when the Vessel arrives at the dry dock port on the actual date. On completion of dry docking, the Vessel will be on hire again upon exit from the dry dock yard. |
(f) | All dry-dock expenses and expenses of preparing the Vessel for dry-dock shall be for Owners’ account. Any natural gas vapour lost in gas freeing for the purpose of dry-docking shall be for Charterers’ account provided that during the last discharge prior to dry-docking Owners shall use their reasonable endeavours to pump out the maximum amount of cargo. |
(g) | Provided that Charterers have been previously notified and agreed to the period in advance, Charterers agree to provide the Owners with a preventative maintenance |
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window or windows that shall not exceed ***** per annum following Delivery until the first anniversary thereof and thereafter for each twelve (12) month period beginning on each anniversary of the Delivery (the “Yearly Allowance”). Owners shall be entitled to use the Yearly Allowance to carry out, with the approval of Charterers, scheduled preventative maintenance work to the Vessel. Owners shall provide Charterers with a completed Maintenance Request Form and subsequent maintenance reports on completion of maintenance.
(h) | After the first special survey of the Vessel; this Yearly Allowance shall increase to up to ***** per annum, provided that Charterers is able to provide up to *****in underutilised time and that the maintenance has no impact on Charterers’ commercial operations. For the avoidance of doubt, the Yearly Allowance shall never be lower than *****. |
25. | Ship Inspection |
Charterers or their representatives shall have the right at any time during the charter period to make such inspection of the Vessel or necessary operational and condition audits of the Vessel, crew, Owners’ office or Vessel’s technical manager as they may consider necessary. This right may be exercised as often and at such intervals as Charterers in their absolute discretion may determine and whether the Vessel is in port or on passage.
Owners shall afford all necessary co-operation and accommodation on board provided, however:
(a) | that neither the exercise nor the non-exercise, nor anything done or not done in the exercise or non-exercise, by Charterers of such right shall in any way reduce the master’s or Owners’ authority over, or responsibility to Charterers or third parties for, the Vessel and every aspect of her operation, nor increase Charterers’ responsibilities to Owners or third parties for the same; |
(b) | that Charterers shall not be liable for any act, neglect or default by themselves, their servants or agents in the exercise or non-exercise of the aforesaid right; |
(c) | that any cost incurred by such inspections or audits shall be for Charterers’ account provided such costs have been disclosed to and approved by Charterers in advance; |
(d) | that any inspection carried out by Charterers shall be made without interference with or hindrance to the Vessel’s safe and efficient operation, and shall be limited to a maximum of two persons; and |
(e) | that any overnight stays shall be subject to Clause 18. |
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26. | Key Vessel Performance Criteria |
Subject to Appendix C, Owners guarantee that:
(a) | the Laden Service Speed shall be ***** knots; |
(b) | the Ballast Service Speed shall be ***** knots; |
(c) | the Minimum Speed shall be ***** knots; |
(d) | the Vessel shall be capable of loading and discharging the cargo as follows: |
(i) | a full cargo may be loaded within fourteen (14) hours if the Vessel’s cargo tanks are colder than the tank design temperature for commencement of loading, excluding the time for connecting; disconnecting; cooling down; topping up and custody transfer measurement, and provided that the loading terminal is capable of pumping at least 13,000 cubic meters of LNG per hour to the Vessel at not less than 230 kPa (gauge) pressure at the flange connection between ship and terminal utilising a minimum of two liquid loading arms and provided that the terminal is capable of receiving all return vapour from the Vessel that may be generated when loading the Vessel at the above specified flow rate of LNG; |
(ii) | a full cargo may be discharged within fourteen (14) hours, excluding the time for connecting; disconnecting; cooling down; starting up pumps; ramping up; ramping down for stripping at end of discharge and custody transfer measurement, and provided that the discharge terminal is capable of receiving LNG at a rate of at least 12,000 cubic meters of LNG per hour with a back pressure at the flange connection between ship and terminal not exceeding 100 metres of liquid LNG of specific gravity of 0.47 utilising a minimum of two liquid unloading arms. The terminal must also be capable of providing sufficient return vapour to the Vessel to compensate for the displacement of the LNG being discharged from the Vessel; |
(iii) | If Charterers request either slow loading or slow discharging, Owners shall permit such operations. |
(e) | the Vessel’s guaranteed maximum fuel consumption, for weather conditions not exceeding Beaufort force 5, shall be as defined by per the table in this Clause 26; |
Methane Series (Samsung 145kcbm)
Class Steam Vessel |
(tonnes of Fuel Oil Equivalent / day) | |||
Average Speed (Knots) | Laden | Ballast | ||
19.5 (service speed) | ***** | ***** | ||
19.0 | ***** | ***** | ||
18.0 | ***** | ***** | ||
17.0 | ***** | ***** | ||
16.0 | ***** | ***** | ||
15.0 | ***** | ***** |
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(f) | The fuel oil equivalent factor (tonnes fuel oil per cubic metre of LNG) shall be calculated using actual bunker survey reports and LNG quality reports and engine performance data as provided in Gas Form C and shall be agreed upon by both Owners and Charterers. |
(g) | the maximum laden Boil-Off shall be zero point one five percent (0.15%) per day (or such lower percentage as guaranteed by the shipyard) of the Cargo Capacity on fully laden sea passages (or pro rated by the ratio of volumetric cargo loaded to cargo capacity if all tanks are not used); |
(h) | the maximum ballast Boil-Off shall be ***** per day (or such lower percentage as guaranteed by the shipyard) of the cargo capacity where the previous sea passage was fully laden and provided heel is carried in maximum two tanks and no spray cooling is required. |
27. | Salvage |
Subject to the provisions of Clause 22 hereof, all loss of time and all expenses (excluding any damage to or loss of the Vessel or tortious liabilities to third parties) incurred in saving or attempting to save life or in successful or unsuccessful attempts at salvage shall be borne equally by Owners and Charterers provided that Charterers shall not be liable to contribute towards any salvage payable by Owners arising in any way out of services rendered under this Clause 27.
All salvage and all proceeds from derelicts shall be divided equally between Owners and Charterers after deducting the master’s, officers’ and crew’s share.
28. | Lien |
Owners shall have a lien upon all cargoes and all freights, sub-freights and demurrage for any amounts due under this Charter; and Charterers shall have a lien on the Vessel for all monies paid in advance and not earned, and for all claims for damages arising from any breach by Owners of this Charter.
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29. | Exceptions |
(a) | Unless caused by the actual fault or privity of the Owners or the Vessel, the Vessel, her master and Owners shall not, unless otherwise in this Charter expressly provided, be liable for any loss or damage or delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners or other servants of Owners in the navigation or management of the Vessel; fire, collision or stranding; dangers and accidents of the sea; explosion, bursting of boilers, breakage of shafts or any latent defect in hull, equipment or machinery; provided, however, that Clauses 1, 2, 3 and 26 hereof shall be unaffected by the foregoing. Further, neither the Vessel, her master or Owners, nor Charterers shall, unless otherwise in this Charter expressly provided, be liable for any loss or damage or delay or failure in performance hereunder arising or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes, lock-outs, riots, restraints of labour, civil commotions or arrest or restraint of princes, rulers, pirates or people. |
(b) | The Vessel shall have liberty to sail with or without pilots, to tow or go to the assistance of vessels in distress and to deviate for the purpose of saving life or property. |
(c) | Clause 29 (a) shall not apply to, or affect any liability of Owners or the Vessel or any other relevant person in respect of: |
(i) | loss or damage caused to any berth, jetty, dock, dolphin, buoy, mooring line, pipe or crane or other works or equipment whatsoever at or near any place to which the Vessel may proceed under this Charter, whether or not such works or equipment belong to Charterers; or |
(ii) | any claim (whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. Any such claim shall be subject to the Hague-Visby Rules or the Hague Rules or the Hamburg Rules, as the case may be, which ought pursuant to Clause 40 hereof to have been incorporated in the relevant Bill of Lading (whether or not such Rules were so incorporated) or, if no such Bill of Lading is issued, to the Hague-Visby Rules unless the Hamburg Rules compulsorily apply in which case to the Hamburg Rules. |
(d) | In particular and without limitation, the foregoing subsections (a), (b) and (c) of this Clause shall not apply to or in any way affect any provision in this Charter relating to off-hire or to reduction of hire or Boil-Off or bunkers consumed during periods of off-hire. |
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30. | Injurious Cargoes |
No acids, explosives or cargoes injurious to the Vessel shall be shipped and without prejudice to the foregoing any damage to the Vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers’ account. No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the Vessel to capture or seizure by rulers or governments.
31. | Disbursements |
Should the master require advances for ordinary disbursements up to a cap of United States Dollars twenty-five thousand ($25,000) at any port, Charterers or their agents shall make such advances to him, in consideration of which Owners shall pay a commission of two and a half per cent, and all such advances and commission shall be deducted from hire.
32. | Laying-up |
Charterers shall have the option, after consultation with Owners, of requiting Owners to lay up the Vessel at a safe place nominated by Charterers, taking into account questions of maintenance access and security and with Owners’ consent and always subject to Clause 4, in which case the hire provided for under this Charter shall be adjusted to reflect any net increases in expenditure reasonably incurred or any net saving which should reasonably be made by Owners as a result of such lay up. Charterers may exercise the said option any number of times during the charter period.
33. | Requisition |
Should the Vessel be requisitioned by any government, de facto or de jure, during the period of this Charter, the Vessel shall be off-hire during the period of such requisition, and any hire paid by such governments in respect of such requisition period shall be for Owners’ account. Any such requisition period shall count as part of the charter period.
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34. | Outbreak of War |
If war or hostilities break out between any two or more of the following countries: United States of America, the countries or republics having been part of the former U.S.S.R (except that declaration of war or hostilities solely between any two or more of the countries or republics having been part of the former USSR shall be exempted), Peoples Republic of China, United Kingdom, and the country that the Vessel is registered in, then both Owners and Charterers shall have the right to cancel this charter provided that such war or hostilities materially and adversely affect the trading of the Vessel for a period of at least thirty (30) days.
35. | Additional War Expenses |
If the Vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war, Charterers shall reimburse Owners for any additional insurance premiums, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable, and provided further that Owners obtain from their insurers a waiver of any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.
Any payments by Charterers under this Clause will only be made against proven documentation. Any discount or rebate refunded to Owners, for whatever reason, in respect of additional war risk premium shall be passed on to Charterers.
In the event that Owners are unable to secure adequate war risk coverage, Charterers shall have the option of providing war risk coverage for the Vessel, subject to Owners’ consent, such consent not to be unreasonably withheld. Charterers shall always make Owners aware of the cover limits to ensure Owners have excess War P&I cover available under their respective P&I Club entries.
36. | War Risks |
(a) | The master shall not be required or bound to sign Bills of Lading for any place which in his or Owners’ reasonable opinion is dangerous or impossible for the Vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions, terrorism or piracy revolutions. |
(b) | If in the reasonable opinion of the master or Owners it becomes, for any of the reasons set out in Clause 36 (a) or by the operation of international law, dangerous, impossible or prohibited for the Vessel to reach or enter, or to load or discharge cargo at, any place to which the Vessel has been ordered pursuant to this Charter (a “place of peril”), then Charterers or their agents shall be immediately notified in writing or by radio messages, and Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this Charter (provided such other place is not itself a place of peril). If |
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any place of discharge is or becomes a place of peril, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo or such part of it as may be affected at any place suitable for the discharge of LNG which they or the master may in their or his discretion select within the trading limits of this Charter and such discharge shall be deemed to be due fulfilment of Owners obligations under this Charter so far as cargo so discharged is concerned. |
(c) | The Vessel shall have liberty to comply with any directions or recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any other wise whatsoever given by the government of the state under whose flag the Vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority including any de facto government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority or by any committee or person having under the terms of the war risks insurance on the Vessel the right to give any such directions or recommendations. If by reason of or in compliance with any such directions or recommendations anything is done or is not done, such shall not be deemed a deviation. If by reason of or in compliance with any such direction or recommendation the Vessel does not proceed to any place of discharge to which she has been ordered pursuant to this Charter, the Vessel may proceed to any place which the master or Owners in his/her or their discretion select and there discharge the cargo or such part of it as may be affected. Such discharge shall be deemed to be due fulfilment of Owners’ obligations under this Charter so far as cargo so discharged is concerned. |
Charterers shall procure that all Bills of Lading issued under this Charter shall contain the Chamber of Shipping War Risks Clause 1952.
37. | Piracy |
a) | Subject to Clause 37(e) below, if the Vessel proceeds to or through an area in which there is a current risk of piracy, verified by the International Group of P&I Clubs, Owners shall be entitled: |
i) | to take reasonable preventive measures to protect the Vessel, her crew and cargo by proceeding in convoy, using escorts, avoiding day or night navigation, adjusting speed or course, or engaging security personnel or equipment provided that such security personnel or equipment is provided by third party, private sector and non-governmental entities; on or about the Vessel; |
ii) | to follow any orders given by the flag state, any governmental or supra governmental organization; and |
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iii) | where there is an actual, imminent act of piracy, and only after giving Charterers reasonable advance notice, to take a safe and reasonable alternative route in place of the normal, direct or intended route to the next port of call, provided that such alternative route does not, in the case of the Gulf of Aden, physically extend beyond the transit of the Gulf of Aden in which case Owners shall give Charterers reasonable advance notice of the alternative route, an estimate of time and bunker consumption and a revised estimated time of arrival. |
b) | Subject to sub Clause 37(e) below, *****. |
c) | Subject to Clause 37(e), the Vessel shall remain on-hire for any time lost taking the measures referred to in sub Clause 37(a) of this Clause. |
d) | Where, notwithstanding the taking of any of the measures referred to in sub Clause 37(a) above, and where not caused by a lack of due diligence on Owners’ part, and where Charterers have not purchased off-hire insurance pursuant to sub Clause 37(e) below, the Vessel is captured by pirates, hire shall be payable at 100% of the hire rate for the duration of any such capture. As is further set forth in sub Clause 37(e) and for the avoidance of doubt, should Charterers purchase the off-hire insurance more fully described below, the Vessel shall be off-hire during the attack or seizure by pirates. |
e) | Charterers shall have the option, where the Vessel is scheduled to transit to or through an area in which there is a current risk of piracy, verified by the International Group of P&I Clubs, to require Owners to either (a) extend existing war risk insurance; or (b) purchase off-hire insurance, adding Charterers as co-assured, and which in either case will cover loss of hire, the cost of which shall be reimbursed by Charterers, provided always that (i) the terms of cover and cost have been disclosed to, and agreed by, Charterers prior to the purchase of such insurance; and (ii) that following the exercise of such option, the Vessel shall be off-hire for any time lost as a result of an attack or capture by pirates. |
f) | Charterers may elect, at any time, to pay any relevant insurances as described in sub Clause 37(e) directly. |
g) | Boil-off losses during piracy shall be for Charterers’ account. |
38. | Both to Blame Collision Clause |
If the liability for any collision in which the Vessel is involved while performing this Charter falls to be determined in accordance with the laws of the United States of America, the following provision shall apply:
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“If the ship comes into collision with another ship as a result of the negligence of the other ship and any act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship, the owners of the cargo carried hereunder will indemnify the carrier against all loss, or liability to the other or non-carrying ship or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of the said cargo, paid or payable by the other or non-carrying ship or her owners to the owners of the said cargo and set off, recouped or recovered by the other or non-carrying ship or her owners as part of their claim against the carrying ship or carrier.”
The foregoing provisions shall also apply where the owners, operators or those in charge of any ship or ships or objects other than, or in addition to, the colliding ships or objects are at fault in respect of a collision or contact.
Charterers shall procure that all Bills of Lading issued under this Charter shall contain a provision in the foregoing terns to be applicable where the liability for any collision in which the Vessel is involved falls to be determined in accordance with the laws of the United States of America.
39. | New Jason Clause |
General average contributions shall be payable according to York/Antwerp Rules, 1994, as amended from time to time, and shall be adjusted in London in accordance with English law and practice but should adjustment be made in accordance with the law and practice of the United States of America, the following position shall apply:
“In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the cargo, shippers, consignees or owners of the cargo shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo.”
“If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the cargo and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the cargo to the carrier before delivery.”
Charterers shall procure that all Bills of Lading issued under this Charter shall contain a provision in the foregoing terms, to be applicable where adjustment of general average is made in accordance with the laws and practice of the United States of America.
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40. | Clause Paramount |
Charterers shall procure that all Bills of Lading issued pursuant to this Charter shall contain the following:
“(a) | Subject to sub-clause (b) or (c) hereof, this Bill of Lading shall be governed by, and have effect subject to, the rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading signed at Brussels on 25th August 1924 (hereafter the “Hague Rules”) as amended by the Protocol signed at Brussels on 23rd February 1968 (hereafter the “Hague-Visby Rules”). Nothing contained herein shall be deemed to be either a surrender by the carrier of any of his rights or immunities or any increase of any of his responsibilities or liabilities under the Hague-Visby Rules.” |
“(b) | If there is governing legislation which applies the Hague Rules compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hague Rules. Nothing therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hague Rules.” |
“(c) | If there is governing legislation which applies the United Nations Convention on the Carriage of Goods by Sea 1978 (hereafter the “Hamburg Rules”) compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hamburg Rules. Nothing therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hamburg Rules.” |
“(d) | If any term of this Bill of Lading is repugnant to the Hague-Visby Rules, or Hague Rules, or Hamburg Rules, as applicable, such term shall be void to that extent but no further.” |
“(e) | Nothing in this Bill of Lading shall be construed as in any way restricting, excluding or waiving the right of any relevant party or person to limit his liability under any available legislation and/or law.” |
41. | Insurance/ITOPF |
Owners warrant that the Vessel is now, and will, throughout the duration of the Charter:
(a) | be owned or demise chartered by a member of the International Tanker Owners Pollution Federation Limited; |
(b) | be properly entered in a reputable P&I Club that is a member of the International Group of P&I Clubs; |
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(c) | have in place insurance cover for oil pollution for the maximum on offer through the International Group of P&I Clubs but always a minimum of United States Dollars 1,000,000,000 (one thousand million); |
(d) | have in full force and effect Hull and Machinery insurance placed through reputable brokers on Institute Time Clauses to a value as would be procured by a first class operator of similar such vessels. |
Owners will provide, within a reasonable time following a request from Charterers to do so, documented evidence of compliance with the obligations in this Clause 41.
42. | Export Restrictions |
The master shall not be required or bound to sign Bills of Lading for the carriage of cargo to any place to which export of such cargo is prohibited under the laws, rules or regulations of the country in which the cargo was produced and/or shipped.
Charterers shall procure that all Bills of Lading issued under this Charter shall contain the following clause:
“If any laws rules or regulations applied by the government of the country in which the cargo was produced and/or shipped, or any relevant agency thereof, impose a prohibition on export of the cargo to the place of discharge designated in or ordered under this Bill of Lading, carriers shall be entitled to require cargo owners forthwith to nominate an alternative discharge place for the discharge of the cargo, or such part of it as may be affected, which alternative place shall not be subject to the prohibition, and carriers shall be entitled to accept orders from cargo owners to proceed to and discharge at such alternative place. If cargo owners fail to nominate an alternative place within 72 hours after they or their agents have received from carriers notice of such prohibition, carriers shall be at liberty to discharge the cargo or such part of it as may be affected by the prohibition at any safe place on which they or the master may in their or his absolute discretion decide and which is not subject to the prohibition, and such discharge shall constitute due performance of the contract contained in this Bill of Lading so far as the cargo so discharged is concerned”.
The foregoing provision shall apply mutatis mutandis to this Charter, the references to a Bill of Lading being deemed to be references to this Charter.
43. | Business Principles |
Owners shall act in a manner consistent with BG Group’s Business Principles set out in Appendix E so as to enable Charterers to operate in accordance with those principles. Owners shall comply with the procedures for monitoring and reporting compliance as set out in the Business Principles Appendix E.
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Owners acknowledge that Charterers have a reporting policy and facility respectively called the ‘Speak Up Policy’ and ‘Speak Up’. The Speak Up Policy requires Charterers’ employees, and encourages others, to report any situation where there is reason to suspect that there has been a breach, or suspected breach, of BG Group’s Business Principles or other misconduct. Speak Up provides reporting channels by telephone and internet service (accessed via the BG Group website or through www.bg-speakup.com) to communicate any concerns confidentially. Owners are expected to use Speak Up.
44. | Drugs and Alcohol |
Owners warrant that they have in force an active policy covering the Vessel which meets or exceeds the standards set out in the “Guidelines for the Control of Drugs and Alcohol On Board Ship” as published by the Oil Companies International Marine Forum (OCIMF) dated June 1995 (or any subsequent modification, version, or variation of these guidelines) and that this policy will remain in force throughout the charter period, and Owners will exercise due diligence to ensure the policy is complied with.
45. | Pollution and Emergency Response |
Owners are to advise Charterers of organisational details and names of Owners’ personnel together with their relevant telephone/facsimile/e-mail details, including the names and contact details of Qualified Individuals for OPA 90 response, who may be contacted on a 24-hour basis in the event of oil spills or emergencies.
Notice to Owners’ Pollution and Emergency Response Department:
Attn | : Emergency Response Manager | |
Address | : 69 Akti Miaouli, Piraeus 18537, Greece | |
Telephone | : +30 210 4591280-1-2 | |
Fax | : +30 210 4591240 | |
: EmergencyResponse@gaslogserv.com | ||
Cc | : tkatemidis@gaslogserv.com; mbourekas@gaslogserv.com |
Notice to Charterers’ Pollution and Emergency Response Department:
Attn | : Duty Officer | |
Address | : BG Group, 811 Main St., Houston, Texas 77002, USA | |
Telephone | : +1 713 366 6248 (primary); +1 713 884 9142 (secondary) | |
Fax | : +1 713 877 9212 | |
: AIRIS@bg-group.com , incident@bg-group.com (for incidents only) | ||
Cc | : shipping@bg-group.com; lngcharters@bg-group.com |
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Owners shall also refer the initial incident notification instructions detailed within the Charterers’ Instructions.
46. | ISPS Code/USMTSA 2002 |
This Clause 46 makes reference to the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter Xl of SOLAS (“ISPS Code”) and the US Maritime Transportation Security Act 2002 (“MTSA”).
(a) | (i) | During the currency of this Charter, Owners shall procure that both the Vessel and “the Company” (as defined by the ISPS Code) and the “owner” (as defined by the MTSA) shall comply with the requirements of the ISPS Code relating to the Vessel and “the Company” and the requirements of MTSA relating to the Vessel and the “owner”. Upon request Owners shall provide documentary evidence of compliance with this Clause 46 (a) (i). |
(ii) | Except as otherwise provided in this Charter, loss, damage, expense or delay, caused by failure on the part of Owners or “the Company”/“owner” to comply with the requirements of the ISPS Code/MTSA or this Clause shall be for Owners’ account. |
(b) | (i) | Charterers shall provide Owners/Master with their full style contact details and shall ensure that the contact details of all sub-charterers are likewise provided to Owners/Master. Furthermore, Charterers shall ensure that all sub-charter parties they enter into during the period of this Charter contain the following provision: |
“The Charterers shall provide the Owners with their full style contact details and, where sub-letting is permitted under the terms of the Charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners”.
(ii) | Except as otherwise provided in this Charter, loss, damage, expense or delay, caused by failure on the part of Charterers to comply with this sub-Clause 46 (b) shall be for Charterers’ account. |
(c) | Notwithstanding anything else contained in this Charter costs or expenses related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code/MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be for Charterers’ account, unless such costs or expenses result solely from Owners’ negligence in which case such costs or expenses shall be for Owners’ account. All measures required by Owners to comply with the security plan required by the ISPS Code/MTSA shall be for Owners’ account. |
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(d) | Notwithstanding any other provision of this Charter, the Vessel shall not be off-hire where there is a loss of time caused by Charterers’ failure to comply with the ISPS Code/MTSA. |
(e) | If either party makes any payment, which is for the other party’s account according to this Clause, the other party shall indemnify the paying party. |
47. | Law and Litigation |
(a) | This Charter shall be construed and the relations between the parties determined in accordance with the laws of England. |
(b) | Each of the parties hereto hereby submits to the exclusive jurisdiction of the High Court of London for the purposes of all legal proceedings arising out of or relating to this Charter or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. |
(c) | It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this Charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay. |
48. | Confidentiality |
All terms and conditions of this Charter arrangement shall be kept private and confidential. Charterers or Owners shall have the right to release information as part of a mandatory audit requirement or third party contractual obligation, provided the auditors or third party sign a mutually agreed confidentiality agreement.
49. | Construction |
The headings have been included in this Charter for convenience of reference and shall in no way affect the construction hereof.
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50. | Notices |
(a) | Whenever written notices are required to be given by either party to the other party, such notices shall be sent by fax, registered mail, e-mail or registered airmail to the following addresses: |
Notice to Owners: | ||
Attn | : | Graham Westgarth |
Address | : | Gildo Pastor Center, 7, Rue du Gabian, MC-98000 Monaco |
Telephone | : | +377 97975115 / +33 680869369 (AOH) |
Fax | : | +377 97975124 |
: | gwestgarth@gaslogltd.com | |
Cc | : | tkatemidis@gaslogserv.com |
Notice to Owners’ Operations Department: | ||
Attn | : | Duty Manager |
Address | : | 69 Akti Miaouli, Piraeus 18537, Greece |
Telephone | : | +30 210 4591250 |
Fax | : | +30 210 4591242 |
: | LNG@cereslng.com | |
Cc | : | tkatemidis@gaslogserv.com;thsallis@gaslogserv.com |
or to such other addresses as the parties may respectively from time to time designate by notice in writing. Any failure to transmit a copy of the notice to a party listed as entitled
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to receive a copy shall not in any way affect the validity of any notice otherwise properly given as provided in this Clause.
(b) | Any notice required under this Charter to be given in writing shall be deemed to be duly received only: |
i) | In the case of a letter, whether delivered in course of the post or by hand or by courier, at the date and time of its actual delivery if within normal business hours on a working day at the place of receipt otherwise at the commencement of normal business on the next such working day. |
ii) | In the case of a facsimile or e-mail, at the time of transmission recorded on the message if such time is within normal business hours (09:00 - 17:00) in the country of receipt, otherwise at the commencement of normal business hours on the next working day at the place of receipt. |
51. | Invoices |
All invoices should be sent to the following contacts and shall be deemed to be duly received as per Clause 50(b):
Owners:
Attn | : | Chief Operating Officer |
Address | : | Gildo Pastor Center, 7, Rue du Gabian, MC-98000 Monaco |
Telephone | : | +377 97975115 / +33 680869369 (AOH) |
Fax | : | +377 97975124 |
: | gwestgarth@gaslogltd.com | |
Cc | : | glagonikas@gaslogltd.com |
Charterers:
Attention | : | LNG Charter Manager |
Address | : |
BG Group Thames Valley Park, Reading, Berkshire, RG6 1PT United Kingdom |
Telephone | : | +44 118 929 36769 |
Fax | : | +44 8450848913 |
: | LNGCharters@bg-group.corn | |
52. | Ship Contact details |
The Vessel’s contact details are as follows:
Telephone (VSAT) | : | ***** |
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Telephone (SATCOM) | : | ***** |
Satcom Fax | : | ***** |
: | ***** | |
53. | Definitions |
In this Charter, save where the context otherwise requires, the following words and expressions shall have the meanings respectively assigned to them in this Clause;
“Boil-Off” | means the vapour, which results from vaporisation of LNG in the cargo tanks. |
“Cargo Capacity” | means the maximum safe LNG loading limit of the Vessel as per LNG Form C. |
“Certificate of Financial Responsibility” | means a certificate of financial responsibility as required by the US Oil Pollution Act 1990. |
“Fuel Oil Equivalent” | refers collectively to its two components, fuel oil and Boil-Off gas and is measured in metric tonnes applying the fuel oil equivalent factor set out in Clause 26 (f). |
“Fuel Price” | means last invoiced price per increment of volume bunkered in USD $ per metric tonne (or relevant volumetric unit) |
“Gas Free” | means the Vessel’s cargo tanks are free of all natural gas vapour and under an atmosphere of inert gas. |
“GTT” | Gaztransport & Technigaz SA of France |
“LNG” | means natural gas liquefied by cooling and which is in a liquid state at or near atmospheric pressure. |
“LNG Heel” | means cargo retained in the cargo tanks on completion of discharge. |
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“LNG Price” | means the ex-ship price of LNG in USD/mmBtu at the port where the LNG was retained, based upon composition of LNG at discharge (except for LNG supplied for cool down at a loading port, and for excess LNG boiled off on ballast leg, where the price will be based on the price charged by the terminal for cool down LNG). |
“Service Speed” | shall have the meaning ascribed to it in Appendix C, Article 1. (a). |
“BG Group” | mean companies owned directly or indirectly by BG Group plc. |
54. | Claim Validity Period |
Any claims arising under this Charter party must be brought within twelve (12) months of the conclusion of the Charter.
55. | Eligibility & Compliance |
At all times during this Charter:
(a) | the Vessel shall be in all respects eligible under applicable conventions, laws and regulations for, and shall not be prevented for any reason whatsoever from, trading to and from the ports and places permitted in Clause 4 of the Charter; |
(b) | Without prejudice to Clause 65, the Vessel shall comply with all applicable conventions, laws, rules and regulations of any international, national, state or local government entity having jurisdiction and shall have on board for inspection by the authorities all necessary certificates, records, letters and other documents evidencing such compliance, including but not limited to certificates evidencing compliance with international and US oil pollution regulations, SOLAS 1974, as amended and MARPOL 1973/1978; and |
(c) | the Vessel shall comply fully with all applicable U.S. Federal, U.S. Coastguard and State laws, rules, orders, regulations, guidelines and circulars now in effect and which may be promulgated (and subsequent amendments and successors thereto) including, but not limited to, the following provisions relating to maritime safety and oil pollution response: |
(vi) | the U.S. Federal Water Pollution Control Act (as amended by the Clean Water Act of 1977 (Water Pollution)); |
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(vii) | the U.S. Oil Pollution Act of 1990 and the governmental regulations issued thereunder (“OPA-90“); |
(viii) | the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980; and |
(ix) | the U.S. Port and Tanker Safety Act; |
(x) | the U.S. Coastguard Navigational and Vessel Inspection Circular No. 8-92; |
(xi) | the Code of Federal Regulations; |
(xii) | the compliance with practices and limits for the regulated effluents as per the US Environmental Protection Agency’s Vessel General Permit (VGP) requirements under the authority of the Clean Water Act (CWA) requirements for National Pollutant Discharge Elimination System (NPDES) program.. |
(d) | the Vessel shall have on board throughout the Charter any certificates or other documentation required under the said laws, rules, orders, regulations, guidelines and circulars and evidencing such compliance, which shall include but not be limited to a U.S. Coastguard Certificate of Financial Responsibility for Oil Pollution (“COFR”) together with a similar certificate for hazardous substances and a Tanker Vessel Examination Letter (“TVEL”). |
(e) | prior to delivery the Owners or the Vessel’s operator shall have submitted, and obtained approval from the US Coastguard for a response plan for the Vessel (“VRP”) which meets in full the requirements of OPA-90 and of the US Coastguard and in accordance with which the Vessel shall at all times be operated. Charterers shall reimburse Owners for all port specific OPA charges (including but not limited to additional premium to maintain P&I cover) incurred by the Vessel calling at ports in the USA in accordance with Charterers’ orders. Requirements of a similar nature imposed by other countries after the date of this Charter shall be treated in the same way. |
(f) | to the extent that the Vessel does not at any time comply with any USCG regulation now in effect or to be promulgated, all necessary waivers are or will be held. Owners will advise Charterers of all such waivers, including period of validation and reason(s) for waiver. |
(g) | Owners shall ensure that the Vessel is free to trade to the USA and if Certificate of Compliance (CoC) is not available at the commencement of the Charter, then an inspection shall be carried prior to arrival at the first USA port or on arrival at the first USA port. Any delay incurred carrying out this initial inspection that exceeds three hours shall be classified as off-hire. Charterers shall provide sufficient notice to Owners to allow Owners to comply with the rules and regulations in USA and LNG Terminals not listed in Appendix A. |
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(h) | If the Vessel is required to discharge at a US port during this Charter, the Owners are required to install an AIS Pilot Plug as defined by SOLAS regulations. Specific regulations can be found in Chapter V, Regulation 19 and in Title 33 Code of Federal Regulations §164.46 Automatic Identification System (AIS), Paragraph (d) “The AIS Pilot Plug, on each vessel over 1600 gross tons on an international voyage, must be available for pilot use, easily assessable from the primary conning position of the vessel, and near a 120 Volt, AC power, 3-prong receptacle.” Additional information regarding proper installation of the AIS Pilot Plug can be found in IMO SN/Circ. 227. |
(i) | When calling at LNG terminals located in ports in the European Union, Vessel must be able to meet the requirements of EU Council Directives 1999/32/EC dated 26 April 1999 and 2005/33/EC dated 6 July 2005. |
Any delays, direct losses, expenses or damages arising from failure to comply with this Clause shall be for Owners’ account and Owners shall fully indemnify Charterers therefor. Charterers shall not be liable for any delay caused by the Vessel’s failure to comply with the foregoing warranty.
For any time lost due to a breach of this Clause the Vessel shall be off-hire, and any expenses incurred due to such breach (including bunkers consumed) shall be for Owners’ account.
56. | Vapour Pressure |
Owners undertake that the Vessel will arrive at each discharge port or terminal with the Vessel and its cargo in such a condition that the vapour pressure in the Vessel’s cargo tanks meets the requirements of the discharging port or terminal as advised to Owners with reasonable prior notice. In any event, Owners will follow vapour pressure instructions received from Charterers and will not allow vapour pressure to increase beyond the pressure permitted by Charterers’ voyage instructions.
57. | Cargo Transfer Inspection and System Calibration |
(a) | Charterers may at their option place their cargo transfer inspection representative on board to observe preparation for loading and discharging of cargo during periods when the Vessel is in port, at Charterers’ expense. Such representative will not, however, under any circumstances order or direct the taking of any particular action by the Vessel or crew or interfere in any way with the Master’s exercise of his authority. |
(b) | The Custody Transfer Measurement Gauging System (CTMS) shall undergo a full calibration check and recertification by a recognized calibration company at intervals of no more than sixty (60) months. This check shall include a full in tank calibration check of the Primary Gauging Systems, Secondary Gauging System, in tank temperature |
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monitoring system, tank pressure monitoring system, Trim/List Transmission System and independent tank hi level alarm(s). Charterers shall have access to calibration check reports. |
(c) | Notwithstanding Clause 57 (d) Charterers can request, at Charterers cost and time, to perform an intermediate recertification process of the CTMS equipment in addition to the above full calibration check. This intermediate recalibration survey shall be performed by an industry recognized calibration company and may be performed at intervals of thirty (30) months (+/- 6 months). The test will not require cargo tank entry but include a full calibration verification of the Primary Level Gauging Systems, Secondary Level Gauging System, Tank Temperature Monitoring System, Tank Pressure Monitoring System and Trim/List Transmission System. Charterers shall have access to calibration check reports. |
(i) | If the Vessel is required to discharge at a Japanese port during this Charter, the Owners are required to start Japan customs approval process for the CTMS and cargo tank tables immediately once Charterers notify Owners of intention to discharge at a Japanese port. The Vessel shall comply with Japanese customs approvals requirements throughout the charter period. |
(ii) | The vessel’s CTMS must have the functionality to change settings upon request in order for Charterers to meet various sales and purchase agreements or terminal requirements. This shall include, but not be limited to temperature, pressure, liquid level gauging intervals and settings. |
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58. | Vessel Data |
(a) | Charterers shall have full access to daily (and other) reports provided from the Vessel’s voyage data recorder and ship performance software. |
(b) | If Vessel is equipped with ship performance software or equivalent system, Charterers may request Owners to run a performance trial at sea as per Charterers’ Instructions. When available the ship performance software (or equivalent) shall be used to record information during a minimum one hour trial. |
(c) | A detailed procedure for carrying out the trial shall be included in charterers’ instructions. Owners agree to send the resulting data and/or summary report of the trial to the Charterers within fifteen (15) days of carrying out each trial. |
(d) | For the duration of this charter Owners shall provide access to the Vessels’ Inmarsat C tracking system which shall automatically provide the Vessels’ position, speed and heading at set intervals. Such information shall be available to Charterers through a password controlled website. |
59. | Third Party Vetting Information |
Owners shall permit Charterers to discuss vetting results with third party vetting companies upon Charterers’ request.
60. | Taxes |
All taxes and dues on the Vessel and on the Charter hire to be for Owners’ account. All taxes and dues on cargo to be for Charterers’ account.
61. | U.S. Compliance |
Owners represent and guarantee that Owners and the Vessel are not in any way directly owned, controlled by or related to any U.S. sanctioned countries.
62. | Compliance with the Bribery Act, 2010 (England and Wales) and the US Foreign Corrupt Practices Act (FCPA) |
a) | Owners represent, warrant and covenant that it and its Representatives comply with the Bribery Act, 2010 (England and Wales) and the FCPA (“Applicable Corruption Law”) with respect to all matters connected to this charter (“Matters”) even if the provisions of Applicable Corruption Law do not strictly apply to Owners or its Representatives because of their jurisdictional status and references in this Clause 62 to Applicable Corruption |
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Law shall be interpreted accordingly. The remaining provisions of this Clause 62 are without prejudice to the generality of the foregoing. |
b) | Owners represent, warrant and covenant that it and its Representatives have not offered and will not offer with respect to any Matters any advantage to any Public Official which would violate Applicable Corruption Law. |
c) | Owners represent, warrant and covenant that it and its Representatives have not offered and will not offer with respect to any Matters any advantage to any person or entity which would violate Applicable Corruption Law. |
d) | Owners represent, warrant and covenant that it and its Representatives will not, directly or through any other person or entity, request any service, action or inaction by any other person or entity with respect to any Matters which would violate Applicable Corruption Law. |
e) | Owners represent, warrant and covenant that it and its Representatives will not, directly or indirectly with respect to any Matters request an advantage which would violate the Applicable Corruption Law. |
f) | Owners represent warrant and covenant that it will provide Charterers with a Certificate of Compliance no later than 31 January of each calendar year during the term of this Charter. |
g) | Owners represent, warrant and covenant that it and its Affiliates: |
(i) | maintain accurate and complete Books and Records and internal controls sufficient and of such quality, consistent with accounting principles and practices contained in International Financial Reporting Standards so as to permit an audit of its Books and Records by an internationally recognised firm of public or chartered accountants or their equivalent, and which would, following that audit, result in an unqualified audit opinion and will not maintain any off the book accounts or record any non existent expenditure nor enter liabilities with incorrect identification of their object or use false documents; |
(ii) | will provide all reasonable assistance to permit the Charterers’ accountant or internationally recognised firm of public or chartered accountants or other advisors (‘Auditor’) to conduct an audit of its Books and Records (including without limitation providing copies of documentation when requested) during normal business hours at Owners’ principal place of business for the purpose of confirming compliance with this Clause 61; |
(iii) | will permit Auditor reasonable access to its properties, officers, representatives, agents and employees in order to make reasonable inspection and examination of the business operations and affairs of the Owners; and |
(iv) | without prejudice to the generality of the foregoing, use its reasonable endeavours to procure for Auditor access to any third party, or any third party’s properties, |
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employees and Books and Records, where such access is reasonably necessary for the purposes of the audit. For the avoidance of doubt, access includes providing copies of relevant third party documentation where requested. |
(h) | Owners represent, warrant and covenant that it and its Representatives have been given adequate training and informed of their obligations in relation to Applicable Corruption Law and have in place adequate policies and procedures in relation to business ethics and conduct and the reporting, investigating and acting upon of suspected violations of Applicable Corruption Law. |
(i) | (a) | Owners represent, warrant and covenant that where there exists a relationship between, on the one hand, (i) it or any of its Representatives, or (ii) any person who is a Connected Person of any of its Representatives, and any Public Official on the other, and such relationship may or may reasonably be considered to have an influence on the Owners’ performance of its obligations hereunder or the performance by the Public Official of his/her duties, that the fact and nature of such relationship has been notified to the Charterers in writing prior to this Charter being entered into. |
(b) | Owners represent, warrant and covenant that it will promptly take all such steps as may be necessary and/or reasonably requested by Charterers which are designed to ensure that such relationship does not give rise to any conflict of interest or any breach of Applicable Corruption Law. |
(j) | Owners represent, warrant and covenant that to the best of its knowledge and belief neither it nor any of its Representatives or Service Providers: |
(i) | appears on any list of entities or individuals debarred from tendering or participating in any project funded by the World Bank, European Bank of Reconstruction and Development or any other multi-lateral or bi-lateral aid agency; |
(ii) | has at any time been found by a court in any jurisdiction to have breached Applicable Corruption Law; |
(iii) | has at any time been investigated or is being investigated or is involved in an investigation (as a witness or possible suspect) or been suspected in any jurisdiction of having engaged in any conduct with respect to Matters which would constitute a breach of Applicable Corruption Law. |
(k) | Owners represent, warrant and covenant that if at any time it becomes aware that any of the circumstances set out in Clauses 62.9 and 62.10 are not as it has confirmed it will notify Charterers immediately in writing and will promptly take all such steps as may be necessary and/or requested by the Charterers to ensure minimum adverse effect on the Charterers’ reputation or on this Charter. |
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(l) | Owners represent, warrant and covenant that it will, if requested in writing by the Charterers, promptly: |
(i) | provide any information which the Charterers may reasonably require in order to monitor its compliance with the warranties, covenant and/or representations contained in this Clause 62; and |
(ii) | provide, where available, documentation evidencing such compliance. |
(m) | Without prejudice to any other express remedies referred to elsewhere in this Charter or any rights or remedies available at law or in equity, in the event of a breach of this Clause 62 by Owners, Charterers have the right to take whatever action it deems appropriate including the right to terminate this Charter with immediate effect and will not be liable to pay any compensation to Owners for loss of profits or loss of goodwill or for any other loss or damage howsoever arising as a result of a termination under this Clause 62(m), |
(n) | Where this Charter is terminated in accordance with Clause 62(m), Owners will cease to be entitled to receive any payments which are due or may otherwise be due under the terms of this Charter. Where this Charter is terminated in accordance with Clause 62(m) Charterers will not be obliged to make any payments which are due or may otherwise be due under the terms of this Charter where to do so would violate any law or regulation to which Charterers are subject. |
(o) | Owners indemnify and hold Charterers and its Affiliates harmless from and against any and all claims, damages, liabilities, losses, penalties, fees, costs and expenses arising from or related to, any breach of this Clause 62. |
(p) | The rights and obligations contained in Clauses 62(g), 62(k), 62(1), 62(m), 62(n) and 62(o) will survive the termination or expiration of this Charter, |
(q) | Owners shall require its Service Providers to act in accordance with the requirements of this Clause 62 and Applicable Corruption Law. |
(r) | Owners will operate a program of regular assessments of its Service Providers involved in Matters to verify that they are complying with their obligations as set out in Clause 62(q) above and retain the right to have an independent auditor review and verify their compliance. |
(s) | Owners will procure that provisions no less onerous than those set out in this Clause 62 are incorporated in all documentation issued to, and contracts entered into, with their Service Providers involved in Matters. |
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63. | Owners’ Defaults |
(a) | Each of the following events shall be deemed to be a breach of this Charter and an “Owners’ Default” for the purposes of this Charter: |
i) | if any licence, approval, consent, authorisation or registration at any time necessary for Owners to comply with their obligations under this Charter, or in connection with the ownership and operation of the Vessel, is revoked, withheld or expires or is modified so as to prevent or materially delay the lawful performance by Owners of their obligations hereunder (unless remedied, if capable of remedy, within thirty (30) days); |
ii) | if an order is made, or an effective resolution passed, for the compulsory or voluntary winding-up or dissolution of Owners (other than for the purposes of amalgamation or reconstruction in respect of which the prior written consent of Charterers has been obtained) or if Owners suspend payment of or are unable to or admit inability to pay, their debts as they fall due or make any special arrangement or composition with their creditors generally or any class of their creditors; |
iii) | if an administrator, administrative receiver, receiver or trustee or similar official is appointed in respect of the whole, or a material part, of the property, assets or undertaking of Owners, and such appointment is not discharged within thirty (30) days of the date of such appointment (unless such appointment is being contested by Owners in good faith by appropriate proceedings) or if Owners apply for, or consent to, any such appointment; |
iv) | if any event occurs in relation to Owners in any jurisdiction which has an effect equivalent to any of the events specified in ii) and 0 above; |
v) | if an encumbrancer takes possession of, or distress or execution is levied upon, the whole, or a material part, of the property, assets or undertaking of Owners and the same shall not be discharged within thirty (30) days of the date of commencement of such action unless such possession or levy is being contested by Owners in good faith by appropriate proceedings; |
vi) | if Owners cease to carry on their business, or dispose of the whole, or a material part, of their property, assets or undertaking without Charterers’ consent; |
vii) | if Owners cease to be a corporation duly registered in good standing in its place of incorporation without Charterers’ consent; |
viii) | if Owners shall place or permit to exist on the Vessel (A) any mortgage other than a mortgage in respect of which a quiet enjoyment undertaking has been provided in a form approved by Charterers, such approval not to be unreasonably withheld (B) |
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any charge, pledge, consensual security interest, lien or encumbrance of any kind (not occasioned by any act, omission or default of Charterers) for a period of more than thirty (30) days cumulative in one year, other than liens for crew’s wages or salvage or otherwise arising in the ordinary course of trading which are regularly settled or secured; |
ix) | if it becomes impossible or unlawful for Owners to fulfil any of their obligations under this Charter, or for Charterers to exercise any of the rights vested in them by this Charter, or this Charter for any reason becomes invalid or unenforceable or ceases to be in full force and effect or Owners repudiate this Charter; |
x) | if the Vessel is arrested as a consequence of any claim or event other than a claim arising by, through or under acts, deeds or omission of Charterers and is not released for any reason from such arrest within thirty (30) days after being arrested; |
xi) | if Owners are in material breach of any other provision of this Charter with serious and adverse consequences to Charterers; and Owners have failed to cure such breach or taken all necessary steps within a reasonable period of time but in no event longer than thirty (30) days after notice of such breach from Charterers (unless such breach has a shorter cure period hereunder, in which case, the shorter period shall apply). |
xii) | if Owners fail to maintain any of the insurances they are obliged to maintain and such failure is not rectified within fourteen (14) days of receipt of notice from the Charterers; |
(b) | Upon the occurrence of an Owners’ Default and at any time thereafter for so long as such default is continuing, and whether or not the Charter has commenced, Charterers shall be entitled to terminate this Charter by giving notice in writing to Owners. This Clause 61(b) is without prejudice to any other rights Charterers may have hereunder or at common law. |
64. | Charterers’ Defaults |
(a) | Each of the following events shall be deemed to be a breach of this Charter and a “Charterers’ Default” for the purposes of this Charter: |
i) | if an order is made, or an effective resolution passed, for the compulsory or voluntary winding-up or dissolution of Charterers (other than for the purposes of amalgamation or reconstruction in respect of which the prior written consent of Owners has been obtained) or if Charterers suspend payment of, or are unable to or admit inability to pay, their debts as they fall due or make any special arrangement or composition with their creditors generally or any class of their creditors; |
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ii) | if an administrator, administrative receiver, receiver or trustee or similar official is appointed in respect of the whole, or a material part, of the property, assets or undertaking of Charterers, and such appointment is not discharged within thirty (30) days of the date of such appointment (unless such appointment is being contested by Charterers in good faith by appropriate proceedings) or if Charterers apply for, or consent to, any such appointment; |
iii) | if any event occurs in relation to Charterers in any jurisdiction which has an effect equivalent to any of the events specified in (ii) and (iii) above; |
iv) | if an encumbrancer takes possession of, or distress or execution is levied upon, the whole, or a material part, of the property, assets or undertaking of Charterers and the same shall not be discharged within thirty (30) days of the date of commencement of such action unless such possession or levy is being contested by Charterers in good faith by appropriate proceedings; |
v) | if Charterers cease to carry on their business, or dispose of the whole, or a material part, of their property assets or undertaking without Owners’ consent; |
vi) | if Charterers cease to be a corporation duly registered in good standing in its place of incorporation without Owners’ consent; |
vii) | if it becomes impossible or unlawful for Charterers to fulfil any of their obligations under this Charter or for Owners to exercise any of the rights vested in them by this Charter, or this Charter for any reason becomes invalid or unenforceable or ceases to be in full force and effect or Charterers repudiate this Charter; |
(b) | Upon the occurrence of a Charterers’ Default and at any time thereafter for so long as such default is continuing, and whether or not the Charter has commenced, Owners shall be entitled to terminate this Charter by giving notice in writing to Charterers. This Clause 63(b) is without prejudice to any other rights Owners may have hereunder or at common law. |
65. | Quiet Enjoyment |
Owners acknowledge that Charterers shall be entitled to the quiet enjoyment and use of the Vessel under this Charter throughout the charter period without interruption. Except as expressly permitted by this Charter, the Owners shall not (either prior to or after delivery of the Vessel hereunder) effect or permit to exist any mortgage, lien, claim or encumbrance or security interest of whatsoever nature on the Vessel without the prior consent of the Charterers. The Charterers hereby consent to the Owners executing a mortgage of the Vessel, as security for the financing of the Vessel, in favour of (i) an international bank or other financial institution, or (ii) a controlled affiliate of an international bank or other financial institution, provided that, in either case, the identity of such party has been approved by the Charterers (such approval not to be unreasonably withheld). It is a condition of the Owners’ consent to any such mortgage that the Owners shall
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procure that the relevant mortgagee executes a letter of quiet enjoyment in favour of the Charterers, which shall be substantially in the form included in Appendix G. Owners shall permit Charterers to review the audited financial accounts of Owners within 2 months following publication.
66. | Rights of Third Parties |
No provision of this Charter shall, under the Contracts (Rights of Third Parties) Act 1999, confer any benefit on, nor be enforceable by, any person who is not a party to this Charter.
67. | Consequential Losses |
Without prejudice to any other provision of this Charter, neither Charterers nor Owners (or their Vessel) nor any of the affiliated companies or shareholders of either of them shall be liable (by reason of negligence, breach of contract or otherwise) for loss of business opportunity, earnings, income or profit whether directly or indirectly and whether by the parties hereto or others arising out of, or in any way connected to, the performance or non-performance of this Charter (“Consequential Loss”). For the avoidance of doubt, Consequential Loss within the meaning of this Clause shall not include any hire payable (or which would but for breach have been payable) under this Charter.
68. | Health, Safety, Security, Environment Reporting Requirements |
(a) | If requested by the Charterers and mutually agreed by both parties, Owners may participate in an emergency response exercise; |
(b) | For any incident, Owners shall notify Charterers as per the Charterers’ Instructions. Charterers may be invited to participate in any subsequent incident investigation; |
(c) | Owners shall ensure a Behavioural Based Safety (BBS) system or equivalent and/or a near miss reporting system is implemented. Owners shall share the observations and lessons learned with the Charterers as they occur, but no less than on a monthly basis; |
(d) | Owners shall submit to Charterers a monthly written report, within five (5) days of the end of each month that the Vessel is on hire, detailing all monthly reporting requirements, in accordance with the “HSSE Monthly Report” detailed in the Charterers’ Instructions; |
(e) | Owners shall maintain HSSE records sufficient to demonstrate compliance with the requirements of the SMS and provide Charterers the right to confirm compliance with HSSE requirements by audit of Owners, including but not limited to the tight to audit and review Owners’ facilities, services and/or performance of its activities as mutually agreed by the Owners; |
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(f) | Owners shall document and report immediately to Charterers any incidents of environmental damage, any unforeseen activity or event which could have led to environmental damage, a spillage of oil on deck or to the water, release or venting of hydrocarbons, breaches or potential breaches of environmental regulations or complaint from local groups, organisations including enforcement agencies or individuals. |
(g) | Owners shall commit to demonstrating leadership in all aspects of HSSE through open dialogue and active participation in relevant forums. |
(h) | The company owning or operating the Vessel shall be a member of SIGTTO. |
69. | Ballast Water Treatment (BWT) System |
If international regulations require that a BWT system to be fitted during the Firm Period, or the Option Charter Period (s) (if such option is exercised by the Charterers); then the Owners and Charterers shall mutually agree on the BWT system to be installed and Charterers shall pay the direct costs for such BWT system at the time that such system is fitted. The vessel shall not be off-hire during this time. Costs for Owners’ personnel to inspect the fitting shall be borne by Owners.
70. | Counterparts |
This Agreement may be executed in any number of counterparts each of which, when so executed, shall be deemed to be an original but such counterparts shall together constitute but one and the same instrument.
Appendix A: | List of Primary Terminals. |
Appendix B: | Gas Form C for the Vessel |
Appendix C: | Detailed Performance Criteria, as attached, shall be incorporated herein. |
Appendix D: | Crew Matrix |
Appendix E: | BG Business Principles |
Appendix F: | Norwegian Sale Form |
Appendix G: | Letter of Quiet Enjoyment |
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Agreed and signed by Owners | Agreed and signed by Charterers | |
/s/ Graham Westgarth |
/s/ Hector Armando Rosales-Macedo |
|
Name: Graham Westgarth | Name: Hector Armando Rosales-Macedo | |
Title: Director | Title: Attorney-in-fact | |
Date: 4 April 2014 | Date: 4 April 2014 |
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APPENDIX A – Terminal Compatibility List
Load | Country | Status | ||
Gladstone | Australia | *2 | ||
Withnell Bay | Australia | 1 | ||
Pluto | Australia | l | ||
Ian | Egypt | l | ||
Damietta | Egypt | 1 | ||
Punta Europa | Equatorial Guinea | 1 | ||
Discharge | Country | Status | ||
Bahia Blanca FSRU | Argentina | 1 | ||
Zeebrugge | Belgium | 1 | ||
Pecem | Brazil | 1 | ||
Guanabara Bay | Brazil | 1 | ||
Canaport | Canada | 1 | ||
Mejillones | Chile | 1 | ||
Quintero | Chile | 1 | ||
Dalian | China | 1 | ||
Fujian | China | 1 | ||
Guangdong | China | 1 | ||
Jiangsu | China | 1 | ||
Shanghai | China | 1 | ||
Zhejiang | China | 1 | ||
Zhuhai | China | *2 | ||
Montoir | France | 1 | ||
Revithoussa | Greece | 1 | ||
Dahej | India | 1 | ||
Hazira | India | 1 | ||
Chita | Japan | 1 | ||
Futtsu | Japan | 1 | ||
Himeji | Japan | 1 | ||
Senboku II | Japan | 1 | ||
Kawagoe | Japan | 1 | ||
Sodeshi | Japan | 1 | ||
Niigata | Japan | 1 | ||
Tobata | Japan | 1 | ||
Hitachi | Japan | *2 | ||
Joetsu Thermal Power | Japan | 1 | ||
INPEX Naoetsu | Japan | 1A | ||
Negishi | Japan | 1 | ||
Yanai | Japan | 1 | ||
Sodegaura | Japan | 1 | ||
Ohgishima | Japan | 1 | ||
Oita | Japan | 1 | ||
Sakai | Japan | 1 | ||
Load | Country | Status | ||
Bonny Island (Jetty 1,2) | Nigeria | 1 | ||
Snohvit | Norway | *4 | ||
Point Fortin | Trinidad | l | ||
Das Island | UAE | l | ||
Lake Charles | USA | 1 | ||
Sabine Pass (Cheniere)* | USA | 1 | ||
Discharge | Country | Status | ||
Incheon | Korea | 1 | ||
Pyeongtaek | Korea | 1 | ||
Tongyeong | Korea | 1 | ||
Gwang Yang | Korea | 1 | ||
Mina Al Ahmadi | Kuwait | 1 | ||
Bintulu | Malaysia | 1 | ||
Altamira | Mexico | 1 | ||
Costa Azul | Mexico | 1 | ||
Sines | Portugal | 1 | ||
Ras Laffan | Qatar | 1 | ||
Singapore | Singapore | 1 | ||
Barcelona | Spain | 1 | ||
Bilbao | Spain | 1 | ||
Cartagena | Spain | 1 | ||
Huelva | Spain | 1 | ||
Sagunto | Spain | 1 | ||
Map Ta Phut | Thailand | 1 | ||
Rotterdam | The Netherlands | 1 | ||
Yung-An | Taiwan | 1 | ||
Taichung | Taiwan | 1 | ||
Aliaga | Turkey | 1 | ||
Marmara Ereglisi | Turkey | *3 | ||
Jebel Ali FSRU | UAE | 1 | ||
Elba Island | USA | 1 | ||
Cameron | USA | 1 | ||
Pascagoula | USA | 1 | ||
Freeport | USA | 1 | ||
Isle of Grain | UK | 1 | ||
Dragon | UK | 1 |
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1 Primary Terminals
* 1 A - Primary Terminals ~ Pending
Signifies terminals where some terminal data is not complete, but which will be treated as Primary Terminals so long as, in order for the Vessel to be accepted by the terminal, no changes are required to the principal dimensions of the Vessel, including: length, breadth, draft, displacement, location of cargo manifolds and lay-out of cargo manifolds (pipe size, layout of liquid and vapour lines, manifold dimensions, etc). Owners and Charterers to cooperate to complete any missing terminal data and to achieve Terminal acceptance and any minor changes to the Vessel (gangway landing areas/rails, etc.) will be the responsibility of the Owners.
*2 Terminals Under Construction
Signifies terminals that are under construction at the date of signing the Charter party and are not Primary Terminals (“Terminals Under Construction”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Terminals Under Construction are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Terminal Under Construction. Once Owners are reasonably satisfied that a Terminal Under Construction is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Terminal Under Construction has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Terminal Under Construction to the list of Primary Terminals.
*3 Terminals With Compatibility Issues
Signifies terminals which have identified compatibility issues and are not Primary Terminals. However, Owners agree to allow the Vessel to call at such terminals provided: (i) they are reasonably satisfied that there is sufficient compatibility to allow safe navigation, loading and/or discharge; and (ii) the terminal have confirmed to Owners their acceptance of the Vessel to call, and carry out cargo operations at their terminal.
*4 Terminals Pending Further Data
Signifies terminals in respect of which, at the date hereof, there is insufficient information available in order to allow Owners to assess whether the terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge (“Pending Terminals”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Pending Terminals are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Pending Terminals. Once Owners are reasonably satisfied that a Pending Terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Pending Terminal has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Pending Terminals to the list of Primary Terminals.
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APPENDIX B – Gas Form C for the Vessel
GAS FORM C DESCRIPTION OF
THE VESSEL
METHANE RITA ANDREA
SHI – HULL 1554
1. | GENERAL | |||
1.1 | Vessel Name and Hull Number | : |
Methane
Rita Andrea
SHI - HN 1553 |
|
1.2 | Builder and Yard | : |
Samsung Heavy
Industries
Geoje Island, Korea |
|
1.3 | Year Built | : | 2006 | |
1.4 | Containment System | : | Membrane Type GTT Mark III | |
1.5 | Country of Registry | : | Bermuda | |
1.6 | Port of registration | : | Hamilton | |
1.7 | Classification Society | : |
American Bureau of Shipping
HA1 |
|
2. | DIMENSIONS, TONNAGE | |||
2.1 | Length Overall | : | 283.062 metres | |
2.2 | Length between Perpendiculars | : | 270.0 metres | |
2.3 | Beam (moulded) | : | 43.40 metres | |
2.4 | Depth to upper deck, moulded | : | 26.0 metres | |
2.5 | Scantling Draft, moulded (in seawater of specific gravity of 1.025) | : | 12.4 metres | |
2.6 | Design Draft, moulded (in seawater of specific gravity of 1.025) | : | 11.400 metres | |
2.7 | Summer Draft (extreme) | : | 12.025 metres | |
2.8 | Air Draft | : | 40.26/n with radar mast in lowered position and about 46.26m with radar mast in raised position. Ballast draught 9,74m | |
3. | TONNAGE | |||
3.1 | Deadweight at Design Draft, extreme at Summer Draft, extreme | : | 72,994.6 metric tonnes | |
: | 79,046.2 metric tonnes | |||
3.2 | Lightweight | : | 29,540.1 metric tonnes | |
3.3 | Displacement at Summer Freeboard (8.751m) | : | 108,586.3 metric tonnes | |
3.4 | Gross Tonnage (International) | : | 95,753 | |
3.5 | Net Register Tonnage | : | 28,726 | |
3.6 | Suez Canal Gross Tonnage | : | 99,138.45 | |
3.7 | Suez Canal Net Tonnage | : | 86,082.93 |
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No. 1 tank : 22,120.715 m 3 | No. 2 tank : 42,899.636 m 3 | |
No. 3 tank : 42,904.760 m 3 | No. 4 tank : 37,697.140 m 3 |
7.8 | The Vessel’s cargo tanks can be cooled down from ambient temperature to the loading condition in less than 10 hours (-130°C , mean temp. of cargo tanks). | |
8 | CARGO LOADING AND DISCHARGE PERFORMANCE | |
(a) | The ship shall be able to load the bulk of the cargo (excluding slow starting and topping off) through two (2) liquid manifolds in approximately 12 hours at pressure of 240 kPa(G) inboard of the manifold strainer. | |
(b) | The ship shall be able to discharge the bulk cargo through three (3) liquid manifolds in approximately 12 hours (excluding slow starting and stripping) against a backpressure of 100 MLC measured inboard of the manifold strainer with cargo tanks at mid-level. |
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Number and Capacity | 2 off 26,000 m 3 /h | |||
Discharge Pressure | 200 kPa A | |||
Suction Press and Temp | -140°C, 103 kPa A | |||
19.2 | Low Duty | |||
Type and Make | : | Horizontal, single stage centrifugal /Cryostar | ||
Number and Capacity | : | 2 off 8,000 m 3 /h | ||
Discharge Pressure | : | 200 kPa A | ||
Suction Press and Temp | : | -40°C, 106 kPa A | ||
20. | FORCING VAPORIZER | |||
20.1 | Capacity | : | 8,000 kg/h from -163°C to -40°C / Cryostar | |
21. | DECK MACHINERY | |||
21.1 | Winches | |||
Number, Position, Type (incl. windlass) | : | 4 for’d (2 combined with windlass) 5 aft, Electro-hydraulic self contained power pack, non auto-tension type mooring winches & windlasses / Kochs | ||
21.2 | Holding Power of Brake | : | 80% of mooring line MBL (design) set at 60% | |
21.4 | Size of Wires and whether fitted with TailsState Length, Material | : | Twenty-two (22) sets including two (2) spares, each 200 m long and 44 mm diameter of spectra rope or equivalent with each 11 / 22 m long nylon / polyester tail. | |
21.5 | Derrick, cranes, etc. Type and Capacity | : |
Electro-hydraulic
driven single jib crane
One (1) x 5.0 Te SWL at port aft and one (1) x 10.0 Te SWL at starboard aft. One (1) x 6.0 Tc SWL for cargo machinery room Two (2) x 5.0 Te SWL at P&S manifold |
|
22. | NAVIGATION AND RADIO | |||
22.1 | Navigation Aids and Radio Equipment | : |
VHF radio telephones
GMDSS distress message controller Display units for radars (X and S-bands), ECDIS and conning display Auto pilot operating unit CCTV control station for mooring area camera and night vision camera UHF base station DGPS navigator Echo sounder recorder Master electric clock system Speed log main unit Navtex receiver Signal light control panel Inmarsat-F (Fleet 77) Inmarsat-C |
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23. | OTHER | |||
23.1 | Bilge Oily Water Monitor | : | 1 X m 3 /h (15 ppm) | |
23.2 | Incinerator | : | 1 X 500,000 kcal/h for solid garbage waste and sludge oil having flash point above 60°C | |
23.3 | Sewage Treatment Plant | : | One (1) biological type for 45 persons | |
23.4 | CCTV system with 11 cameras and monitors in wheelhouse, engine control room and cargo control room; | |||
23.5 | Loading computer including damage stability calculations | |||
23.6 | Shipboard management system | |||
23.7 | Public address system | |||
23.8 | UHF onboard radio communication with 2 base stations, l base repeater station and twelveportable sets |
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APPENDIX C – Detailed Performance Criteria
CONTENTS
Article 1. | Speed Warranties |
Article 2. | Timeliness |
Article 3. | Guaranteed Daily Fuel Consumption |
Article 4. | Definitions for Fuel Consumption Calculations |
Article 5. | Basis of Calculation for Fuel Consumption |
Article 6. | Actual Fuel Consumption on a Voyage |
Article 7. | Guaranteed Maximum Boil-Off |
Article 8. | Boil-Off Calculations |
Article 9. | Spray Cooling, Forced Vaporisation and use of Boil-Off |
Article 10. | Provisions for Gauging |
Article 11. | Underwater Cleaning / Waiting at Anchorage |
Article 12. | Interpretation |
Article 13. | Weather Limits for Performance Warranties |
Article 14 | Claim Validity Period |
1. | Speed Warranties |
(a) | Owners guarantee that the Vessel is capable of steaming and, subject to Article 1(b), shall steam at the Laden Service Speed or the Ballast Service Speed as set out in Clause 26(a) and (b) as applicable (the “Service Speed”). |
(b) | Charterers may order the Vessel to steam at the Service Speed or at any lesser average speed but not less than the Minimum Speed as set out in Clause 26(c) and not at a greater average speed, except with Owners’ consent, which shall not be unreasonably withheld. For the avoidance of doubt, it is agreed that Owners may decline orders to steam at any lesser average speed than the Minimum Speed or at any greater average speed than the Service Speed for operational reasons. |
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2. | Timeliness |
(a) | Prior to each voyage Charterers may, subject to Article 1(b), instruct the Vessel to proceed so as to arrive at the pilot boarding station at each port at a given date and time (the “Scheduled Arrival Time” or “SAT”). Provided however: |
(i) | In the event that Charterers fail to provide a SAT to Owners the SAT shall be deemed to be the estimated arrival time of the Vessel assuming the Vessel steams at the Service Speed by the shortest safe route to the named port measured from pilot station to pilot station (a “Sea Passage”) (or the route specified by Charterers, if different) from the time Charterers instruct the Vessel to proceed. |
(ii) | The SAT shall in any event not be earlier than the estimated arrival time calculated in accordance with Article 2(a)(i). |
(iii) | Subject to Article 1(b), Charterers may amend the SAT from time to time during or prior to each voyage to accommodate changes in circumstances concerning the voyage (the “Amended SAT”). |
(iv) | The speed at which the Vessel needs to steam in order to meet the SAT or the Amended SAT or any permissible speed ordered by the Charterers shall be a “Guaranteed Speed”. |
(b) | Charterers shall compare the actual time of arrival of the Vessel at the pilot station at each port with the SAT save that if the SAT was amended solely for reasons not attributable to any failure in performance by the Vessel, then such comparison shall be made with the Amended SAT. |
(c) | If the Vessel arrives at the pilot station at the arrival port not later than ***** after the SAT or Amended SAT, where applicable, the Vessel shall be deemed to have arrived “On Time”. If the Vessel arrives at the pilot station more than ***** after the SAT, or Amended SAT where applicable, the Vessel shall be deemed to have arrived “Late”. |
(d) | Subject to Article 2(e) and (f), Charterers shall be entitled to make a deduction from hire in respect of any period by which the Vessel arrives Late. |
(e) | Notwithstanding the foregoing but subject to Article 2(f), Charterers shall not be entitled to make any deduction from hire if the Vessel arrives Late to the extent that such late arrival is caused by one or more of the following during the voyage and is not indirectly or directly due to Owners’ negligence: |
(i) | the incidence of bad weather, being any day in which the Vessel has to proceed in wind force in excess of Beaufort Force 5 for more than ***** hours noon to noon, or |
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(ii) | poor visibility, or |
(iii) | congested waters, or |
(iv) | alterations in speed or course to avoid areas of bad weather, or |
(v) | any period spent at a waiting area following arrival, or |
(vi) | the saving of life or (with Charterers’ consent) property, or |
(vii) | time lost waiting for or as a result of a canal transit, or |
(viii) | time taken for bunkering during a sea passage in accordance with Charterers’ instructions, or |
(ix) | time spent steaming at a reduced speed by mandatory order of regulatory bodies having jurisdiction over the Vessel, or |
(x) | time spent steaming at reduced speed as a result of fouling caused by extraordinary delays in port beyond Owners’ control or as a result of lay-up or usage as storage vessel (if mutually agreed), or |
(xi) | time lost for safe navigation and navigating restricted areas |
(xii) | time lost in order to observe recommendations as to traffic separation and routing as issued by the International Maritime Organisation, or any state or agencies whose waters the Vessel may pass. |
(Article 2(e)(i)(ii)(iii)(iv)(v),(vi)(vii),(viii),(ix),(x),(xi) and (xii) being known as “Restricted Periods”), or
(xii) | any period when the Vessel is off-hire at sea on any individual voyage. The master shall record in his daily noon report the time lost in the previous 24 hours due to any of the matters referred to in this Article 2(e). |
(f) | If the Vessel arrives Late the following calculation shall be made to assess the period in respect of which Charterers shall be entitled to deduct hire. The speed of the Vessel shall be calculated over the Sea Passage excluding all Restricted Periods (the “Achieved Speed”). If the Achieved Speed equals or exceeds the Guaranteed Speed Owners shall be deemed to have met the speed warranties. If the Achieved Speed is less than the Guaranteed Speed Charterers shall apply the Achieved Speed to the total Sea Passage and the time at which the Vessel would have arrived if steaming at the Achieved Speed shall be the Deemed Arrival Time. Charterers shall be entitled to deduct hire to the extent to which the Deemed Arrival Time exceeds the SAT by more than ***** hours. |
(g) | The relationship between this Article 2 and Clause 22 shall be as follows: |
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(i) | Periods of off-hire under Clause 22 shall be excluded for all purposes from calculations under this Article 2. |
(ii) | Article 2 shall apply to deal with lateness to which Clause 22 does not apply pursuant to Clause 22 (b). |
3. | Guaranteed Daily Fuel Consumption |
(a) | Owners guarantee that subject to the other provisions of Appendix C, the maximum daily fuel consumption of the Vessel for all purposes shall not exceed the quantities tabulated in Clause 26(e) and, where applicable shall be prorated between the speeds shown. |
(b) |
The average speed in knots on any Voyage (as defined in Article 4) shall be calculated by reference
to the observed distance steamed and the duration of the Voyage, but
excluding from the calculation of average speed the duration of all off-hire periods and distance covered in such periods and excluding the distance covered during any deviation which is not an off-hire period because the Vessel arrives On Time. |
4. | Definitions for Fuel Consumption |
(a) | In this Appendix C: |
(i) | “EOP” means the time the Vessel records End of Passage on arrival after any voyage. |
(ii) | “FAOP” means the time the Vessel proceeds Full Away On Passage from her departure point on a voyage. |
(iii) | “fuel” refers collectively to its two components, fuel oil and Boil-Off, measured in tonnes |
(b) | For the purpose of fuel consumption calculations a voyage shall, where applicable, be divided into separate segments (each a “Voyage”). A Voyage shall be deemed to have started either: |
(i) | at FAOP or |
(ii) | immediately after an off-hire period, or |
(iii) | at the time the Vessel alters speed to comply with an amended SAT or otherwise pursuant to Charterers’ orders as the case may be. |
(c) | A Voyage shall be deemed to have ended either: |
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(i) | at EOP, or |
(ii) | immediately before an off-hire period, or |
(iii) | at the time the Vessel alters speed to comply with an amended SAT or otherwise pursuant to Charterers’ orders as the case may be. |
5. | Basis of Calculation for Fuel Consumption |
(a) | For each Voyage the guaranteed fuel consumption shall be calculated by multiplying the maximum daily consumption as determined pursuant to Article 3 by the duration of the Voyage calculated on the assumption that the Vessel steamed at the Guaranteed Speed. In calculating both the guaranteed fuel consumption and the actual fuel consumption Restricted Periods pursuant to Article 2(e) shall be excluded. Subject as hereinafter provided, there shall be a saving of fuel for that Voyage equal to the amount by which the guaranteed fuel consumption exceeds the actual fuel consumption and an excess consumption for that Voyage equal to the amount by which the actual fuel consumption exceeds the guaranteed fuel consumption. Such saving or excess shall be adjusted to take into account the Restricted Periods by dividing such saving or excess by the number of miles over which the fuel consumption has been calculated and multiplying by the same number of miles plus the miles steamed during the Restricted Periods in order to establish the total saving or excess in fuel consumption for the Voyage. |
(b) | If on any Voyage the Vessel has to steam faster than the Service Speed or slower than the Minimum Speed pursuant to Charterers’ orders, or in order to achieve the SAT (provided this is not attributable to any failure of performance by the Vessel), the Vessel shall be deemed to have complied with the fuel consumption guarantees for the duration of such Voyage. |
(c) | Owners’ warranties relating to speed and fuel consumption shall not apply to the period between the end of one Voyage and the start of the next Voyage as described in Article 4. |
(d) | As soon as practicable after receipt of the necessary voyage returns, Charterers shall furnish Owners with their calculations determining fuel consumption on each Voyage. |
(e) | At the conclusion of the charter period or annually (whichever occurs first) (the “Performance Period”), the quantities of excess fuel used and the quantities of fuel saved on all voyages in the Performance Period shall each be added up. The total of fuel saved for the Performance Period shall then be subtracted from the total of excess fuel used for the Performance Period and if the balance is positive Charterers shall deduct from hire due under Clause 11 an amount calculated by multiplying the net excess quantity of fuel consumed for the Performance Period by the weighted average price paid by the Charterers for fuel oil for the Vessel over the Performance Period in question. If the balance is zero or negative, Owners shall be deemed to have complied with their Fuel consumption obligations for the Performance Period. |
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6. | Actual Fuel Consumption on a Voyage |
(a) | The actual fuel consumption on a Voyage shall, subject to Article 6(b), be the sum of, |
(i) | the fuel oil consumed during the Voyage (expressed in tonnes ) and excluding any fuel oil used in any off-hire period on that voyage; and |
(ii) | the fuel equivalent of the total volume of cargo lost as Boil-Off during the Voyage (expressed in tonnes of Fuel Oil Equivalent) excluding any Boil-Off in any off-hire period on that voyage and excluding any Boil-Off in excess of guaranteed maximum Boil-Off under the provisions of Article 8, except the excess that is a result of Charterers’ orders as per Article 7(b). |
(b) | For the purpose of this Article 6 the Fuel Oil Equivalent of the LNG lost as Boil-Off which is available as fuel during the voyage shall be assumed to be the total volumetric loss of the cargo, measured in cubic meters, as determined from the difference between gaugings at the loading and discharging ports (in accordance with Article 9), pro rated for the difference between the on hire voyage and gauging times and multiplied by the Fuel Oil Equivalent factor set out in Clause 26(f). |
7. | Guaranteed Maximum Boil-Off |
(a) | Owners guarantee that Boil-Off shall not exceed: |
(i) | the maximum laden Boil-Off percentage stated in Clause 26(g); and |
(ii) | the maximum ballast Boil-Off percentage stated in Clause 26(h). |
(b) | If Charterers give orders that require the temperature or vapour pressure of a cargo to fall during a laden sea passage and that order is complied with, the Boil-Off guarantee shall be deemed to have been complied with on that sea passage. |
8. | Boil-Off Calculations |
(a) | The Boil-Off excess or saving on any sea passage shall be calculated by comparing the guaranteed Boil-Off for the sea passage (i.e. the daily guaranteed maximum Boil-Off multiplied by the time between gaugings) with the actual Boil-Off. |
(b) | The actual amount of Boil-Off on a sea passage shall be calculated by subtracting the volume of LNG contained in the Vessel’s tanks at gauging after the sea passage from the volume therein at gauging before the sea passage. |
(c) | If the Vessel was off-hire during any sea passage the excess or saving shall be pro rated in the same proportion as the time on hire is to the total time between gaugings. |
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(d) | At the conclusion of the charter period or annually (whichever occurs first) (the “Performance Period”), the quantities of excess Boil-Off and the quantities of Boil-Off saved on all trips in the Performance Period shall each be added up. The total Boil-Off saved for any such period shall then be subtracted from the total excess Boil-Off in the same period and if the balance is positive Charterers may deduct from hire due under Clause 11 an amount calculated by multiplying the said balance by the LNG Price or, if more than one LNG Price is applicable during the Performance Period, the arithmetical average of such LNG Prices. If the balance is zero or negative, then Owners shall be deemed to have complied with this Clause for the Performance Period. |
9. | Spray Cooling, Forced Vaporisation and use of Boil-Off |
(a) | If on any sea passage, Charterers order the Vessel to force vaporise LNG to eliminate or minimise the use of bunkers and the order is complied with, the Boil-Off guarantee shall be deemed to have been complied with on that sea passage. |
(b) | The master shall notify Charterers if he/she is of the opinion that the Vessel will not, on arrival at the loading port, be able to commence bulk loading within half an hour after cooling of the loading arms without spray cooling on the ballast sea passage. |
(c) | Without prejudice to any of Owners’ or Charterers’ obligations under this Article 9; if Owners intend to order spray cooling at any time during the charter period, Owners agree, if requested by Charterers, to discuss the reasons and technical basis for spray cooling. |
(d) | Subject to the provisions of this Charter, Owners shall have free use of Boil-Off. At no time during the charter period, (except for safety reasons) shall the Vessel use the vent system as a primary means of controlling the cargo tank pressures. Any such safety related venting, or venting caused by any other reason, shall immediately be reported to Charterers (as per Clause 68(d)) with full explanation as to why venting was required and duration and quantity of venting. |
(e) | Each of the Vessel’s four diesel generators is to be equipped with a dual system to burn either Boil-Off gas from the LNG carried (together with a diesel pilot oil) or, diesel oil alone or heavy fuel oil (together with a diesel pilot oil) as independent of the other engines as the Vessel’s design allows. The Vessel shall, at Charterers’ option, use the available Boil-Off gas, or fuel, or complement the boil-off gas being used as fuel by forced vaporised natural gas or by fuel oil, within such limits as may be imposed by Charterers and, in any event, by safety regulations and the safety of the Vessel. |
10. | Provisions for Gauging |
(a) | The time at which any volume of LNG is determined is referred to in this Charter as a gauging time. |
(b) | In relation to any laden sea passage the cargo volume on loading at the start of the laden sea passage shall be the volume of LNG contained in the Vessel’s cargo tanks measured |
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promptly after the closing of the Vessel’s manifold vapour return valve in the loading port and on discharge at the end of the laden sea passage shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly before the opening of the Vessel’s manifold vapour return valve in the discharge port. |
(c) | In relation to any ballast sea passage the LNG heel volume after discharge (i.e. at the start of the ballast sea passage) shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly after the closing of the manifold vapour return valve in the discharge port and the LNG heel volume on loading (i.e. at the end of the ballast sea passage) shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly before the opening of the Vessel’s manifold vapour return valve in the loading port. |
11. | Underwater Cleaning / Waiting at Anchorage |
(a) | Charterers may request Owners at any time to arrange for the cleaning afloat of the Vessel’s underwater hull and propeller whereupon Owners shall arrange for the said cleaning to take place provided that: |
(i) | the Vessel is free of cargo but may be under vapour if permitted by the port authority and; |
(ii) | in Owners’ opinion such cleaning will not damage in any way the Vessel’s underwater hull coatings and the cleaning method is approved by the coating manufacturer, and; |
(iii) | such cleaning afloat can be carried out safely at a place approved by Owners and where the water is sufficiently clear for an underwater survey to be made of cleanliness of the Vessel’s hull and propeller immediately thereafter. The Vessel shall be considered clean when the hull is substantially free from macroscopic and microscopic biofouling. |
(iv) | Charterers may request Owners to perform underwater cleaning to be carried out when the vessel is fully loaded to enable access to entire underwater area. Owners and Charterers shall agree whether this procedure can be safely carried out. |
(b) | The cost of such underwater hull and propeller cleaning and underwater survey referred to in Article 11 (a) shall be for Charterers’ account and the Vessel shall remain on hire for their duration. If the underwater survey shows that both the Vessel’s underwater hull and propeller are substantially free from macroscopic and microscopic biofouling, a successful cleaning shall be deemed to have occurred. |
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(c) | If Charterers order the Vessel to wait at anchorage or in lay up for more than 20 days on any one occasion or more than 60 days comprising periods of not less than 5 days each in any period of 6 months, and, if as a result of such waiting or lay up Owners have good reason to believe that the performance of the Vessel or her fuel consumption is affected and speed and/or fuel warranties can no longer be met because of fouling then Owners shall so state by written notice to Charterers and if Charterers request, shall carry out an underwater inspection at Charterers’ expense to see if there is fouling of the hull and/or propeller. |
To prevent hull fouling from marine growth during charter period, wherever practically possible, Charterers are required to steam the Vessel for a period of 24 hours, every 7 days after anchoring, at a speed between 14 and 15 knots. |
(d) | If as a result of the aforesaid inspection, Owners consider that there is evidence of such fouling then if Charterers so request, Owners shall arrange and carry out cleaning afloat of the Vessel’s underwater hull and propeller provided that the provisions of Article 11 (a)(i), (ii) and (iii) apply. |
(e) | The cost of such underwater hull and propeller cleaning and underwater survey referred to in Article 11 (d) shall be for Charterers’ account and the Vessel shall remain on hire for their duration. If the underwater survey shows that both the Vessel’s underwater hull and propeller are substantially free from macroscopic and microscopic biofouling, a successful cleaning shall be deemed to have occurred. |
(f) | If any inspection pursuant to Article 11 (c) reveals the presence of hull or propeller fouling, or if Charterers decline to request an inspection following receipt of a notice from Owners under Article 11 (c), then from the time Owners give written notice that performance is affected by fouling, Owners shall be deemed to have complied with the speed and fuel warranties until the completion of the next periodic dry-docking or successful cleaning, whichever occurs sooner. |
12. | Interpretation |
(a) | In this Appendix C, “Article” shall mean an Article of this Appendix, and “Clause” shall mean a Clause of the Charter. |
(b) | In the event of any conflict between the Charter and Appendix C, Appendix C shall prevail. |
13. | Weather Limits for Performance Warranties |
Speed, boil-off and fuel consumption warranties defined in this Appendix are not valid under weather conditions in which the Vessel has to proceed in wind force in excess of Beaufort Force 5 for more than ***** hours noon to noon.
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For the purposes of calculating claims, the Wind Force reported in the Master’s noon report shall be used. Charterers may employ the services of a reputable weather reporting company at their own cost.
In the event of a consistent discrepancy between deck logs and weather reporting company’s reports, Owners and Charterers shall meet in good faith to agree which numbers shall be used.
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APPENDIX D – Crew Matrix
Steam LNG Engineer Officer | |||||||||||||
Rank | Chief Engineer | 2nd Engineer | Cargo Engineer | 3rd Engineer | 3rd Engineer | Electronic | |||||||
Work Hours | Dayworker | Day/Watch | Dayworker | Day/Watch | Day/Watch | Dayworker | |||||||
STCW Certificate of Competency | Class 1 | Class 2 | Class 3 | Class 3 | Class 3 | Electro-Technical | |||||||
Tanker Certification | G - O | G - O | G | G | G | G | |||||||
STCW V/1-2 para 2 or para 4 for LNG | 4 | 4 | 4 | 2 | 2 | 2 | |||||||
Combined sea time on all vessels | 4 years at Second engineer or above | ||||||||||||
Individual minimum sea time as Certificated Officer | 4 years | 2 years | 1 year | 1 year | |||||||||
Combined sea time on LNG Vessels | 2 years in rank on LNG vessels | ||||||||||||
Individual minimum sea time on LNG Vessels |
4 years diesel sea time with a minimum of 30 days intensive training + completion of SIGTTO competency standards training for LNG + Completion of SIGTTO competency standards for steam engineers and the appropriate steam endorsement for the rank.
or, 2 years steam sea time and completion of SIGTTO competency standards for steam engineers
or, 2 year steam LNG sea time
|
2 years diesel sea time with a minimum of 30 days intensive training + completion of SIGTTO competency standards training for LNG + Completion of SIGTTO competency standards for steam engineers
or, 1 year steam sea time and completion of SIGTTO competency standards for steam engineers
or, 1 year steam LNG sea time.
|
1 year as a certified engineering officer on an LNGC + management level (STCW V/1.2 paragraph 4) cargo endorsement for liquefied gas tanker cargo operations. (Note 4) |
Tanker Certification: G=Gas O=Oil | STCW V V/1-2: 2=Operational 4=Management |
APPENDIX E - BG Business Principles
The BG Group Business Principles are set out below.
Conduct
— | We act with integrity, fairness and transparency. |
— | We comply with legal, regulatory and license requirements. |
— | We do not tolerate corruption in any form, whether direct or indirect. |
— | Our investment criteria take account of economic returns, environmental impacts, social consequences and human rights. |
— | High standards of corporate governance are integral to the way we manage our business. |
People
— | We treat people with fairness, respect and decency. |
— | We help employees to develop their potential. |
— | We believe that all injuries are preventable. |
— | We provide healthy, safe and secure work environments. |
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Society
— | We work to ensure that neighboring communities benefit from our presence on an enduring basis. |
— | We listen to neighboring communities and take account of their interests. |
— | We support human rights within our areas of influence. |
Environment
— | We make a positive contribution to the protection of the environment. |
— | We go beyond compliance with local environmental regulation to meet internationally accepted best practice. |
— | We reduce to the minimum practicable any adverse effects of our operations on the environment. |
For further information on BG Group’s Business Principles and how to implement BG Group’s Business Principles refer to ‘Principles into Practice at
http://www.bg-group.com/sustainability/Principles/Pages/BusinessPrinciples.aspx
Any breach or potential breach of BG Group’s Business Principles should be reported through BG Group’s Speak Up facility via the confidential website www.bg-speakup.com or confidential telephone line 1-866-482-5517.
BUSINESS PRINCIPLES RISK ASSESSMENT AND REPORTING
For the purposes of this Clause “Material Risks” means any potential events or actions in connection with the performance of the Services/Work under the Charter that may compromise the Charterers’ ability to operate in accordance with BG Group’s Business Principles. Table 1 below provides examples to assist in assessing Material Risks and materiality thresholds.
Prior to commencement of the Charter; Owners, if requested, shall participate in a joint risk assessment meeting to analyse Material Risks and identify and allocate actions to mitigate such risks.
Owners shall maintain a ‘Risk Register’ (in addition to any required by the HSSE provisions in the Charter). This ‘Risk Register’ shall:
(a) | identify Material Risks, and any actions to mitigate those Material Risks, that are the Owners’ responsibility, resulting from the risk assessment meetings; and |
(b) | monitor and document the implementation of Owners’ actions to mitigate Material Risks |
The Parties shall also periodically conduct joint risk assessment meetings to assess any additional Material Risks and mitigating steps as the Charter progresses. Owners’ Risk Register shall be updated to reflect the outcome of such meetings.
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Table 1 – Examples of Thresholds for Determining Material Risk
Impact Score | 1 | 2 | 3 | 4 | ||||
Descriptor | Insignificant | Less significant | Significant | Very Significant | ||||
Reputation | No adverse publicity likely | Adverse coverage for BG Group/asset at local level | Adverse coverage for BG Group/asset or subsidiaries at national and/or industry level | Adverse coverage for BG Group/asset or partners at international level | ||||
Legal | Failure to comply with legal, regulatory or license requirements | |||||||
Health | Minor transient health issue | Medical treatment | Widespread debilitating illnesses or diseases (i.e. Malaria) / fatality caused by occupational illness | Loss of lives, fatalities caused by occupational illness | ||||
Safety | Minor / No Injury to workers or the public caused by work-related activity | Reportable injury to workers caused by work-related activity | Fatality / Major injury to workers or the public caused by work-related activity | Multiple Fatalities to workers or the public caused by work-related activity | ||||
Security |
Minor/No intimidation
or threats to security |
Burglary / Robbery / Assault | Fatality / Security incidents involving firearms / Threats to life | Multiple fatalities / Direct terrorist attack | ||||
Environmental Impact | Slight or negligible effect / Oil spill < 1 barrel | Minor effect / Single breach of prescribed limits / Public complaint / Oil spill < 1 tonne | Local effect / Significant damage / Repeated breach of statutory or prescribed limits / Oil spill 1-100 tonnes | Persistent damage / Severe nuisance over large area / Constant or extended breach of statutory or prescribed limits / Oil spill >100 tonnes |
Likelihood Score | 1 | 2 | 3 | 4 |
Descriptor | Unlikely | Possible | Probable | Almost certain |
Percentage | <5% | 5-49% (~30%) | 50-90% (~70%) | >90% |
Likelihood | Impact | |||||
1 | 2 | 3 | 4 | |||
1 | ||||||
2 | ||||||
3 | ||||||
4 |
INCIDENTS
In this Section “Incident” means an event or action in connection with the performance under this Charter by the Owners, their representatives or subcontractors that compromises or has the potential to compromise the Charterers’ ability to operate in accordance with BG Group’s Business Principles.
Owners’ obligations in this Section are subject only to any legal obligations restricting the disclosure of information or any information that is agreed between the Parties to be subject to legal professional privilege.
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Within a reasonable time of Owners’ actual knowledge of an Incident occurring, Owners shall document and report it to the Charterers. Subject to any obligations on the Charterers to disclose information, the Charterers shall treat Incident reports as confidential.
Where the Charterers has reasonable grounds for believing that an Incident,
— | is at risk of occurring; or |
— | has occurred; or |
— | is reported to the Charterers by Owners, its representatives or subcontractor or by a third-party (e.g. through Owners’ ‘whistle blower’ or grievance facility, or the Speak-Up facility or risk assessment meetings); |
the Charterers are entitled to enquire of relevant documents and personnel of the Owners in order to provide assurance that the Incident, or potential Incident, is being effectively managed. Owners shall cooperate with and respond to Charterers enquiries promptly.
Enquiries shall be conducted in a spirit of collaboration between the parties, initially through a meeting and subsequently, if required, through self-assessment questionnaires, visits by the Charterers or its representatives to relevant sites and facilities, or through other appropriate means discussed by the Parties.
INFORMING SUB-CONTRACTORS
Prior to commencement of the Charter, Owners shall ensure that all representatives and subcontractors are made aware of BG Group’s Business Principles and the BG Group Speak-Up facility.
AUDITING COMPLIANCE WITH PROVISIONS
In addition to any entitlement to audit under this Charter, the Charterers reserve the right at all times to audit, by itself or by a third-party, Owners’ compliance with the provisions of the Business Principles Clause and this Exhibit.
GIFTS AND HOSPITALITY REGISTRATION
Regarding Gifts and Hospitality given by Owners to Charterers, Owners agree to comply with Annex 1 below.
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Annex 1 - Gifts and Hospitality Registration/Approval Values
Single gifts/hospitality events | Single gifts/hospitality greater | |||||||
Position |
greater than this value must be
registered |
than this value must be pre-
approved |
||||||
Column A | Column B | |||||||
Gifts | Hospitality | Gifts | Hospitality | |||||
Senior Vice President, Asset General Manager and Head Function | $85 | $425 | $425 | $850 | ||||
All other employees | $45 | $170 | $85 | $425 | ||||
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APPENDIX F – Norwegian Sale Form
To be attached
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APPENDIX G - Letter of Quiet Enjoyment
LETTER OF QUIET ENJOYMENT
[ Letterhead of Mortgagee ]
[ To Charterers ]
[ — ] 2014
Dear Sirs,
Re: [ — ] (the “ Vessel ” )
We refer to:
a. | the time charter dated [ — ] (the “ Time Charter ”) made between [ — ] as owners and you (the “ Time Charterer ”) as charterers in respect of the Vessel; |
b. | a facility agreement dated [ — ] (the “ Loan Agreement ”) made between [ — ] (the “ Owner ”) as borrower, us as agent and as security agent and trustee (the “ Security Agent ”), and the financial institutions named on the signature pages therein as lenders the “ Finance Parties ”); and |
c. | [ — ] the first priority mortgage executed or to be executed by the Owner over the Vessel in our favour between the Owners and us (the “ Mortgage ”). |
1. | References in this Letter to the Time Charter or to the Loan Agreement and the Mortgage (together the “ Finance Documents ”) shall include such documents as amended, supplemented or varied from time to time so long as any such amendment, supplement or variation has been notified to, and agreed by, us. References to paragraphs are to paragraphs of this Letter. |
2. | The Security Agent confirms that: |
a. it has received a copy of the Time Charter and is familiar with its terms; and
b. it consents to the Owners’ execution of the Time Charter.
3. | In consideration of the sum of US$10.00 and for other good and valuable consideration (receipt and the sufficiency of which the Security Agent acknowledges), the Security Agent undertakes for itself and on behalf of the other Finance Parties not, without the Time Charterer’s prior written consent, but subject as provided below and subject to this undertaking expiring on the expiry of the charter period to: |
(a) | issue any arrest, detention or similar proceedings against the Vessel in any jurisdiction; or |
(b) | exercise any power of sale or other disposal of the Vessel or of foreclosure to which the Security Agent may be entitled or make any application for the sale of the Vessel or any |
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share therein in any part of the world whether by public auction or private treaty or otherwise (excluding, for the avoidance of doubt, any steps to be taken solely to protect, but not enforce, the Finance Parties’ rights in any arrest proceedings or applications for sale made against the Vessel by any third parties, but only insofar as any such proceedings or applications are continuing and not permanently stayed, and subject to the condition that the Security Agent shall cease any such action upon the relevant proceedings or application being permanently stayed (and release any arrest, or caveat against release, upon the relevant third party arrest being released) and the Security Agent shall notify the Time Charterer in writing promptly upon taking or ceasing any such action); or |
(c) | take possession of the Vessel; or |
(d) | appoint a receiver in respect of the Vessel; or |
(e) | exercise against the Vessel any right or remedy which would diminish, prejudice or interfere with the Time Charterer’s rights, options, benefits or privileges under the Time Charter or otherwise interfere with the quiet use and enjoyment of the Vessel by the Time Charterer under the Time Charter; or |
(f) | take any step to wind up, liquidate, or place in administration or receivership the Owner nor commence or continue any analogous steps, actions or proceedings in any jurisdiction (excluding, for the avoidance of doubt, proving in a liquidation commenced by any third party, but only insofar as any such steps, actions or proceedings are continuing and not permanently stayed, and subject to the condition that the Security Agent shall cease any such steps, actions or proceedings upon the relevant third party steps, actions or proceedings being permanently stayed and the Security Agent shall notify the Time Charterers in writing promptly upon taking or ceasing any such steps, actions or proceedings); |
SUBJECT ALWAYS:
(i) | to there having occurred no event under the Time Charter (a “ Charterers’ Termination Event ”) in consequence of which the Owner, is entitled to terminate and has lawfully terminated the Time Charter in accordance with its terms including, without limitation, withdrawal of the Vessel from the Time Charter by the Owner under the terms of the Time Charter for non-payment of hire; and |
(ii) | to the Vessel not having become an actual, agreed, arranged or constructive total loss and being no longer available to the Owner; |
4. | The Security Agent agrees that unless the Time Charterer is no longer entitled to the use and quiet enjoyment of the Vessel under paragraph 3 above, if the Security Agent enforces or exercises its rights pursuant to the Finance Documents in accordance with the terms thereof, the Security Agent may only sell or transfer the Vessel expressly subject to the terms of the Time Charter (a “ Permitted Transfer ”) and provided that: |
(a) the rights of the Time Charterer under the Time Charter shall be fully preserved and protected following the Permitted Transfer; and
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(b) before the Permitted Transfer, if the Owners’ rights as “Owners” under the Time Charter are to be assigned or transferred to a third party, such third party (the “ Substitute ”) has assumed the rights and obligations of the Owner under the Time Charter and this Letter; and
(c) the Substitute is acceptable to the Time Charterer acting reasonably.
The Time Charterer shall give its consent to the proposed Substitute if the Time Charterer is satisfied, acting reasonably, that the validity and enforceability of the Time Charter will not in any way be prejudiced, and if that Substitute (not being a competitor of the Time Charterer) has such (i) legal capacity (ii) technical competence and (iii) financial capability as are reasonably required to become a party and to perform the obligations of the Owner under the Time Charter, and, provided that (but without prejudice to such Substitute’s ability to meet the foregoing criteria in other circumstances):
(a) | arrangements concluded with third parties by the proposed Substitute shall be taken into account in evaluating its technical competence and financial capability; and |
(b) | in the case of any proposed Substitute which is an affiliate of the Security Agent or a Finance Party, evidence that it is controlled by the Security Agent or a Finance Party shall be sufficient evidence of financial capability for the purposes of this paragraph 4(a); |
The Owner undertakes not to make any claim against the Vessel and/or Substitute and/or the Time Charterer arising directly from a Permitted Transfer made under this Letter.
The Time Charterer shall use all reasonable endeavours to co-operate with the Security Agent in order to effect a Permitted Transfer at the expense of the Security Agent.
5. | By countersigning this Letter, the Time Charterer hereby acknowledges and agrees that: |
(a) | subject to the provisions of paragraphs 3 and 4, the enforcement, in accordance with the terms of the Finance Documents, by the Security Agent of any security interests granted in favour of the Security Agent pursuant to the Finance Documents or the sale or transfer of the Vessel pursuant to the Finance Documents to any other person shall not constitute a disturbance of the Time Charter or the Time Charterer’s use and quiet enjoyment of the Vessel in accordance with the terms of the Time Charter; |
(b) | the covenant by the Security Agent in this Letter is the sole covenant by the Security Agent in respect of quiet enjoyment and is in substitution for, and to the exclusion of, any other covenant for quiet enjoyment which may have otherwise been given by any other party or implied at law or otherwise. |
6. | The Time Charterer agrees that: |
(a) | without prejudice to any other rights the Time Charterer may have in respect of any default by the Owner of any of its obligations under the Time Charter, the Time Charterer will not take any enforcement action in respect of or otherwise terminate the Time Charter without first notifying the Security Agent in writing and giving the Security Agent the opportunity to remedy (or procure the remedy of) any default by the Owner of any of its obligations under or in connection with the Time Charter within the relevant period referred to below. Unless the Security Agent notifies the Time Charterer in writing that it does not wish to exercise any remedy rights, the Time Charterer will not |
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terminate the Time Charter if the Security Agent does so remedy (or procure the remedy of) the default within thirty (30) days of the Time Charterer giving notice to the Owner (copied to the Security Agent) of the default by the Owner to perform its obligations under the Time Charter (which cure period shall be extended to sixty (60) days if it is demonstrated to the Time Charterer (acting reasonably) that the Security Agent is continuing to diligently remedy (or procure the remedy of) the default); |
(b) | if the Security Agent, pursuant to a Permitted Transfer, exercises the power of sale under the Mortgage and/or assigns or transfers the rights of the “Owners” under the Time Charter to the Substitute, the Time Charterer will not terminate the Time Charter by reason solely of such transfer (without prejudice to any accrued rights). In such circumstances, the Time Charterer agrees that the Substitute shall, with effect from the date of the Permitted Transfer and notwithstanding any other provisions thereof, become a party to the Time Charter in place of the Owner and shall be treated for all purposes as if the Substitute had originally been named a party in place of the Owner (without prejudice to any accrued rights). |
7. | The Security Agent acknowledges that the Time Charterer is not a party to and is not bound by the provisions of any of the Finance Documents. |
8. | The Security Agent acknowledges that the terms of this Letter shall (subject to such beneficiary similarly confirming and consenting to the terms of this Letter) enure to the benefit of the successors and assigns of the Time Charterer under the Time Charter. |
9. | The Security Agent confirms that it has been duly authorised to issue this Letter on behalf of the Finance Parties and that its issuance conforms with the Loan Agreement and, without limitation, the agency provisions described therein. |
10. | The terms of this Letter (including any non-contractual obligations in connection with this Letter) shall be governed by and construed in accordance with English law and the provisions of Clause 47 ( Law and litigation ) of the Time Charter shall apply, mutatis mutandis, to any dispute arising out of this Letter (including any non-contractual obligations in connection with this Letter) as if such provisions were set out in this Letter. |
Please acknowledge your receipt of and your agreement to the terms of this Letter by signing the attached copy where indicated and returning it to us.
Each of the parties signing this Letter intends that the agreement constituted by this Letter shall take effect as a deed notwithstanding the fact that a party may only sign this Letter under hand.
Yours faithfully,
for and on behalf of |
[ — ]
[Security Agent]
We, [ — ], for the consideration aforesaid, hereby confirm our agreement to the provisions of this Letter.
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Dated:
for and on behalf of |
[ — ]
[Charterer]
We, [ — ], for the consideration aforesaid , hereby confirm our agreement to the provisions of this Letter.
Dated:
for and on behalf of |
[ — ]
[Owner]
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Exhibit 10.24
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS (*****).
LNG TIME CHARTER PARTY
BETWEEN
GAS-seventeen Ltd.
AND
METHANE SERVICES LIMITED
4 - April- 2014
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TABLE OF CONTENTS
1. | Description and Condition of Vessel | 5 |
2. | Shipboard Personnel and their Duties | 8 |
3. | Duty to Maintain | 9 |
4. | Trading Limits and Safe Places | 10 |
5. | Bunkers and LNG Heel at Delivery and Redelivery | 12 |
6. | Grade of Bunkers | 13 |
7. | Period, Delivery, Redelivery, Laydays and Cancelling | 13 |
8. | Owners to Provide | 15 |
9. | Charterers to Provide | 15 |
10. | Rate of Hire | 16 |
11. | Payment of Hire | 16 |
12. | Space Available to Charterers | 17 |
13. | Instructions and Logs | 18 |
14. | Bills of Lading | 18 |
15. | Conduct of Vessel’s Personnel | 20 |
16. | LNG Retention/Supply for Operational Purposes | 20 |
17. | Pilots and Tugs | 22 |
18. | Super-Numeraries | 22 |
19. | Sub-letting/Assignment/Novation/Change of Control | 22 |
20. | Final Voyage | 23 |
21. | Loss of Vessel | 23 |
22. | Off-hire | 24 |
23. | Ship to Ship Transfers and FPSO/FSRU Cargo Operations | 28 |
24. | Periodical Dry-dock | 29 |
25. | Ship Inspection | 30 |
26. | Key Vessel Performance Criteria | 31 |
27. | Salvage | 32 |
28. | Lien | 32 |
29. | Exceptions | 33 |
30. | Injurious Cargoes | 34 |
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31. | Disbursements | 34 |
32. | Laying-up | 34 |
33. | Requisition | 34 |
34. | Outbreak of War | 34 |
35. | Additional War Expenses | 35 |
36. | War Risks | 35 |
37. | Piracy | 36 |
38. | Both to Blame Collision Clause | 37 |
39. | New Jason Clause | 38 |
40. | Clause Paramount | 39 |
41. | Insurance/ITOPF | 39 |
42. | Export Restrictions | 40 |
43. | Business Principles | 40 |
44. | Drugs and Alcohol | 41 |
45. | Pollution and Emergency Response | 41 |
46. | ISPS Code/USMTSA 2002 | 42 |
47. | Law and Litigation | 43 |
48. | Confidentiality | 43 |
49. | Construction | 43 |
50. | Notices | 44 |
51. | Invoices | 45 |
52. | Ship Contact details | 45 |
53. | Definitions | 46 |
54. | Claim Validity Period | 47 |
55. | Eligibility & Compliance | 47 |
56. | Vapour Pressure | 49 |
57. | Cargo Transfer Inspection and System Calibration | 49 |
58. | Vessel Data | 51 |
59. | Third Party Vetting Information | 51 |
60. | Taxes | 51 |
61. | U.S. Compliance | 51 |
62. | Compliance with the Bribery Act, 2010 (England and Wales) and the US Foreign Corrupt Practices Act (FCPA) | 51 |
63. | Owners’ Defaults | 55 |
64. | Charterers’ Defaults | 56 |
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65. | Quiet Enjoyment | 57 |
66. | Rights of Third Parties | 58 |
67. | Consequential Losses | 58 |
68. | Health, Safety, Security, Environment Reporting Requirements | 58 |
69. | Ballast Water Treatment (BWT) System | 59 |
70. | Counterparts | 59 |
APPENDIX A – Terminal Compatibility List | 61 | |
APPENDIX B – Gas Form C for the Vessel | 63 | |
APPENDIX C – Detailed Performance Criteria | 69 | |
APPENDIX D - Crew Matrix | 79 | |
APPENDIX E - BG Business Principles | 79 | |
APPENDIX F – Norwegian Sale Form | 84 | |
APPENDIX G - Letter of Quiet Enjoyment | 85 |
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IT IS THIS DAY AGREED between GAS-seventeen Ltd., an exempted company incorporated under the laws of Bermuda and having its registered office at Clarendon House, 2 Church Street, Hamilton, RG6 1PT, Bermuda (hereinafter referred to as “Owners”), being owners of the good Liquefied Natural Gas Carrier called “Methane Jane Elizabeth” (hereinafter referred to as “the Vessel”) described as per Clause 1 hereof and METHANE SERVICES LIMITED, a company incorporated under the laws of England and Wales and having its registered office at 100 Thames Valley Park Drive, Reading, Berkshire RG6 1PT, United Kingdom (hereinafter referred to as “Charterers”):
1. | Description and Condition of Vessel |
At the date of delivery of the Vessel under this charter and throughout the charter period:
(a) | she shall be classed by a classification society (“Classification Society”), which is a member of the International Association of Classification Societies; |
(b) | if she is fifteen years old or over she shall obtain and maintain a LNG Condition Assessment Programme (“CAP”) of not less than / worse than two (2); |
(c) | she shall be in every way fit to load, carry, discharge and measure Liquefied Natural Gas (“LNG”); |
(d) | she shall be tight, staunch, strong, in good order and condition, and in every way fit for the service, with her machinery, boilers, hull and other equipment (including but not limited to hull stress calculator, radar, computers and computer systems) in a good and efficient state; |
(e) | her tanks, valves and pipelines shall be liquid and gas tight; she shall have a working inert gas system and nitrogen generator with officers and crew experienced in the operation of both; |
(f) | she shall be in every way fitted for burning fuels, in accordance with the grades specified in Clause 6 hereof: |
(i) | at sea, fuel oil or marine diesel oil in any proportion with LNG Boil-Off or 100% LNG Boil-Off for main propulsion (allowing the use of diesel oil for pilot). When transiting and manoeuvring in restricted waters only dual fuel mode is permitted; Owners and Charterers will discuss in good faith future operational process changes to allow 100% boil-off during transiting and manoeuvring (provided it can be demonstrated to be safe and reliable for the proposed operating modes); and heavy fuel oil, marine diesel oil and marine gas oil for auxiliaries; |
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(ii) | in port, fuel oil or marine diesel oil in boilers; and fuel oil or marine diesel oil in any proportion with LNG Boil-Off or 100% LNG Boil-Off (however always using a minimal amount of diesel oil for pilot purposes) for power generation; |
(iii) | in all cases able to comply with all national and international emissions compliance regulations applicable to Charterers’ required trading routes in force at the keel laying date for a minimum of six (6) days at the Service Speed without burning LNG; although Charterers shall allow Owners to take advantage of all relevant national and international waivers that exist related to the year of construction for future changes in regulations. |
(iv) | in all cases able to maintain continuous safe operation of the vessel and all auxiliary equipment during switchover between different types of fuel in any consumer. |
(g) | she shall have all her instrumentation calibrated and certified in accordance with the requirements of the Vessel’s Classification Society; |
(h) | she shall have her cargo measuring equipment calibrated by a recognised calibration company as referenced in Clause 57 hereof and certified in accordance with the requirements of the Vessel’s Classification Society; |
(i) | she shall have her inter-barrier and insulation spaces prepared and performing as per international regulations, and her containment system design conditions |
(j) | she shall comply with the regulations in force so as to enable her, if her size permits, to pass through the Suez Canal and Panama Canal by day and night without delay; |
(k) | she shall have on board all certificates, documents and equipment required from time to time by any applicable law to enable her to perform the charter service without delay. For the avoidance of doubt this will include, but will not be limited to, the Vessel’s Certificate of Financial Responsibility; |
(l) | she shall comply with the description in the LNG Gas Form C appended hereto as Appendix B, provided however that if there is any conflict between the provisions of this Form C and any other provision, including this Clause 1, of this charter such other provisions shall govern; |
(m) | her ownership structure, flag, registry, Classification Society and management company shall not be changed without prior approval of Charterers, which shall not be unreasonably withheld |
(n) | Owners shall complete, on board the Vessel, the daily template from Charterers’ voyage management system. |
(o) | Owners shall operate: |
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(i) | a Safety Management System (“SMS”) that shall comply as a minimum with the following regulations and/or industry standards, plus any additions, modifications or subsequent versions thereof: International Safety Management Code (“ISM Code”) for the Safe Operation of Ships and for Pollution Prevention, International Ship and Port Security Code (“ISPS”), International Convention for the Prevention of Pollution From Ships, 1973 as modified by the Protocol of 1978 (“MARPOL”), International Convention for Safety of Life at Sea, 1974 (“SOLAS”), International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1995 (“STCW”), best practice recommendations from the Tanker Management Self Assessment (“TMSA”), the International Safety Guide for Oil Tankers and Terminals (“ISGOTT”), Society of International Gas Tanker and Terminal Operators (“SIGTTO”) and the Code Of Safe Working Practices (“COSWOP”); |
(ii) | a documented safe working procedures system within the SMS to address the Health Safety Security and Environment (“HSSE”) risks specific to the scope of work set out in this charter party and the management of controls to eliminate, reduce or mitigate these risks as low as reasonably practicable. Owners’ operations shall be certified, as a minimum to ISO:9001:2008; |
(iii) | a documented environmental management system to protect environmental resources by applying best available techniques to minimise or, where possible, eliminate any direct or indirect impact from operations; Owners shall meet the requirements of ISO 14001:2004 or demonstrate that plans are in place to obtain this certification within the next twelve (12) months from the charter start date. |
(iv) | Owners shall operate a Ship Energy Efficiency Management Plan (SEEMP), in accordance with IMO MEPC.l/Circ.683, to continuously improve the efficiency of ship operations. |
(v) | a documented accident/incident reporting system compliant with flag state requirements. |
(p) | Owners shall arrange at their expense for a Ship Inspection Report (SIRE) inspection to be carried out at intervals of six months plus or minus thirty days, subject to Vessel’s trading pattern and availability of surveyors. Upon delivery, Vessel shall have a SIRE report, if this is not possible then a non operational inspection will be permitted provided a further vetting inspection is carried out at the first available opportunity and is conducted during cargo operations. |
(q) | Owners shall ensure that all crew are provided an orientation training programme for the Vessel with training relevant under the SMS. Owners shall ensure that all subcontractors visiting the Vessel shall receive a briefing or information on the parts of the SMS |
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relevant to their visit and comply with the Owners’ HSSE policies and procedures during the visit.
(r) | Owners shall take all necessary precautions and measures specific for piracy deterrence in piracy prone areas of the world. This shall include using reference material and industry guidelines such as OCIMF Best management Practices (BMP). |
2. | Shipboard Personnel and their Duties |
(a) | At the date of delivery of the Vessel under this Charter and throughout the charter period: |
(i) | she shall have a full and efficient complement of master, officers and crew for a Vessel of her tonnage, who shall in any event be not less than the number required by the laws of the flag state and who shall be trained to operate the Vessel and her equipment competently and safely; |
(ii) | all shipboard personnel shall hold valid certificates of competence in accordance with the requirements of the law of the flag state; |
(iii) | all shipboard personnel shall be trained in accordance with Appendix D and the relevant provisions of the International Convention on Standards of Training, Certification and Watchkeeping (STCW) for Seafarers, 1995 or any additions, modifications or subsequent versions thereof. Shipboard personnel shall be trained under a system certified to the SIGTTO “LNG Shipping Suggested Competency Standards 2005” or subsequent versions thereof. |
(iv) | there shall be on board sufficient personnel with a good working knowledge of the English language to enable cargo operations at loading and discharging places to be carried out efficiently and safely and to enable communications between the Vessel and those loading the Vessel or accepting discharge therefrom to be carried out quickly and efficiently; |
(v) | the terms of employment of the Vessel’s staff and crew shall always remain acceptable to the International Transport Worker’s Federation and the Vessel shall at all times carry a Blue Card; |
(vi) | the Vessel shall always operate with safe manning levels that comply with STCW and with the work hour limits set out by the International Labour Organisation (ILO) including the Maritime Labour Convention 2006 (MLC) as designated in Appendix D. The Vessel shall maintain a STCW record of deviation hours for all officers and crew aboard the Vessel and provide this record to the Charterers upon request. If Charterers express concern with the STCW deviation hours, Charterers and Owners shall discuss and agree to a mitigation plan that shall ensure the Vessel can comply with the requisite STCW rest hours. |
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(vii) | Charterers shall have the right to review the qualifications of the Master, Chief Officer, Chief Engineer, Second Engineer, Electrical Engineer, Electronics Officer, and the Gas Engineer. Charterers shall also have the right to interview these officers, at Charterers’ cost. |
(viii) | the Vessel’s officers shall comply with the requirements set out in Appendix D. |
(b) | Owners guarantee that throughout the charter service the master shall with the Vessel’s officers and crew, unless otherwise ordered by Charterers: |
(i) | prosecute all voyages with the utmost despatch; |
(ii) | render all customary assistance; and |
(iii) | load and discharge cargo as rapidly as possible when required by Charterers or their agents to do so, by night or by day, but always in accordance with the laws of the place of loading or discharging (as the case may be) and in each case in accordance with any applicable laws of the flag state and within the safe capabilities of the Vessel and crew. |
(c) | Owners shall at all times have responsibility for the proper stowage of the cargo and shall keep a strict account of all cargo loaded, Boil-Off, commencement and termination of forced cargo vaporisation and cargo discharged. |
3. | Duty to Maintain |
(a) | Throughout the charter service Owners shall, whenever the passage of time, wear and tear or any event (whether or not coming within Clause 29 hereof) requires steps to be taken to maintain or restore the conditions stipulated in Clauses 1 and 2(a), exercise due diligence so to maintain or restore the Vessel. |
(b) | If at any time whilst the Vessel is on hire under this Charter the Vessel fails to comply with the requirements of Clauses 1, 2(a) or 12 then hire shall be reduced to the extent necessary to indemnify Charterers for such failure. If and to the extent that such failure affects the time taken by the Vessel to perform any services under this Charter, hire shall be reduced by an amount equal to the value, calculated at the rate of hire, of the time so lost. Any reduction of hire under this sub-Clause (b) shall be without prejudice to any other remedy available to Charterers, but where such reduction of hire is in respect of time lost; such time shall be excluded from any calculation under Clause 26 and Appendix C. |
(c) | If Owners are in breach of their obligations under Clause 3(a), Charterers may so notify Owners in writing and if, after the expiry of ***** following the receipt by Owners of |
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any such notice, Owners have failed to demonstrate to Charterers reasonable satisfaction the exercise of due diligence as required in Clause 3(a), the Vessel shall be off-hire, and no further hire payments shall be due, until Owners have so demonstrated that they are exercising such due diligence.
(d) | Owners shall advise Charterers immediately, in writing, should the Vessel fail an inspection by, but not limited to, a governmental and/or port state authority, and/or terminal and/or major charterers of similar tonnage. Owners shall simultaneously advise Charterers of their proposed course of action to remedy the defects, which have caused the failure of such inspection. |
(e) | If, in Charterers reasonably held view: |
(i) | failure of an inspection, or, |
(ii) | any finding of an inspection, |
referred to in Clause 3 (d), prevents normal commercial operations then Charterers shall have the option to place the Vessel off-hire from the date and time that the Vessel fails such inspection, or becomes commercially inoperable, and the Vessel shall remain off hire until the earlier of the date and time that the Vessel passes a re-inspection by the same organisation, or until the date and time that Owners and Charterers mutually agree that the Vessel is in a condition to pass such re-inspection or until the date and time that the Vessel becomes commercially operable, which shall be in a position no less favourable to Charterers than at which she went off-hire. Owners shall provide Charterers with full details of their plans to remedy the cause of the failure or finding and the period within which this remedy will be completed.
(f) | Furthermore, at any time while the Vessel is off-hire for a continued period of ***** under this Clause 3 (with the exception of Clause 3(e)(ii)), Charterers have the option to terminate this Charter by giving notice in writing with effect from the date on which such notice of termination is received by Owners or from any later date stated in such notice. This sub-Clause (f) is without prejudice to any rights of Charterers or obligations of Owners under this Charter or otherwise (including without limitation Charterers’ rights under Clause 22 and 63 hereof). |
(g) | In the event that during this charter the Vessel undergoes modifications related to the LSGO conversion of the current Kawasaki main boilers, as per the agreement between GasLog and Wartsila dated 14 August 2012 as instructed by BG, the Vessel shall remain on-hire for all such work related to this (including commissioning time), and all costs of such modifications shall be reimbursed by Charterer. |
4. | Trading Limits and Safe Places |
(a) | The Vessel shall be used for the purpose of carrying all lawful merchandise (subject always to Clause 30) including in particular, LNG, in any part of the world as Charterers |
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shall direct, subject to the limits of the current British Institute Warranties and any subsequent amendments thereof. Notwithstanding the foregoing, but subject to Clause 36, Charterers may order the Vessel beyond such limits provided that Owners consent thereto (such consent not to be unreasonably withheld) and that Charterers pay for any insurance premium required by the Vessel’s underwriters as a consequence of such order.
(b) | Charterers shall use due diligence to ensure that the Vessel is only employed between and at safe places (which expression when used in this Charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, bunker barges and other locations including locations at sea, subject to rights and obligations under Clause 23) where she can safely lie always afloat. Notwithstanding anything contained in this or any other Clause of this Charter, Charterers do not warrant the safety of any place to which they order the Vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid. Subject as above, the Vessel shall be loaded and discharged at any places as Charterers may direct. |
(c) | Owners warrant that the Vessel is compatible with the LNG Terminals listed in Appendix A for berthing, unberthing, loading and discharging LNG cargo without modification to the Vessel. In the event that such modification to the Vessel becomes necessary as a result of changes in international regulations, national law or standards and/or are required by the Vessel’s Classification Society or flag state, the cost of such modification shall be for Owners’ account, and the Vessel shall be off-hire for the time required to effect such modifications unless this can be achieved without affecting the performance of the Vessel under this Charter. |
(d) | If Charterers request, Owners shall agree to perform compatibility studies of terminals not listed as Primary Terminals in Appendix A hereof. Costs of routine communications and documentation support, such as submission of Gas Form C, Optimoor® studies and other data requests shall be for Charterers’ account. Required travel by Owners’ representative to the terminal as specifically requested and approved by Charterers shall be for Charterers’ account. If following such compatibility studies, Owners deem a terminal compatible; such terminal shall be added to the Primary Terminals list in Appendix A. |
(e) | If Charterers direct the Vessel to any LNG loading or receiving facilities other than the LNG Terminals listed in Appendix A, Charterers shall give notice to Owners sufficiently in advance thereof so as to enable Owners to comply with environmental, fire prevention, health, safety and other similar regulations, including but not limited to compatibility studies of those terminals, applicable at such other place including any alteration in ship design. The reasonable cost and the necessary time taken to comply with such regulations, necessary, solely, to allow the Vessel to load or discharge at such other place, shall be for Charterers account. Charterers shall reimburse such costs to Owners against presentation to Charterers of appropriate invoices and supporting vouchers, except insofar as Owners are otherwise obliged to bear such costs in accordance with this Charter. For purposes of this sub Clause 4(d), should an alteration in ship design be required, Charterers and Owners shall discuss in good faith the requirement and its |
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impact on the Vessel, with the aim of ensuring that Owners are not penalized by lower performance, reduced residual value, or similar.
(f) | In the event that at any time during the term of this Charter, Charterers request and Owners agree that upgrading works shall be carried out to the Vessel which constitute an alteration on the Vessel from that prevailing at the time of Delivery, the cost of such upgrading shall be agreed between Owners and Charterers. For the avoidance of doubt, if a “Change of Law” requires the Vessel to be modified in order for the Vessel to continue to operate in accordance with Clause 4 and this Charter, the cost of such modification shall be for Owners’ account. For the purpose of this sub Clause (f), “Change of Law” shall be defined as any law, statute, act, ordinance, rule, regulation, requirement or order of any international or national government or regulatory agency that comes into effect after the date of execution of this Charter. |
(g) | Notwithstanding the above, the Vessel shall not be required to force ice or to follow icebreakers. |
(h) | The Vessel shall not trade in breach of UN or other relevant sanctions. |
5. | Bunkers and LNG Heel at Delivery and Redelivery |
(a) | Upon delivery, Charterers shall retain ownership of all HFO, gas oil and diesel on board. Original supplier invoices must be provided by Charterers to Owners. For the avoidance of doubt, any LNG on board the Vessel upon delivery, was and remains the property of Charterers. |
(b) | The Vessel shall be redelivered to Owners with its cargo tanks under natural gas vapours unless Owners declare the option to retain up to 3,000m3 of LNG heel at last discharge. Such option shall be declared no later than five (5) days prior to the loading of the final cargo and will be priced at the LNG Price. |
(c) | Upon redelivery, Owners shall purchase all HFO, gas oil and diesel on board at the documented cost of each. Original supplier invoices must be provided by Charterers to Owners. |
(d) | Throughout the Charter (and upon delivery and redelivery) the Vessel shall operate with at least a quantity of bunkers or Fuel Oil Equivalent, as defined in Clause 53, and a quantity of diesel oil and nitrogen (if nitrogen is applicable) on board sufficient to prosecute safely each voyage or reach the nearest safe bunker port. The above amount shall be in addition to a safety reserve of fuel oil, which would enable the Vessel to steam at the Service speed defined in this Charter for a total of five days. |
(e) | Notwithstanding anything contained in this Charter all bunkers and LNG Heel on board the Vessel shall, throughout the duration of this Charter, remain the property of Charterers or |
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their nominee and can only be purchased on the terms specified in the Charter at the end of the charter period or, if earlier, at the termination of the Charter.
(f) | The Master shall provide an on-hire and off-hire certificate containing the Remaining On Board (ROB) quantities for LNG, HFO, gas oil and diesel oil upon both delivery and redelivery of the Vessel. Owners or Charterers may choose to use an independent surveyor to verify ROB quantities at their own cost, however, in any dispute, the surveyor numbers shall prevail. |
6. | Grade of Bunkers |
(a) | Charterers shall supply fuel oil whose properties comply at a minimum with those set out in ISO Standard 8217:2005 for RMH380 and diesel oil as per ISO 8217:2005 DMB (with any subsequent amendments thereto) and marine gas oil as per ISO 8217:2005 DMX (with any subsequent amendments thereto). If Owners require the Vessel to be supplied with more expensive bunkers they shall be liable for the extra cost thereof. |
(b) | Should Charterers trade the Vessel into a Emissions Control Area (“ECA”) as defined in Annex VI of MARPOL, then the Charterers shall either supply low sulphur fuel oil of a quality which the Vessel can use and which will satisfy the ECA requirements or allow forced vaporisation of cargo for fuel, sufficient for the Vessel’s need while in the restricted area, and the Owners shall provide segregated storage for the low sulphur fuel oil. If Owners are unable to provide segregated bunker tanks, then Owners shall reimburse Charterers for the additional cost of purchasing low sulphur fuel oil which is consumed outside of a ECA zone. |
(c) | Owners and Charterers can request the other party to provide bunker survey data to verify the quality of the bunkers on board. This request can be made at any time during the charter period or the Claim Validity Period. |
7. | Period, Delivery, Redelivery, Laydays and Cancelling |
a) | Owners agree to let and Charterers agree to hire the Vessel commencing from the time and date of delivery to Charterers as provided in Clause 7(b) until time and date of redelivery to Owners as provided in Clause 7(c) |
b) | The Vessel shall be delivered by Owners to Charterers immediately after delivery of the Vessel to the Owners pursuant to the Memorandum of Agreement between the Owners and Brazil Shipping II Limited as appended hereto in Appendix F. |
c) | The Vessel shall be chartered for a period of five (5) years and six (6) months plus up to ***** at Charterers’ option (“Firm Charter Period”) commencing on delivery of the Vessel in accordance with Clause 7 (b). |
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d) | Subject to Clause 7(e), the Charterers shall have the right to extend the Firm Charter Period by one (1) additional period of either three (3) years or five (5) years (an “Option Charter Period”) plus or minus up to ***** at Charterers’ option. |
e) | Provided that the equivalent Option Charter Period has only been exercised under one of the following: |
i. | the time charter agreement between the Charterer and the registered owner of the [m.v. “Methane Rita Andrea” IMO number 9307188 dated the date hereof; or |
ii. | the time charter agreement between the Charterer and the registered owner of the [m.v. “Methane Lydon Volney” IMO number 9307205 dated the date hereof. |
the Charterers shall have the right to exercise one of the two Option Charter Periods in respect of the Vessel. If none of the above referenced time charters have had an Option Charter Period declared, then the Option Charter Period for the Vessel under this contract shall be known as the “Vessel 1 Option Charter Period”. If one of the above referenced time charters has had an Option Charter Period declared, then an Option Charter Period declared under this contract shall be known as the “Vessel 2 Option Charter Period”. For avoidance of doubt, Option Charter Periods cannot be declared simultaneously.
If Owners have proposed and/or secured the Vessel for employment which is not possible if the Option Charter Period is declared for this Vessel, both parties shall discuss the situation in good faith, with the understanding that Charterer could declare Option Charter Period on a sister vessel in lieu thereof.
(g) | The ‘plus or minus’ days must be declared by Charterers no later than ***** in advance of the expiration of the relevant Option Charter Period if exercised. |
(h) | If exercised, Charterers shall declare the Vessel 1 Option Charter Period option no later than 17:00 hours London time, ***** before the termination of the Firm Charter Period. |
(i) | If exercised, Charterers shall declare the Vessel 2 Option Charter Period option no later than 17:00 hours London time, ***** before the termination of the Firm Charter Period. |
(j) | Charterers shall redeliver the Vessel at the pilot boarding station outbound at last discharge port or at one safe anchorage Gibraltar or Singapore at Charterers’ option, such option to be declared ***** before loading of the last cargo. In the event that redelivery takes place DLOP last discharge port and not at either Gibraltar or Singapore, Charterers shall pay Owners a lump sum Ballast Bonus payment equivalent to the notional ballast voyage calculated for hire, fuel, and war risk or piracy routing and costs to return the vessel from the last discharge port to either Gibraltar (if last discharge occurs West of Suez) or Singapore (if last discharge takes place East of Suez). |
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Hire and fuel consumption shall be calculated basis Service Speed. For the purpose of calculating the notional ballast leg, distances shall be used on Dataloy Distance Tables as found on www.dataloy.com
(k) | Charterers shall provide 30, 25, 15, 7, 5, 4, 3, 2, 1 days’ notice of redelivery. |
(l) | Any time during which the Vessel is off-hire under this Charter may be added to the charter period in Charterers’ option up to the total amount of time spent off-hire. In such cases the rate of hire will be that prevailing at the time the Vessel would, but for the provisions of this Clause, have been redelivered. Charterers shall exercise this option no later than ***** before the date on which the Charter would otherwise terminate. Any periods of off-hire occurring after the time and date on which Charterers have declared their option may be added to the charter period as long as Charterers have declared that they will be so added within ***** of the end of the relevant period of off-hire. |
8. | Owners to Provide |
Owners undertake to provide and to pay for all provisions, wages (including but not limited to all overtime payments), and shipping and discharging fees and all other expenses of the master, officers and crew; also, except as provided in Clauses 4, 9(c) and 35 hereof, for all insurance on the Vessel, for all deck, cabin and engine-room stores, lubricating oil, and for water; for all dry-docking, overhaul, maintenance and repairs to the Vessel; and for all fumigation expenses and de-rat certificates. Owners’ obligations under this Clause 8 extend to all liabilities for taxes, customs or import duties arising at any time during the performance of this Charier in relation to the personal effects of the master, officers and crew, and in relation to the stores, provisions and other matters aforesaid which Owners are to provide and pay for and Owners shall refund to Charterers any sums Charterers or their agents may have paid or been compelled to pay in respect of any such liability. Any amounts allowable in general average for wages and provisions and stores shall be credited to Charterers insofar as such amounts are in respect of a period when the Vessel is on-hire.
9. | Charterers to Provide |
(a) | Charterers shall provide and pay for all fuel (which includes fuel consumed for the production of nitrogen and all Boil-Off gas, which in accordance with Charterers instructions is to be used as fuel) which must be supplied from a bunker supplier who applies the standards required by a first class operator, towage and pilotage and shall pay agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues and all charges other than those payable by Owners in accordance with Clause 8 hereof, provided that all charges for the said items shall be for Owners’ account when |
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such items are consumed, employed or incurred for Owners’ purposes or while the Vessel is off-hire (unless such items reasonably relate to any service given or distance made good and taken into account under Clause 22); and provided further that any fuel used in connection with a general average sacrifice or expenditure shall be paid for by Owners.
(b) | In respect of bunkers consumed for Owners’ purposes these will be charged on each occasion by Charterers at the Fuel Price. |
(c) | If the trading limits of this charter include ports in the United States of America and/or its protectorates then Charterers shall reimburse Owners for port specific charges relating to additional premiums charged by providers of oil pollution cover, when incurred by the Vessel calling at ports in the United States of America and/or its protectorates in accordance with Charterers’ orders. |
10. | Rate of Hire |
(a) | Charterers shall pay for the use and hire of the Vessel to the Owners at the rate of ***** per day or pro rata for any day thereof for the Firm Period. |
(b) | Charterers shall pay for the use and hire of the Vessel to the Owners at the rate of ***** per day or pro rata for any day thereof during the Vessel Option Period. |
(c) | Charter hire shall commence from the time and date of delivery of the Vessel to Charterers until the time and date of redelivery to Owners. |
11. | Payment of Hire |
(a) | Subject to Clause 3 (c) and 3 (e) and any other relevant provision herein, payment of hire shall be made in immediately available funds in United States Dollars to the account stipulated below: |
Bank: *****
SWIFT: *****
Account Number: *****
IBAN: *****
Account Name: *****
Currency: USD
Corresponding bank in USD: ***** – SWIFT: *****
(b) | Owners shall invoice Charterers monthly in advance for the payment of hire and Charterers shall pay the invoice in immediately available funds by the later of the following: |
(i) | eight (8) Banking Days after receipt of invoice; or |
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(ii) | the last Banking Day prior to the start of the initial hire period or subsequent hire month. |
(c) | Payment of hire shall be made in immediately available funds, less: |
(i) | any hire paid which Charterers reasonably estimate to relate to off-hire periods, and; |
(ii) | any amounts disbursed on Owners’ behalf, any advances and commission thereon, and charges which are for Owners’ account pursuant to any provision hereof, and; |
(iii) | any amounts due or reasonably estimated to become due to Charterers under Clause 3 (b), 16 or 26 and Appendix C hereof, |
any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained. Charterers shall not be responsible for any delay or error by Owners’ bank in crediting Owners’ account provided that Charterers have made proper and timely payment.
In default of such proper and timely payment:
(i) | Owners shall notify Charterers of such default and Charterers shall within ***** of receipt of such notice pay to Owners the amount due, including interest, failing which Owners may withdraw and/or terminate the Vessel from the service of Charterers without prejudice to any other rights Owners may have under this Charter or otherwise. The period of ***** shall be extended by any period during which the Charterers are prevented from making payment by the Office of Foreign Asset Control in the United States of America (OFAC) and |
(ii) | interest on any amount due but not paid on the due date shall accrue from the day after that date up to and including the day when payment is made, at a rate per annum which shall be ***** per annum above LIBOR (as in effect on the day when such sum was originally due), or, if no such interest rate is published on that day, the interest rate published on the next preceding day on which such a rate was so published, computed on the basis of a 360 day year of twelve 30-day months, compounded semi-annually. |
12. | Space Available to Charterers |
The whole reach, burthen and decks (but no more than she can reasonably stow and safely carry) on the Vessel and any passenger accommodation (including Owners’ suite) shall be at Charterers’ disposal, reserving only proper and sufficient space for the Vessel’s master, officers, crew, tackle, apparel, furniture, provisions and stores, provided that the weight of stores on board
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shall not, unless specially agreed, exceed 250 tonnes (excluding fresh water) at any time during the charter period.
13. | Instructions and Logs |
Charterers shall from time to time give the master all requisite instructions and sailing directions, and the master shall keep a full and correct log of the voyage or voyages, which Charterers or their agents may inspect as required. The master shall when required furnish Charterers or their agents with a true copy of such log and with properly completed loading and discharging port sheets and voyage reports for each voyage and other returns as Charterers may require. Charterers shall be entitled to take copies at Owners’ expense of any such documents, which are not provided by the master.
A controlled copy of Charterers’ Instructions will be placed on board the Vessel. The instructions in this document shall be followed by the crew. If the Vessel or crew cannot comply with such Instructions, immediate notification is required in accordance with Clause 50. In the event of any conflict between the Instructions and this Charter, the Charter shall prevail.
Owners shall be responsible for any time, cost, delay or loss associated with Vessel deviating from Charterers’ voyage instructions, including loading any cargo quantity in excess or short of voyage orders provided such time, cost delay or loss is due to Owners’ fault and negligence. If a discrepancy arises at a loading terminal, the Master shall notify Charterers immediately and in any event before loading to clarify the situation. Owners shall be responsible for any consequences or additional expenses arising from Owners’ non-compliance with this Clause.
14. | Bills of Lading |
(a) | The master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the Vessel, agency and other arrangements, and shall sign Bills of Lading as Charterers or their agents may direct (subject always to Clauses 36 (a) and 41) without prejudice to this Charter. Charterers hereby indemnify Owners against all consequences or liabilities that may arise: |
(i) | from signing Bills of Lading in accordance with the directions of Charterers or their agents, to the extent that the terms of such Bills of Lading fail to conform to the requirements of this Charter, provided, however, that no further indemnity beyond that expressed in this Clause 14 or elsewhere in this Charter shall be implied against Charterers; |
(ii) | from any irregularities in papers supplied by Charterers or their agents. |
(b) | If Charterers by telex, facsimile or other form of written communication that specifically refers to this Clause request Owners to discharge a quantity of cargo either without Bills |
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of Lading and/or at a discharge place other than that named in a Bill of Lading and/or that is different from the Bill of Lading quantity, then Owners shall discharge such cargo in accordance with Charterers’ instructions in consideration of receiving the following indemnity, which shall be deemed to be given by Charterers on each and every such occasion and which is limited in value to 200% of the CIF value of the cargo carried on board:
(i) | Charterers shall indemnify Owners and Owners’ servants and agents in respect of any liability loss or damage of whatsoever nature (including legal costs as between attorney or solicitor and client and associated expenses) which Owners may sustain by reason of delivering such cargo in accordance with Charterers’ request. |
(ii) | If any proceeding is commenced against Owners or any of Owners’ servants or agents in connection with the Vessel having delivered cargo in accordance with such request, Charterers shall provide Owners or any of Owners’ servants or agents from time to time on demand with sufficient funds to defend the said proceedings. |
(iii) | If the Vessel or any other vessel or property belonging to Owners should be arrested or detained, or if the arrest or detention thereof should be threatened, by reason of discharge in accordance with Charterers’ instruction as aforesaid, Charterers shall provide on demand such bail or other security as may be required to prevent such arrest or detention or to secure the release of such Vessel or property and Charterers shall indemnify Owners in respect of any loss, damage or expenses caused by such arrest or detention whether or not same may be justified. |
(iv) | Charterers shall, if called upon to do so at any time while such cargo is in Charterers’ possession, custody or control, redeliver the same to Owners. |
(v) | As soon as all original Bills of Lading for the above cargo which: a) name as discharge port the place where delivery actually occurred and, b) in the case of a negotiable bill of lading, entitle, either by consignment or endorsement, the party to whom the cargo was released to take delivery of said cargo, arrived and/or come into Charterers’ possession, Charterers shall produce and deliver the same to Owners whereupon Charterers liability hereunder shall cease. |
Provided however, if Charterers have not received all such original Bills of Lading by 24.00 hours on the day thirty-six (36) calendar months after the date of discharge, that this indemnity shall terminate at that time unless before that time Charterers have received from Owners’ written notice that aaa) Some person is making a claim, in connection with Owners delivering cargo pursuant to Charterers’ request or,
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bbb) Legal proceedings have been commenced against Owners and/or carriers and/or Charterers and/or any of their respective servants or agents and/or the Vessel for the same reason.
When Charterers have received such a notice, then this indemnity shall continue in force until such claim or legal proceedings are settled. Termination of this indemnity shall not prejudice any legal rights a party may have outside this indemnity.
(vi) | Owners shall promptly notify Charterers if any person (other than a person to whom Charterers ordered cargo to be delivered) claims to be entitled to such cargo and/or if the Vessel or any other property belonging to Owners is arrested by reason of any such discharge of cargo. |
(vii) | This indemnity shall be governed and construed in accordance with English law and each and any dispute arising out of or in connection with this indemnity shall be subject to the jurisdiction of the High Court of Justice of England. |
(c) | Owners warrant that the Master will comply with orders to carry and discharge against one or more duly endorsed Bills of Lading from a set of original negotiable Bills of Lading should Charterers so require. Once delivery has been completed against one bill of lading, the others are to stand void. |
15. | Conduct of Vessel’s Personnel |
If Charterers complain of the conduct of the master or any of the officers or crew, Owners shall immediately investigate the complaint. If the complaint proves to be well founded, Owners shall, without delay, make a change in the appointments and Owners shall in any event communicate the result of their investigations to Charterers as soon as possible.
16. | LNG Retention/Supply for Operational Purposes |
(a) | Unless Charterers stipulate otherwise, Owners shall retain on board the Vessel following completion of discharge sufficient LNG Heel (which will be agreed with Charterers) to enable the Vessel to arrive at the next load port in a cold and ready to load condition and to remain in that condition for not less than twenty-four (24) hours. |
(b) | ***** shall provide and pay for LNG required for cooling the Vessel’s cargo tanks and other handling systems to the temperatures necessary to commence loading only in the following circumstances: |
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(i) | in the event that the quantity of LNG Heel retained on board pursuant to Clause 16 (a) is not sufficient to enable the Vessel to arrive at the next loading port in a cold and ready to load condition unless such insufficiency is the result of a direct act or omission on the part of Owners or fault of the Vessel; |
(ii) | when LNG is required by reason of: |
(aa) | strikes, quarantine restrictions, seizure under legal process, restraint of labour, none of which arise in connection with the Vessel or crew; or |
(bb) | an act of God, act of war, lock outs, riots, piracy, civil commotions, restraint of princes, rulers or people; |
(iii) | when LNG is required by reason of any Restricted Period as defined in Appendix C Article 2 (e) (i) to (viii), or by reason of Charterers changing the SAT, or by reason of Charterers ordering the Vessel to proceed at any speed other than the Service Speed; |
(iv) | upon return of the Vessel to the first load port after any lay-up ordered by Charterers pursuant to Clause 32, after any underwater cleaning ordered under B Article 11 (a), or after the Vessel has been withdrawn from service at the request or convenience of Charterers as a result of which the Vessel has been warmed up and/or gas freed; |
(v) | where the LNG is required and caused directly by Charterers’ breach of this Charter. |
(vi) | where the loading of the Vessel has been delayed by forces beyond Owners’ control. |
(vii) | following Periodical Dry-docking under Clause 24. |
(c) | ***** shall pay for LNG required for gassing up and cooling down the Vessel’s cargo tanks at the LNG Price: |
(i) | following periods of off-hire and such off-hire has solely caused the need to cool down. If the off-hire event is partially responsible for the requirement to gas up and/or cool down, both parties shall mutually discuss the allocation of costs; |
(ii) | following requisition under Clause 33; |
(iii) | where the LNG is required and directly caused by Owners’ breach of this Charter. |
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Quantities required for gas up and cool down shall be in accordance to the cool down tables that shall be provided by Owners to Charterers upon request.
In all cases where Owners are required to pay for LNG required for cooling hereunder, the LNG shall nevertheless be supplied by Charterers who shall be entitled to deduct the cost from the next payment of hire due to Owners at the LNG Price.
17. | Pilots and Tugs |
Owners hereby indemnify Charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in any way whatsoever from the employment of pilots or tugboats, who although employed by Charterers shall be deemed to be the servants of and in the service of Owners and under their instructions (even if such pilots or tugboat personnel are in fact the servants of Charterers their agents or any affiliated company); provided, however, that the foregoing indemnity shall not exceed the amount to which Owners would have been entitled to limit their liability if they had themselves employed such pilots or tugboats. The Master shall have the right to reject pilots, stevedores or similar contractors and tugs which in Master’s reasonable opinion are below industry standard.
18. | Super-Numeraries |
Charterers may send up to two representatives in the Vessel’s available accommodation upon any voyage made under this Charter, Owners providing provisions and all requisites as supplied to officers, except alcohol.
Charterers shall pay at the rate of United States Dollars 15 (fifteen) per day for each representative while on board the Vessel.
Owners shall ensure that all supernumeraries are provided an orientation training programme to the Vessel with training relevant under the SMS.
19. | Sub-letting/Assignment/Novation |
(a) | Charterers may sub-let the Vessel, but shall always remain responsible to Owners for due fulfilment of this Charter. |
(b) | Additionally Owners and Charterers may assign or novate this Charter to any of their affiliates who have comparable credit worthiness and competence, with the benefit of |
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parent company guarantees, subject to the consent of the other party , such consent not to be unreasonably withheld.
(c) | For the avoidance of doubt, neither party hereto shall transfer its rights or obligations by sale, assignment, novation or other disposition to a non-affiliate. |
(d) | In the event that Owners are desirous of transferring its rights, obligations, title and/or interest in the Vessel to an entity as part of a lease structure or to a bank or financial institution in respect of Owners’ financing and mortgaging of the Vessel, Owners shall seek Charterers’ consent. Such consent shall not be unreasonably withheld provided that Owners obtain from their financiers a Letter of Quiet Enjoyment in accordance with the provisions of Clause 65 hereof. In any case, Charterers shall respond to Owners request in ten (10) business days. Should response not be provided within the ten (10) business days period, Charterers shall be deemed to have given their consent. Notwithstanding anything in this such Clause 19(d); Owners shall be fully obligated to provide a crew that is in accordance with all terms under this Charter. |
20. | Final Voyage |
If when a payment of hire is due hereunder Charterers reasonably expect to redeliver the Vessel before the next payment of hire would fall due, the hire to be paid shall be assessed on Charterers’ reasonable estimate of the time necessary to complete Charterers’ programme up to redelivery, and from which estimate Charterers may deduct amounts due or reasonably expected to become due for:
(a) | disbursements on Owners behalf or charges for Owners’ account pursuant to any provision hereof, and |
(b) | bunkers and LNG Heel on board at redelivery pursuant to Clause 5, |
Promptly, and in any event not later than thirty (30) days after redelivery any overpayment shall be refunded by Owners or any underpayment made good by Charterers.
Notwithstanding the provisions of Clause 7, if at the time this charter would otherwise terminate in accordance with Clause 3 the Vessel is on a ballast voyage to a port of redelivery or is upon a laden voyage, Charterers shall continue to have the use of the Vessel at the same rate and conditions as stand herein for as long as necessary to complete such ballast voyage, or to complete such laden voyage at service speed and return to a port of redelivery as provided by this Charter, as the case may be.
21. | Loss of Vessel |
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Should the Vessel be lost, this Charter shall terminate and hire shall cease at noon on the day of her loss; should the Vessel be a constructive total loss, this Charter shall terminate and hire shall cease at noon on the day on which the Vessel’s underwriters agree that the Vessel is a constructive total loss; should the Vessel be missing, this Charter shall terminate and hire shall cease at noon on the day on which she was last heard of. Any hire paid in advance and not earned shall be returned to Charterers and Owners shall reimburse Charterers for the value of the estimated quantity of bunkers on board at the time of termination, at the price paid by Charterers at the last bunkering port.
22. | Off-hire |
(a) | On each and every occasion that there is loss of time or when the Vessel is unavailable to Charterers (whether by way of interruption in the Vessel’s service or, from reduction in the Vessel’s performance, or in any other manner whatsoever): |
(i) | due to deficiency of personnel or stores; repairs; gas-freeing for repairs; time in and waiting to enter dry-dock for repairs; breakdown (whether partial or total) of machinery, boilers or other parts of the Vessel or her equipment (including without limitation tank coatings); overhaul, maintenance or survey; collision, stranding, accident or damage to the Vessel; or any other cause whatsoever preventing the efficient working of the Vessel; and such loss or unavailability continues for more than six (6) consecutive hours if resulting from interruption in the Vessel’s service) or cumulates to more than six (6) hours (if resulting from partial loss of service); or |
(ii) | due to industrial action, refusal to sail, breach of orders or neglect of duty on the part of the master, officers or crew; or |
(iii) | for the purpose of obtaining medical advice or treatment for or landing any sick or injured person (other than a Charterers’ representative carried under Clause 18 hereof) or for the purpose of landing the body of any person (other than a Charterers’ representative), and such loss continues for more than six (6) consecutive hours; or |
(iv) | due to any delay in quarantine arising from the master, officers or crew having had communication with the shore at any infected area without the written consent or instructions of Charterers or their agents, or to any detention by customs or other authorities caused by smuggling or other infraction of local law on the part of the master, officers, or crew; or |
(v) | due to detention of the Vessel by authorities at home or abroad attributable to legal action against or breach of regulations by the Vessel, the Owners (unless brought about by the act or neglect of Charterers); or |
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(vi) | due to pre-docking and repair procedure including warming, gas freeing and inerting post arrival at the dry-dock port; or |
(vii) | due to scheduled dry-docking and maintenance, maintaining, overhauling, repairing or dry-docking the Vessel and submitting her for survey; waiting for any of the aforesaid purposes; and whilst at, any port or place for any of the aforesaid purposes; or |
(viii) | due to post-docking or repair procedure including inerting, if such inerting is undertaken prior to sailing from the dry-dock port, gassing and cooling in excess of that undertaken for normal loading; or |
(ix) | due to any other circumstances where the Vessel is off-hire under this Charter; or |
(x) | due to late arrival for allocated opening for canal transit when such late arrival is due to Owners’ negligence or Vessel breakdown |
then without prejudice to Charterers’ rights under Clause 3 or to any other rights of Charterers hereunder, or otherwise, the Vessel shall be off-hire from the commencement of such loss of time until she is again ready and in an efficient state to resume her service from a position not less favourable to Charterers than that at which such loss of time commenced; provided, however, that any service given or distance made good by the Vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire.
(b) | If the Vessel fails to proceed at any Guaranteed Speed (as defined in Appendix C Article 2 (a) (iv)) pursuant to Clause 26 and Appendix C, and such failure arises wholly or partly from any of the causes set out in Clause 22(a) above, then the following provisions shall apply: |
(i) | if the Vessel is unable to maintain a speed of at least 85% of the Guaranteed Speed under Clause 26 in wind and sea state not exceeding Beaufort force 5, Charterers shall have the option to place the Vessel off-hire but any distance made good by the Vessel whilst off-hire shall be taken into account in accordance with Clause 22(a); |
(ii) | except where Charterers have placed the Vessel off-hire pursuant to Clause 22(b)(i), failure of the Vessel to proceed at any Guaranteed Speed shall be dealt with under Clause 26 and Appendix C and the Vessel will not be off-hire under Clause 22. |
(c) | Further and without prejudice to the foregoing, in the event of the Vessel deviating (which expression includes without limitation putting back, or putting into any port other than that to which she is bound under the instructions of Charterers) for any cause or purpose mentioned in Clause 22 (a), the Vessel shall be off-hire from the commencement of such deviation until the time when she is again ready and in an efficient state to |
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resume her service from a position not less favourable to Charterers than that at which the deviation commenced, provided, however, that any service given or distance made good by the Vessel whilst so off-hire shall be taken into account in assessing the amount to be deducted from hire. If the Vessel, for any cause or purpose mentioned in Clause 22 (a), puts into any port other than the port to which she is bound on the instructions of Charterers, the port charges, pilotage and other expenses at such port shall be borne by Owners. Should the Vessel be driven into any port or anchorage by stress of weather hire shall continue to be due and payable during any time lost thereby.
(d) | If the Vessel’s flag state becomes engaged in hostilities, and Charterers in consequence of such hostilities find it commercially impracticable to employ the Vessel and have given Owners’ written notice thereof then from the date of receipt by Owners of such notice until the termination of such commercial impracticability the Vessel shall be off-hire and Owners shall have the right to employ the Vessel on their own account. |
(e) | Time during which the Vessel is off-hire under this Charter shall count as part of the charter period except where Charterers declare their option to add off-hire periods under Clause 4 (b). |
(f) | All references to “time” in this Charter party shall be references to local time except where otherwise stated. |
(g) | (i) | If as a consequence of any cause or purpose mentioned in this Clause 22 or in Clause 16 (c), the Vessel presents for loading with tank temperatures other than that which would otherwise allow bulk loading to commence within 1/2 (half) an hour after cooling of the loading arms, any time lost as a consequence thereof, including without limitation any time lost in additional cooling of tanks prior to loading shall count as off-hire and the cost of any LNG supplied for such additional cooling shall be paid for by Owners at the LNG Price. |
(ii) | If any LNG is lost as Boil-Off during periods of off-hire, Owners shall reimburse Charterers for the LNG lost at the LNG Price, less any Boil-off consumed in distance made good during the off-hire period by Owners. |
Where accurate measurement of LNG lost as Boil-Off during any such off-hire period is impossible for whatever reason, the LNG lost as Boil-Off shall be assumed to have occurred at a constant rate equal to that obtained by measurement between official gaugings of the cargo in question in accordance with Appendix C Article 8 (b). Where, due to the off-hire occurring during a ballast passage, all LNG Heel is lost as Boil-Off prior to the Vessel next commencing to load, such Boil-Off shall be deemed to have occurred at a constant rate equal to that which occurred during the Vessel’s last previous ballast voyage.
(h) | If the cargo capacity of the Vessel is reduced for any reasons, Charterers shall have the option of putting the Vessel off-hire or using the Vessel, in which case hire shall be reduced pro rata to the reduction in the Vessel’s cargo capacity from the commencement |
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of loading at the loading port until the Vessel is again ready to load at the next loading port without such reduction in capacity. Notwithstanding the option granted to Charterers by the foregoing and subject to Charterers’ need for transportation, Charterers may agree (such agreement not to be unreasonably withheld) to allow Owners to repair the tanks of the Vessel at the earliest opportunity.
(i) | The Vessel shall additionally be off-hire as provided in this Clause 22 whenever there is loss of time: |
(i) | as a result of a boycott arising in connection with the business of Owners, the terms or conditions of employment of Owners’ servants, or employment, trades, or cargoes of the Vessel other than under this Charter; | |
(ii) | due to restraint or interference in the Vessel’s operation by any governmental authority in connection with the ownership, registration, or obligations of Owners or the Vessel, or stowaways, or in connection with smuggling or other prohibited activities, unless such restraint or interference involves a cargo carried under this Charter, or Charterers themselves, or the shippers or receivers of such a cargo; or | |
(iii) | due to strikes, labour boycotts or any other discrimination/difficulties against the Vessel because of Owners and/or their affiliates’ previous trade and/or the ownership and/or flag and/or officers and crew and/or officers and crews’ employment conditions; |
and all losses, damages and expenses directly or indirectly incurred thereby (including bunkers consumed) shall be for Owners’ account.
(j) | In the event that the Vessel is off-hire for any reason other than in connection with periodical dry-docking pursuant to Clause 24 for any period in excess of ninety consecutive days or exceeding ninety (90) days in any period of three hundred and sixty five (365) days, Charterers shall have the option to terminate this Charter by giving notice in writing with effect from any date stated in such notice provided that the Vessel is free of cargo (other than LNG Heel) at such date. If the Vessel is not free of cargo (other than LNG Heel) at such date then the notice shall be deemed to be effective on the next date that the Vessel is free of cargo (other than LNG Heel). This Clause 22(j) is without prejudice to any other rights or obligations of Owners or Charterers under this Charter. For the purposes of this Clause 22(j), in the event of partial loss of service, the period of off-hire shall be the total period during which the Vessel is not fully efficient rather than the resulting loss of time. |
(k) | Notwithstanding any other provision of this Charter, the Charterers shall not be precluded, prevented or estopped from relying on, enforcing and enjoying the full benefit of any provision of this Charter concerning the condition or performance of the Vessel, including but not limited to any provision resulting in the Vessel being placed off-hire, by virtue of the fact that a breach or triggering of such provision occurred directly or indirectly as a result of the status or condition of the Vessel prior to delivery to the Charterers. |
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23. | Ship to Ship Transfers and FPSO/FSRU Cargo Operations |
(a) | Subject to the provisions of Clause 23 (b), Owners shall allow a transhipment of the cargo to another ship or floating storage re-gasification unit (FSRU) or loading from an LNG floating production storage and offloading unit (LNG-FPSO) to be carried out, provided that a suitably documented formalised risk assessment is carried out, identifying potential hazards, probability and consequences and all risks identified can be mitigated adequately to the reasonable satisfaction of Charterers and Owners. |
(b) | Subject to Clause 23(a), such cargo operation shall be carried out in accordance with the recommendations set out in the latest version of ICS/OCIMF Ship-to-Ship Transfer Guide (Liquefied Gases), and SIGTTO’s “Considerations for Planning a Ship-to-Ship Transfer of LNG” as amended from time to time. Owners shall permit, at Charterers’ expense, personnel nominated by Charterers to attend any pre operation risk assessment workshops and to attend on board, subject to Clause 18, to observe in the transhipment operation although such operation shall always be the responsibility of Owners. All expenses incurred for the Ship-to-Ship Transfer shall be for the Charterers’ account, except insofar as Owners are otherwise obliged to bear such costs in accordance with this Charter. |
(c) | Any transfer operations (herein also referred to as “lighterage”) to another ship, FSRU, or FPSO, and any extra equipment required for such, will be for Charterers’ account. All time including shifting time, if any, from the Vessel’s arrival and tendering notice of readiness at lighterage position until disconnection of hoses upon completion of lighterage operation or the removal /unloading of all fendering, hoses and other lighterage equipment (whichever is the later), to count as time on hire. All and any time during which the lighterage operation is discontinued due to breakdown of the Vessel’s equipment and/or operational inefficiency arising as a direct consequence of the additional requirements on the Vessel by the need to conduct such lightering operation, shall not count as off hire. All time and cost used and incurred for steaming/mooring, at Charterers request, from the Vessel’s arrival at the originally agreed lighterage location, shall count as time on hire. All port expenses, if any, incurred as a consequence of such lighterage operation always to be for Charterers’ account. If Owners are obliged to extend their existing insurance policies to cover lighterage operations, Charterers shall reimburse Owners for additional premium incurred, provided that Charterers are given prior notification (if possible) of the additional amount involved. Charterers must obtain permission from proper authorities to perform lighterage operation and all expenses in this connection shall be for Charterers’ account. |
(d) | The loading or discharge at FSRUs, FPSOs, and to another ship shall be subject to Clause 23 and shall, for the avoidance of doubt, always be at the sole discretion of the Master and if at any time the loading or discharge operations are, or become unsafe then he/she may discontinue such operations. |
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24. | Periodical Dry-dock |
(a) | Owners shall dry-dock the Vessel at least once in any five year period for the purposes of maintaining the Vessel’s underwater area, undergo cargo tank inspection and to effect equipment overhaul, scheduled maintenance, other necessary repairs, and re-certification, so that the Vessel is fit in every way for service under this Charter. Provided that Owners can demonstrate to Charterers satisfaction that a performing five year coating system has been applied to the hull and that an Impressed Current Cathodic Protection system and a Marine Growth Prevention System are installed and intermediate dockings will be permitted to be carried out afloat. If Owners elect to apply a five (5) year dry-docking cycle, they shall provide to Charterers a detailed master maintenance plan clearly showing how they will overhaul and maintain all critical equipment. |
Owners shall give Charterers approximately twelve (12) months’ notice of any intended non-emergency dry-docking and the proposed locations for the Dry-dock, together with the reasons for such dry-docking.
(b) | Owners and Charterers shall work together to find the most optimal economic location for the dry-docking for both parties. The costs for different dry-dock locations shall be disclosed by Owners. If Charterers incur costs in delivering the Vessel to a cheaper dry-dock location versus one that falls outside the Vessel’s actual trade route, Owners and Charterers shall mutually agree an equitable economic solution. Owners and Charterers shall agree the actual date that the Vessel will be required to enter the dry-dock port ninety (90) days prior to such date. |
(c) | In addition to any technical superintendent, the Owners shall supply a superintendent whose primary function is HSSE, to attend dry-docking periods. The suitability of the HSSE superintendent shall be agreed by the Owners and Charterers. |
(d) | Charterers shall have the right to review the dry docking specifications and programme and, at Charterers’ costs, shall have the right to send up to two personnel to witness the dry docking |
(e) | In the event of dry docking, the Vessel shall be off-hire when the Vessel arrives at the dry dock port on the actual date. On completion of dry docking, the Vessel will be on hire again upon exit from the dry dock yard. |
(f) | All dry-dock expenses and expenses of preparing the Vessel for dry-dock shall be for Owners’ account. Any natural gas vapour lost in gas freeing for the purpose of dry-docking shall be for Charterers’ account provided that during the last discharge prior to dry-docking Owners shall use their reasonable endeavours to pump out the maximum amount of cargo. |
(g) | Provided that Charterers have been previously notified and agreed to the period in advance, Charterers agree to provide the Owners with a preventative maintenance |
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window or windows that shall not exceed ***** per annum following Delivery until the first anniversary thereof and thereafter for each twelve (12) month period beginning on each anniversary of the Delivery (the “Yearly Allowance”). Owners shall be entitled to use the Yearly Allowance to carry out, with the approval of Charterers, scheduled preventative maintenance work to the Vessel. Owners shall provide Charterers with a completed Maintenance Request Form and subsequent maintenance reports on completion of maintenance.
(h) | After the first special survey of the Vessel; this Yearly Allowance shall increase to up to ***** per annum, provided that Charterers is able to provide up to ***** in underutilised time and that the maintenance has no impact on Charterers’ commercial operations. For the avoidance of doubt, the Yearly Allowance shall never be lower than *****. |
25. | Ship Inspection |
Charterers or their representatives shall have the right at any time during the charter period to make such inspection of the Vessel or necessary operational and condition audits of the Vessel, crew, Owners’ office or Vessel’s technical manager as they may consider necessary. This right may be exercised as often and at such intervals as Charterers in their absolute discretion may determine and whether the Vessel is in port or on passage.
Owners shall afford all necessary co-operation and accommodation on board provided, however:
(a) | that neither the exercise nor the non-exercise, nor anything done or not done in the exercise or non-exercise, by Charterers of such right shall in any way reduce the master’s or Owners’ authority over, or responsibility to Charterers or third parties for, the Vessel and every aspect of her operation, nor increase Charterers’ responsibilities to Owners or third parties for the same; |
(b) | that Charterers shall not be liable for any act, neglect or default by themselves, their servants or agents in the exercise or non-exercise of the aforesaid right; |
(c) | that any cost incurred by such inspections or audits shall be for Charterers’ account provided such costs have been disclosed to and approved by Charterers in advance; |
(d) | that any inspection carried out by Charterers shall be made without interference with or hindrance to the Vessel’s safe and efficient operation, and shall be limited to a maximum of two persons; and |
(e) | that any overnight stays shall be subject to Clause 18. |
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26. | Key Vessel Performance Criteria |
Subject to Appendix C, Owners guarantee that:
(a) | the Laden Service Speed shall be ***** knots; |
(b) | the Ballast Service Speed shall be ***** knots; |
(c) | the Minimum Speed shall be ***** knots; |
(d) | the Vessel shall be capable of loading and discharging the cargo as follows: |
(i) | a full cargo may be loaded within fourteen (14) hours if the Vessel’s cargo tanks are colder than the tank design temperature for commencement of loading, excluding the time for connecting; disconnecting; cooling down; topping up and custody transfer measurement, and provided that the loading terminal is capable of pumping at least 13,000 cubic meters of LNG per hour to the Vessel at not less than 230 kPa (gauge) pressure at the flange connection between ship and terminal utilising a minimum of two liquid loading arms and provided that the terminal is capable of receiving all return vapour from the Vessel that may be generated when loading the Vessel at the above specified flow rate of LNG; |
(ii) | a full cargo may be discharged within fourteen (14) hours, excluding the time for connecting; disconnecting; cooling down; starting up pumps; ramping up; ramping down for stripping at end of discharge and custody transfer measurement, and provided that the discharge terminal is capable of receiving LNG at a rate of at least 12,000 cubic meters of LNG per hour with a back pressure at the flange connection between ship and terminal not exceeding 100 metres of liquid LNG of specific gravity of 0.47 utilising a minimum of two liquid unloading arms. The terminal must also be capable of providing sufficient return vapour to the Vessel to compensate for the displacement of the LNG being discharged from the Vessel; |
(iii) | If Charterers request either slow loading or slow discharging, Owners shall permit such operations. |
(e) | the Vessel’s guaranteed maximum fuel consumption, for weather conditions not exceeding Beaufort force 5, shall be as defined by per the table in this Clause 26; |
Methane Series (Samsung 145kcbm)
Class Steam Vessel |
(tonnes of Fuel Oil Equivalent / day) | |||
Average Speed (Knots) | Laden | Ballast | ||
19.5 (service speed) | ***** | ***** | ||
19.0 | ***** | ***** | ||
18.0 | ***** | ***** | ||
17.0 | ***** | ***** | ||
16.0 | ***** | ***** | ||
15.0 | ***** | ***** |
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(f) | The fuel oil equivalent factor (tonnes fuel oil per cubic metre of LNG) shall be calculated using actual bunker survey reports and LNG quality reports and engine performance data as provided in Gas Form C and shall be agreed upon by both Owners and Charterers. |
(g) | the maximum laden Boil-Off shall be zero point one five percent (0.15%) per day (or such lower percentage as guaranteed by the shipyard) of the Cargo Capacity on fully laden sea passages (or pro rated by the ratio of volumetric cargo loaded to cargo capacity if all tanks are not used); |
(h) | the maximum ballast Boil-Off shall be ***** per day (or such lower percentage as guaranteed by the shipyard) of the cargo capacity where the previous sea passage was fully laden and provided heel is carried in maximum two tanks and no spray cooling is required. |
27. | Salvage |
Subject to the provisions of Clause 22 hereof, all loss of time and all expenses (excluding any damage to or loss of the Vessel or tortious liabilities to third parties) incurred in saving or attempting to save life or in successful or unsuccessful attempts at salvage shall be borne equally by Owners and Charterers provided that Charterers shall not be liable to contribute towards any salvage payable by Owners arising in any way out of services rendered under this Clause 27.
All salvage and all proceeds from derelicts shall be divided equally between Owners and Charterers after deducting the master’s, officers’ and crew’s share.
28. | Lien |
Owners shall have a lien upon all cargoes and all freights, sub-freights and demurrage for any amounts due under this Charter; and Charterers shall have a lien on the Vessel for all monies paid in advance and not earned, and for all claims for damages arising from any breach by Owners of this Charter.
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29. | Exceptions |
(a) | Unless caused by the actual fault or privity of the Owners or the Vessel, the Vessel, her master and Owners shall not, unless otherwise in this Charter expressly provided, be liable for any loss or damage or delay or failure arising or resulting from any act, neglect or default of the master, pilots, mariners or other servants of Owners in the navigation or management of the Vessel; fire, collision or stranding; dangers and accidents of the sea; explosion, bursting of boilers, breakage of shafts or any latent defect in hull, equipment or machinery; provided, however, that Clauses 1, 2, 3 and 26 hereof shall be unaffected by the foregoing. Further, neither the Vessel, her master or Owners, nor Charterers shall, unless otherwise in this Charter expressly provided, be liable for any loss or damage or delay or failure in performance hereunder arising or resulting from act of God, act of war, seizure under legal process, quarantine restrictions, strikes, lock-outs, riots, restraints of labour, civil commotions or arrest or restraint of princes, rulers, pirates or people. |
(b) | The Vessel shall have liberty to sail with or without pilots, to tow or go to the assistance of vessels in distress and to deviate for the purpose of saving life or property. |
(c) | Clause 29 (a) shall not apply to, or affect any liability of Owners or the Vessel or any other relevant person in respect of: |
(i) | loss or damage caused to any berth, jetty, dock, dolphin, buoy, mooring line, pipe or crane or other works or equipment whatsoever at or near any place to which the Vessel may proceed under this Charter, whether or not such works or equipment belong to Charterers; or |
(ii) | any claim (whether brought by Charterers or any other person) arising out of any loss of or damage to or in connection with cargo. Any such claim shall be subject to the Hague-Visby Rules or the Hague Rules or the Hamburg Rules, as the case may be, which ought pursuant to Clause 40 hereof to have been incorporated in the relevant Bill of Lading (whether or not such Rules were so incorporated) or, if no such Bill of Lading is issued, to the Hague-Visby Rules unless the Hamburg Rules compulsorily apply in which case to the Hamburg Rules. |
(d) | In particular and without limitation, the foregoing subsections (a), (b) and (c) of this Clause shall not apply to or in any way affect any provision in this Charter relating to off-hire or to reduction of hire or Boil-Off or bunkers consumed during periods of off-hire. |
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30. | Injurious Cargoes |
No acids, explosives or cargoes injurious to the Vessel shall be shipped and without prejudice to the foregoing any damage to the Vessel caused by the shipment of any such cargo, and the time taken to repair such damage, shall be for Charterers’ account. No voyage shall be undertaken, nor any goods or cargoes loaded, that would expose the Vessel to capture or seizure by rulers or governments.
31. | Disbursements |
Should the master require advances for ordinary disbursements up to a cap of United States Dollars twenty-five thousand ($25,000) at any port, Charterers or their agents shall make such advances to him, in consideration of which Owners shall pay a commission of two and a half per cent, and all such advances and commission shall be deducted from hire.
32. | Laying-up |
Charterers shall have the option, after consultation with Owners, of requiting Owners to lay up the Vessel at a safe place nominated by Charterers, taking into account questions of maintenance access and security and with Owners’ consent and always subject to Clause 4, in which case the hire provided for under this Charter shall be adjusted to reflect any net increases in expenditure reasonably incurred or any net saving which should reasonably be made by Owners as a result of such lay up. Charterers may exercise the said option any number of times during the charter period.
33. | Requisition |
Should the Vessel be requisitioned by any government, de facto or de jure, during the period of this Charter, the Vessel shall be off-hire during the period of such requisition, and any hire paid by such governments in respect of such requisition period shall be for Owners’ account. Any such requisition period shall count as part of the charter period.
34. | Outbreak of War |
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If war or hostilities break out between any two or more of the following countries: United States of America, the countries or republics having been part of the former U.S.S.R (except that declaration of war or hostilities solely between any two or more of the countries or republics having been part of the former USSR shall be exempted), Peoples Republic of China, United Kingdom, and the country that the Vessel is registered in, then both Owners and Charterers shall have the right to cancel this charter provided that such war or hostilities materially and adversely affect the trading of the Vessel for a period of at least thirty (30) days.
35. | Additional War Expenses |
If the Vessel is ordered to trade in areas where there is war (de facto or de jure) or threat of war, Charterers shall reimburse Owners for any additional insurance premiums, crew bonuses and other expenses which are reasonably incurred by Owners as a consequence of such orders, provided that Charterers are given notice of such expenses as soon as practicable , and provided further that Owners obtain from their insurers a waiver of any subrogated rights against Charterers in respect of any claims by Owners under their war risk insurance arising out of compliance with such orders.
Any payments by Charterers under this Clause will only be made against proven documentation. Any discount or rebate refunded to Owners, for whatever reason, in respect of additional war risk premium shall be passed on to Charterers.
In the event that Owners are unable to secure adequate war risk coverage, Charterers shall have the option of providing war risk coverage for the Vessel, subject to Owners’ consent, such consent not to be unreasonably withheld. Charterers shall always make Owners aware of the cover limits to ensure Owners have excess War P&I cover available under their respective P&I Club entries.
36. | War Risks |
(a) | The master shall not be required or bound to sign Bills of Lading for any place which in his or Owners’ reasonable opinion is dangerous or impossible for the Vessel to enter or reach owing to any blockade, war, hostilities, warlike operations, civil war, civil commotions, terrorism or piracy revolutions. |
(b) | If in the reasonable opinion of the master or Owners it becomes, for any of the reasons set out in Clause 36 (a) or by the operation of international law, dangerous, impossible or prohibited for the Vessel to reach or enter, or to load or discharge cargo at, any place to which the Vessel has been ordered pursuant to this Charter (a “place of peril”), then Charterers or their agents shall be immediately notified in writing or by radio messages, and Charterers shall thereupon have the right to order the cargo, or such part of it as may be affected, to be loaded or discharged, as the case may be, at any other place within the trading limits of this Charter (provided such other place is not itself a place of peril). If |
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any place of discharge is or becomes a place of peril, and no orders have been received from Charterers or their agents within 48 hours after dispatch of such messages, then Owners shall be at liberty to discharge the cargo or such part of it as may be affected at any place suitable for the discharge of LNG which they or the master may in their or his discretion select within the trading limits of this Charter and such discharge shall be deemed to be due fulfilment of Owners obligations under this Charter so far as cargo so discharged is concerned.
(c) | The Vessel shall have liberty to comply with any directions or recommendations as to departure, arrival, routes, ports of call, stoppages, destinations, zones, waters, delivery or in any other wise whatsoever given by the government of the state under whose flag the Vessel sails or any other government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority including any de facto government or local authority or by any person or body acting or purporting to act as or with the authority of any such government or local authority or by any committee or person having under the terms of the war risks insurance on the Vessel the right to give any such directions or recommendations. If by reason of or in compliance with any such directions or recommendations anything is done or is not done, such shall not be deemed a deviation. If by reason of or in compliance with any such direction or recommendation the Vessel does not proceed to any place of discharge to which she has been ordered pursuant to this Charter, the Vessel may proceed to any place which the master or Owners in his/her or their discretion select and there discharge the cargo or such part of it as may be affected. Such discharge shall be deemed to be due fulfilment of Owners’ obligations under this Charter so far as cargo so discharged is concerned. |
Charterers shall procure that all Bills of Lading issued under this Charter shall contain the Chamber of Shipping War Risks Clause 1952.
37. | Piracy |
a) | Subject to Clause 37(e) below, if the Vessel proceeds to or through an area in which there is a current risk of piracy, verified by the International Group of P&I Clubs, Owners shall be entitled: |
i) | to take reasonable preventive measures to protect the Vessel, her crew and cargo by proceeding in convoy, using escorts, avoiding day or night navigation, adjusting speed or course, or engaging security personnel or equipment provided that such security personnel or equipment is provided by third party, private sector and non-governmental entities; on or about the Vessel; |
ii) | to follow any orders given by the flag state, any governmental or supra governmental organization; and |
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iii) | where there is an actual, imminent act of piracy, and only after giving Charterers reasonable advance notice, to take a safe and reasonable alternative route in place of the normal, direct or intended route to the next port of call, provided that such alternative route does not, in the case of the Gulf of Aden, physically extend beyond the transit of the Gulf of Aden in which case Owners shall give Charterers reasonable advance notice of the alternative route, an estimate of time and bunker consumption and a revised estimated time of arrival. |
b) | Subject to sub Clause 37(e) below, *****. |
c) | Subject to Clause 37(e), the Vessel shall remain on-hire for any time lost taking the measures referred to in sub Clause 37(a) of this Clause. |
d) | Where, notwithstanding the taking of any of the measures referred to in sub Clause 37(a) above, and where not caused by a lack of due diligence on Owners’ part, and where Charterers have not purchased off-hire insurance pursuant to sub Clause 37(e) below, the Vessel is captured by pirates, hire shall be payable at 100% of the hire rate for the duration of any such capture. As is further set forth in sub Clause 37(e) and for the avoidance of doubt, should Charterers purchase the off-hire insurance more fully described below, the Vessel shall be off-hire during the attack or seizure by pirates. |
e) | Charterers shall have the option, where the Vessel is scheduled to transit to or through an area in which there is a current risk of piracy, verified by the International Group of P&I Clubs, to require Owners to either (a) extend existing war risk insurance; or (b) purchase off-hire insurance, adding Charterers as co-assured, and which in either case will cover loss of hire, the cost of which shall be reimbursed by Charterers, provided always that (i) the terms of cover and cost have been disclosed to, and agreed by, Charterers prior to the purchase of such insurance; and (ii) that following the exercise of such option, the Vessel shall be off-hire for any time lost as a result of an attack or capture by pirates. |
f) | Charterers may elect, at any time, to pay any relevant insurances as described in sub Clause 37(e) directly. |
g) | Boil-off losses during piracy shall be for Charterers’ account. |
38. | Both to Blame Collision Clause |
If the liability for any collision in which the Vessel is involved while performing this Charter falls to be determined in accordance with the laws of the United States of America, the following provision shall apply:
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“If the ship comes into collision with another ship as a result of the negligence of the other ship and any act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship, the owners of the cargo carried hereunder will indemnify the carrier against all loss, or liability to the other or non-carrying ship or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of the said cargo, paid or payable by the other or non-carrying ship or her owners to the owners of the said cargo and set off, recouped or recovered by the other or non-carrying ship or her owners as part of their claim against the carrying ship or carrier.”
“The foregoing provisions shall also apply where the owners, operators or those in charge of any ship or ships or objects other than, or in addition to, the colliding ships or objects are at fault in respect of a collision or contact
Charterers shall procure that all Bills of Lading issued under this Charter shall contain a provision in the foregoing terns to be applicable where the liability for any collision in which the Vessel is involved falls to be determined in accordance with the laws of the United States of America.
39. | New Jason Clause |
General average contributions shall be payable according to York/Antwerp Rules, 1994, as amended from time to time, and shall be adjusted in London in accordance with English law and practice but should adjustment be made in accordance with the law and practice of the United States of America, the following position shall apply:
“In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the carrier is not responsible by statute, contract or otherwise, the cargo, shippers, consignees or owners of the cargo shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo.”
“If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the cargo and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the cargo to the carrier before delivery.”
Charterers shall procure that all Bills of Lading issued under this Charter shall contain a provision in the foregoing terms, to be applicable where adjustment of general average is made in accordance with the laws and practice of the United States of America.
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40. | Clause Paramount |
Charterers shall procure that all Bills of Lading issued pursuant to this Charter shall contain the following:
“(a) | Subject to sub-clause (b) or (c) hereof, this Bill of Lading shall be governed by, and have effect subject to, the rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading signed at Brussels on 25th August 1924 (hereafter the “Hague Rules”) as amended by the Protocol signed at Brussels on 23rd February 1968 (hereafter the “Hague-Visby Rules”). Nothing contained herein shall be deemed to be either a surrender by the carrier of any of his rights or immunities or any increase of any of his responsibilities or liabilities under the Hague-Visby Rules.” |
“(b) | If there is governing legislation which applies the Hague Rules compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hague Rules. Nothing therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hague Rules.” |
“(c) | If there is governing legislation which applies the United Nations Convention on the Carriage of Goods by Sea 1978 (hereafter the “Hamburg Rules”) compulsorily to this Bill of Lading, to the exclusion of the Hague-Visby Rules, then this Bill of Lading shall have effect subject to the Hamburg Rules. Nothing therein contained shall be deemed to be either a surrender by the carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Hamburg Rules.” |
“(d) | If any term of this Bill of Lading is repugnant to the Hague-Visby Rules, or Hague Rules, or Hamburg Rules, as applicable, such term shall be void to that extent but no further.” |
“(e) | Nothing in this Bill of Lading shall be construed as in any way restricting, excluding or waiving the right of any relevant party or person to limit his liability under any available legislation and/or law.” |
41. | Insurance/ITOPF |
Owners warrant that the Vessel is now, and will, throughout the duration of the Charter:
(a) | be owned or demise chartered by a member of the International Tanker Owners Pollution Federation Limited; |
(b) | be properly entered in a reputable P&I Club that is a member of the International Group of P&I Clubs; |
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(c) | have in place insurance cover for oil pollution for the maximum on offer through the International Group of P&I Clubs but always a minimum of United States Dollars 1,000,000,000 (one thousand million); |
(d) | have in full force and effect Hull and Machinery insurance placed through reputable brokers on Institute Time Clauses to a value as would be procured by a first class operator of similar such vessels. |
Owners will provide, within a reasonable time following a request from Charterers to do so, documented evidence of compliance with the obligations in this Clause 41.
42. | Export Restrictions |
The master shall not be required or bound to sign Bills of Lading for the carriage of cargo to any place to which export of such cargo is prohibited under the laws, rules or regulations of the country in which the cargo was produced and/or shipped.
Charterers shall procure that all Bills of Lading issued under this Charter shall contain the following clause:
“If any laws rules or regulations applied by the government of the country in which the cargo was produced and/or shipped, or any relevant agency thereof, impose a prohibition on export of the cargo to the place of discharge designated in or ordered under this Bill of Lading, carriers shall be entitled to require cargo owners forthwith to nominate an alternative discharge place for the discharge of the cargo, or such part of it as may be affected, which alternative place shall not be subject to the prohibition, and carriers shall be entitled to accept orders from cargo owners to proceed to and discharge at such alternative place. If cargo owners fail to nominate an alternative place within 72 hours after they or their agents have received from carriers notice of such prohibition, carriers shall be at liberty to discharge the cargo or such part of it as may be affected by the prohibition at any safe place on which they or the master may in their or his absolute discretion decide and which is not subject to the prohibition, and such discharge shall constitute due performance of the contract contained in this Bill of Lading so far as the cargo so discharged is concerned”.
The foregoing provision shall apply mutatis mutandis to this Charter, the references to a Bill of Lading being deemed to be references to this Charter.
43. | Business Principles |
Owners shall act in a manner consistent with BG Group’s Business Principles set out in Appendix E so as to enable Charterers to operate in accordance with those principles. Owners shall comply with the procedures for monitoring and reporting compliance as set out in the Business Principles Appendix E.
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Owners acknowledge that Charterers have a reporting policy and facility respectively called the ‘Speak Up Policy’ and ‘Speak Up’. The Speak Up Policy requires Charterers’ employees, and encourages others, to report any situation where there is reason to suspect that there has been a breach, or suspected breach, of BG Group’s Business Principles or other misconduct. Speak Up provides reporting channels by telephone and internet service (accessed via the BG Group website or through www.bg-speakup.com) to communicate any concerns confidentially. Owners are expected to use Speak Up.
44. | Drugs and Alcohol |
Owners warrant that they have in force an active policy covering the Vessel which meets or exceeds the standards set out in the “Guidelines for the Control of Drugs and Alcohol On Board Ship” as published by the Oil Companies International Marine Forum (OCIMF) dated June 1995(or any subsequent modification, version, or variation of these guidelines) and that this policy will remain in force throughout the charter period, and Owners will exercise due diligence to ensure the policy is complied with.
45. | Pollution and Emergency Response |
Owners are to advise Charterers of organisational details and names of Owners’ personnel together with their relevant telephone/facsimile/e-mail details, including the names and contact details of Qualified Individuals for OPA 90 response, who may be contacted on a 24-hour basis in the event of oil spills or emergencies.
Notice to Owners’ Pollution and Emergency Response Department:
Attn | : Emergency Response Manager |
Address | : 69 Akti Miaouli, Piraeus 18537, Greece |
Telephone | : +30 210 4591280-1-2 |
Fax | : +30 210 4591240 |
: EmergencyResponse@gaslogserv.com | |
Cc | : tkatemidis@gaslogserv.com; mbourekas@gaslogserv.com |
Notice to Charterers’ Pollution and Emergency Response Department:
Attn | : Duty Officer |
Address | : BG Group, 811 Main St., Houston, Texas 77002, USA |
Telephone | : +1 713 366 6248 (primary); +1 713 884 9142 (secondary) |
Fax | : +1 713 877 9212 |
: AIRIS@bg-group.com , incident@bg-group.com (for incidents only) | |
Cc | : shipping@bg-group.com ; lngcharters@bg-group.com |
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Owners shall also refer the initial incident notification instructions detailed within the Charterers’ Instructions.
46. | ISPS Code/USMTSA 2002 |
This Clause 46 makes reference to the International Code for the Security of Ships and of Port Facilities and the relevant amendments to Chapter Xl of SOLAS (“ISPS Code”) and the US Maritime Transportation Security Act 2002 (“MTSA”).
(a) | (i) | During the currency of this Charter, Owners shall procure that both the Vessel and “the Company” (as defined by the ISPS Code) and the “owner” (as defined by the MTSA) shall comply with the requirements of the ISPS Code relating to the Vessel and “the Company” and the requirements of MTSA relating to the Vessel and the “owner”. Upon request Owners shall provide documentary evidence of compliance with this Clause 46 (a) (i). |
(ii) | Except as otherwise provided in this Charter, loss, damage, expense or delay, caused by failure on the part of Owners or “the Company”/“owner” to comply with the requirements of the ISPS Code/MTSA or this Clause shall be for Owners’ account. |
(b) | (i) | Charterers shall provide Owners/Master with their full style contact details and shall ensure that the contact details of all sub-charterers are likewise provided to Owners/Master. Furthermore, Charterers shall ensure that all sub-charter parties they enter into during the period of this Charter contain the following provision: |
“The Charterers shall provide the Owners with their full style contact details and, where sub-letting is permitted under the terms of the Charter party, shall ensure that the contact details of all sub-charterers are likewise provided to the Owners”.
(ii) | Except as otherwise provided in this Charter, loss, damage, expense or delay, caused by failure on the part of Charterers to comply with this sub-Clause 46 (b) shall be for Charterers’ account. |
(c) | Notwithstanding anything else contained in this Charter costs or expenses related to security regulations or measures required by the port facility or any relevant authority in accordance with the ISPS Code/MTSA including, but not limited to, security guards, launch services, tug escorts, port security fees or taxes and inspections, shall be for Charterers’ account, unless such costs or expenses result solely from Owners’ negligence in which case such costs or expenses shall be for Owners’ account. All measures required by Owners to comply with the security plan required by the ISPS Code/MTSA shall be for Owners’ account. |
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(d) | Notwithstanding any other provision of this Charter, the Vessel shall not be off-hire where there is a loss of time caused by Charterers’ failure to comply with the ISPS Code/MTSA. |
(e) | If either party makes any payment, which is for the other party’s account according to this Clause, the other party shall indemnify the paying party. |
47. | Law and Litigation |
(a) | This Charter shall be construed and the relations between the parties determined in accordance with the laws of England. |
(b) | Each of the parties hereto hereby submits to the exclusive jurisdiction of the High Court of London for the purposes of all legal proceedings arising out of or relating to this Charter or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. |
(c) | It shall be a condition precedent to the right of any party to a stay of any legal proceedings in which maritime property has been, or may be, arrested in connection with a dispute under this Charter, that that party furnishes to the other party security to which that other party would have been entitled in such legal proceedings in the absence of a stay. |
48. | Confidentiality |
All terms and conditions of this Charter arrangement shall be kept private and confidential. Charterers or Owners shall have the right to release information as part of a mandatory audit requirement or third party contractual obligation, provided the auditors or third party sign a mutually agreed confidentiality agreement.
49. | Construction |
The headings have been included in this Charter for convenience of reference and shall in no way affect the construction hereof.
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50. | Notices |
(a) | Whenever written notices are required to be given by either party to the other party, such notices shall be sent by fax, registered mail, e-mail or registered airmail to the following addresses: |
Notice to Owners: | ||
Attn | : | Graham Westgarth |
Address | : | Gildo Pastor Center, 7, Rue du Gabian, MC-98000 Monaco |
Telephone | : | +377 97975115 / +33 680869369 (AOH) |
Fax | : | +377 97975124 |
: | gwestgarth@gaslogltd.com | |
Cc | : | tkatemidis@gaslogserv.com |
Notice to Owners’ Operations Department: | ||
Attn | : | Duty Manager |
Address | : | 69 Akti Miaouli, Piraeus 18537, Greece |
Telephone | : | +30 210 4591250 |
Fax | : | +30 210 4591242 |
: | LNG@cereslng.com | |
Cc | : | tkatemidis@gaslogserv.com;thsallis@gaslogserv.com |
or to such other addresses as the parties may respectively from time to time designate by notice in writing. Any failure to transmit a copy of the notice to a party listed as entitled
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to receive a copy shall not in any way affect the validity of any notice otherwise properly given as provided in this Clause.
(b) | Any notice required under this Charter to be given in writing shall be deemed to be duly received only: |
(i) | In the case of a letter, whether delivered in course of the post or by hand or by courier, at the date and time of its actual delivery if within normal business hours on a working day at the place of receipt otherwise at the commencement of normal business on the next such working day. |
(ii) | In the case of a facsimile or e-mail, at the time of transmission recorded on the message if such time is within normal business hours (09:00 - 17:00) in the country of receipt, otherwise at the commencement of normal business hours on the next working day at the place of receipt. |
51. | Invoices |
All invoices should be sent to the following contacts and shall be deemed to be duly received as per Clause 50(b):
Owners: | |||
Attn | : | Chief Operating Officer | |
Address | : | Gildo Pastor Center, 7, Rue du Gabian, MC-98000 Monaco | |
Telephone | : | +377 97975115 / +33 680869369 (AOH) | |
Fax | : | +377 97975124 | |
: | gwestgarth@gaslogltd.com | ||
Cc | : | glagonikas@gaslogltd.com |
Charterers:
Attn | : | LNG Charter Manager | |
Address | : |
BG Group Thames Valley Park, Reading, Berkshire, RG6 1PT United Kingdom |
|
Telephone | : | +44 118 929 36769 | |
Fax | : | +44 8450848913 | |
: | LNGCharters@bg-group.corn |
52. | Ship Contact details |
The Vessel’s contact details are as follows:
Telephone (VSAT) | : | ***** |
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Telephone (SATCOM) | : | ***** |
Satcom Fax | : | ***** |
: | ***** |
53. | Definitions |
In this Charter, save where the context otherwise requires, the following words and expressions shall have the meanings respectively assigned to them in this Clause;
“ Boil-Off ” | means the vapour, which results from vaporisation of LNG in the cargo tanks, | |
“ Cargo Capacity ” | means the maximum safe LNG loading limit of the Vessel as per LNG Form C. | |
“ Certificate of Financial Responsibility ” | means a certificate of financial responsibility as required by the US Oil Pollution Act 1990. | |
“ Fuel Oil Equivalent ” | refers collectively to its two components, fuel oil and Boil-Off gas and is measured in metric tonnes applying the fuel oil equivalent factor set out in Clause 26 (f). | |
“ Fuel Price ” | means last invoiced price per increment of volume bunkered in USD $ per metric tonne (or relevant volumetric unit) | |
“ Gas Free ” | means the Vessel’s cargo tanks are free of all natural gas vapour and under an atmosphere of inert gas. | |
“ GTT ” | Gaztransport & Technigaz SA of France | |
“ LNG ” | means natural gas liquefied by cooling and which is in a liquid state at or near atmospheric pressure. | |
“ LNG Heel ” | means cargo retained in the cargo tanks on completion of discharge. |
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“ LNG Price ” | means the ex-ship price of LNG in USD/mmBtu at the port where the LNG was retained, based upon composition of LNG at discharge (except for LNG supplied for cool down at a loading port, and for excess LNG boiled off on ballast leg, where the price will be based on the price charged by the terminal for cool down LNG). | |
“ Service Speed ” | shall have the meaning ascribed to it in Appendix C, Article 1. (a). | |
“ BG Group ” | mean companies owned directly or indirectly by BG Group plc. |
54. | Claim Validity Period |
Any claims arising under this Charter party must be brought within twelve (12) months of the conclusion of the Charter.
55. | Eligibility & Compliance |
At all times during this Charter:
(a) | the Vessel shall be in all respects eligible under applicable conventions, laws and regulations for, and shall not be prevented for any reason whatsoever from, trading to and from the ports and places permitted in Clause 4 of the Charter; |
(b) | Without prejudice to Clause 65, the Vessel shall comply with all applicable conventions, laws, rules and regulations of any international, national, state or local government entity having jurisdiction and shall have on board for inspection by the authorities all necessary certificates, records, letters and other documents evidencing such compliance, including but not limited to certificates evidencing compliance with international and US oil pollution regulations, SOLAS 1974, as amended and MARPOL 1973/1978; and |
(c) | the Vessel shall comply fully with all applicable U.S. Federal, U.S. Coastguard and State laws, rules, orders, regulations, guidelines and circulars now in effect and which may be promulgated (and subsequent amendments and successors thereto) including, but not limited to, the following provisions relating to maritime safety and oil pollution response: |
(vi) | the U.S. Federal Water Pollution Control Act (as amended by the Clean Water Act of 1977 (Water Pollution)); |
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(vii) | the U.S. Oil Pollution Act of 1990 and the governmental regulations issued thereunder ( “ OPA-90 ” ); |
(viii) | the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980; and |
(ix) | the U.S. Port and Tanker Safety Act; |
(x) | the U.S. Coastguard Navigational and Vessel Inspection Circular No. 8-92; |
(xi) | the Code of Federal Regulations; |
(xii) | the compliance with practices and limits for the regulated effluents as per the US Environmental Protection Agency’s Vessel General Permit (VGP) requirements under the authority of the Clean Water Act (CWA) requirements for National Pollutant Discharge Elimination System (NPDES) program. |
(d) | the Vessel shall have on board throughout the Charter any certificates or other documentation required under the said laws, rules, orders, regulations, guidelines and circulars and evidencing such compliance, which shall include but not be limited to a U.S. Coastguard Certificate of Financial Responsibility for Oil Pollution ( “ COFR ” ) together with a similar certificate for hazardous substances and a Tanker Vessel Examination Letter ( “ TVEL ” ). |
(e) | prior to delivery the Owners or the Vessel’s operator shall have submitted, and obtained approval from the US Coastguard for a response plan for the Vessel ( “ VRP ” ) which meets in full the requirements of OPA-90 and of the US Coastguard and in accordance with which the Vessel shall at all times be operated. Charterers shall reimburse Owners for all port specific OPA charges (including but not limited to additional premium to maintain P&I cover) incurred by the Vessel calling at ports in the USA in accordance with Charterers’ orders. Requirements of a similar nature imposed by other countries after the date of this Charter shall be treated in the same way. |
(f) | to the extent that the Vessel does not at any time comply with any USCG regulation now in effect or to be promulgated, all necessary waivers are or will be held. Owners will advise Charterers of all such waivers, including period of validation and reason(s) for waiver. |
(g) | Owners shall ensure that the Vessel is free to trade to the USA and if Certificate of Compliance (CoC) is not available at the commencement of the Charter, then an inspection shall be carried prior to arrival at the first USA port or on arrival at the first USA port. Any delay incurred carrying out this initial inspection that exceeds three hours shall be classified as off-hire. Charterers shall provide sufficient notice to Owners to allow Owners to comply with the rules and regulations in USA and LNG Terminals not listed in Appendix A. |
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(h) | If the Vessel is required to discharge at a US port during this Charter, the Owners are required to install an AIS Pilot Plug as defined by SOLAS regulations. Specific regulations can be found in Chapter V, Regulation 19 and in Title 33 Code of Federal Regulations §164.46 Automatic Identification System (AIS), Paragraph (d) “ The AIS Pilot Plug, on each vessel over 1600 gross tons on an international voyage, must be available for pilot use, easily assessable from the primary conning position of the vessel, and near a 120 Volt, AC power, 3-prong receptacle. ” Additional information regarding proper installation of the AIS Pilot Plug can be found in IMO SN/Circ. 227. |
(i) | When calling at LNG terminals located in ports in the European Union, Vessel must be able to meet the requirements of EU Council Directives 1999/32/EC dated 26 April 1999 and 2005/33/EC dated 6 July 2005. |
Any delays, direct losses, expenses or damages arising from failure to comply with this Clause shall be for Owners’ account and Owners shall fully indemnify Charterers therefor. Charterers shall not be liable for any delay caused by the Vessel’s failure to comply with the foregoing warranty.
For any time lost due to a breach of this Clause the Vessel shall be off-hire, and any expenses incurred due to such breach (including bunkers consumed) shall be for Owners’ account.
56. | Vapour Pressure |
Owners undertake that the Vessel will arrive at each discharge port or terminal with the Vessel and its cargo in such a condition that the vapour pressure in the Vessel’s cargo tanks meets the requirements of the discharging port or terminal as advised to Owners with reasonable prior notice. In any event, Owners will follow vapour pressure instructions received from Charterers and will not allow vapour pressure to increase beyond the pressure permitted by Charterers’ voyage instructions.
57. | Cargo Transfer Inspection and System Calibration |
(a) | Charterers may at their option place their cargo transfer inspection representative on board to observe preparation for loading and discharging of cargo during periods when the Vessel is in port, at Charterers’ expense. Such representative will not, however, under any circumstances order or direct the taking of any particular action by the Vessel or crew or interfere in any way with the Master’s exercise of his authority. |
(b) | The Custody Transfer Measurement Gauging System (CTMS) shall undergo a full calibration check and recertification by a recognized calibration company at intervals of no more than sixty (60) months. This check shall include a full in tank calibration check of the Primary Gauging Systems, Secondary Gauging System, in tank temperature |
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monitoring system, tank pressure monitoring system, Trim/List Transmission System and independent tank hi level alarm(s). Charterers shall have access to calibration check reports. | ||
(c) | Notwithstanding Clause 57 (d) Charterers can request, at Charterers cost and time, to perform an intermediate recertification process of the CTMS equipment in addition to the above full calibration check. This intermediate recalibration survey shall be performed by an industry recognized calibration company and may be performed at intervals of thirty (30) months (+/- 6 months). The test will not require cargo tank entry but include a full calibration verification of the Primary Level Gauging Systems, Secondary Level Gauging System, Tank Temperature Monitoring System, Tank Pressure Monitoring System and Trim/List Transmission System. Charterers shall have access to calibration check reports. |
(i) | If the Vessel is required to discharge at a Japanese port during this Charter, the Owners are required to start Japan customs approval process for the CTMS and cargo tank tables immediately once Charterers notify Owners of intention to discharge at a Japanese port. The Vessel shall comply with Japanese customs approvals requirements throughout the charter period. |
(ii) | The vessel’s CTMS must have the functionality to change settings upon request in order for Charterers to meet various sales and purchase agreements or terminal requirements. This shall include, but not be limited to temperature, pressure, liquid level gauging intervals and settings. |
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58. | Vessel Data |
(a) | Charterers shall have full access to daily (and other) reports provided from the Vessel’s voyage data recorder and ship performance software. |
(b) | If Vessel is equipped with ship performance software or equivalent system, Charterers may request Owners to run a performance trial at sea as per Charterers’ Instructions. When available the ship performance software (or equivalent) shall be used to record information during a minimum one hour trial. |
(c) | A detailed procedure for carrying out the trial shall be included in charterers’ instructions. Owners agree to send the resulting data and/or summary report of the trial to the Charterers within fifteen (15) days of carrying out each trial. |
(d) | For the duration of this charter Owners shall provide access to the Vessels’ Inmarsat C tracking system which shall automatically provide the Vessels’ position, speed and heading at set intervals. Such information shall be available to Charterers through a password controlled website. |
59. | Third Party Vetting Information |
Owners shall permit Charterers to discuss vetting results with third party vetting companies upon Charterers’ request.
60. | Taxes |
All taxes and dues on the Vessel and on the Charter hire to be for Owners’ account. All taxes and dues on cargo to be for Charterers’ account.
61. | U.S. Compliance |
Owners represent and guarantee that Owners and the Vessel are not in any way directly owned, controlled by or related to any U.S. sanctioned countries.
62. | Compliance with the Bribery Act, 2010 (England and Wales) and the US Foreign Corrupt Practices Act (FCPA) |
a) | Owners represent, warrant and covenant that it and its Representatives comply with the Bribery Act, 2010 (England and Wales) and the FCPA (“Applicable Corruption Law”) with respect to all matters connected to this charter (“Matters”) even if the provisions of Applicable Corruption Law do not strictly apply to Owners or its Representatives because of their jurisdictional status and references in this Clause 62 to Applicable Corruption Law shall be interpreted accordingly. The remaining provisions of this Clause 62 are without prejudice to the generality of the foregoing. |
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b) | Owners represent, warrant and covenant that it and its Representatives have not offered and will not offer with respect to any Matters any advantage to any Public Official which would violate Applicable Corruption Law. |
c) | Owners represent, warrant and covenant that it and its Representatives have not offered and will not offer with respect to any Matters any advantage to any person or entity which would violate Applicable Corruption Law. |
d) | Owners represent, warrant and covenant that it and its Representatives will not, directly or through any other person or entity, request any service, action or inaction by any other person or entity with respect to any Matters which would violate Applicable Corruption Law. |
e) | Owners represent, warrant and covenant that it and its Representatives will not, directly or indirectly with respect to any Matters request an advantage which would violate the Applicable Corruption Law. |
f) | Owners represent warrant and covenant that it will provide Charterers with a Certificate of Compliance no later than 31 January of each calendar year during the term of this Charter. |
g) | Owners represent, warrant and covenant that it and its Affiliates: |
(i) | maintain accurate and complete Books and Records and internal controls sufficient and of such quality, consistent with accounting principles and practices contained in International Financial Reporting Standards so as to permit an audit of its Books and Records by an internationally recognised firm of public or chartered accountants or their equivalent, and which would, following that audit, result in an unqualified audit opinion and will not maintain any off the book accounts or record any non existent expenditure nor enter liabilities with incorrect identification of their object or use false documents; |
(ii) | will provide all reasonable assistance to permit the Charterers’ accountant or internationally recognised firm of public or chartered accountants or other advisors (‘Auditor’) to conduct an audit of its Books and Records (including without limitation providing copies of documentation when requested) during normal business hours at Owners’ principal place of business for the purpose of confirming compliance with this Clause 61; |
(iii) | will permit Auditor reasonable access to its properties, officers, representatives, agents and employees in order to make reasonable inspection and examination of the business operations and affairs of the Owners; and |
(iv) | without prejudice to the generality of the foregoing, use its reasonable endeavours to procure for Auditor access to any third party, or any third party’s properties, |
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employees and Books and Records, where such access is reasonably necessary for the purposes of the audit. For the avoidance of doubt, access includes providing copies of relevant third party documentation where requested. |
(h) | Owners represent, warrant and covenant that it and its Representatives have been given adequate training and informed of their obligations in relation to Applicable Corruption Law and have in place adequate policies and procedures in relation to business ethics and conduct and the reporting, investigating and acting upon of suspected violations of Applicable Corruption Law. |
(i) | (a) | Owners represent, warrant and covenant that where there exists a relationship between, on the one hand, (i) it or any of its Representatives, or (ii) any person who is a Connected Person of any of its Representatives, and any Public Official on the other, and such relationship may or may reasonably be considered to have an influence on the Owners’ performance of its obligations hereunder or the performance by the Public Official of his/her duties, that the fact and nature of such relationship has been notified to the Charterers in writing prior to this Charter being entered into. |
(b) | Owners represent, warrant and covenant that it will promptly take all such steps as may be necessary and/or reasonably requested by Charterers which are designed to ensure that such relationship does not give rise to any conflict of interest or any breach of Applicable Corruption Law. |
(j) | Owners represent, warrant and covenant that to the best of its knowledge and belief neither it nor any of its Representatives or Service Providers: |
(i) | appears on any list of entities or individuals debarred from tendering or participating in any project funded by the World Bank, European Bank of Reconstruction and Development or any other multi-lateral or bi-lateral aid agency; |
(ii) | has at any time been found by a court in any jurisdiction to have breached Applicable Corruption Law; |
(iii) | has at any time been investigated or is being investigated or is involved in an investigation (as a witness or possible suspect) or been suspected in any jurisdiction of having engaged in any conduct with respect to Matters which would constitute a breach of Applicable Corruption Law. |
(k) | Owners represent, warrant and covenant that if at any time it becomes aware that any of the circumstances set out in Clauses 62.9 and 62.10 are not as it has confirmed it will notify Charterers immediately in writing and will promptly take all such steps as may be necessary and/or requested by the Charterers to ensure minimum adverse effect on the Charterers’ reputation or on this Charter. |
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(l) | Owners represent, warrant and covenant that it will, if requested in writing by the Charterers, promptly: |
(i) | provide any information which the Charterers may reasonably require in order to monitor its compliance with the warranties, covenant and/or representations contained in this Clause 62; and |
(ii) | provide, where available, documentation evidencing such compliance. |
(m) | Without prejudice to any other express remedies referred to elsewhere in this Charter or any rights or remedies available at law or in equity, in the event of a breach of this Clause 62 by Owners, Charterers have the right to take whatever action it deems appropriate including the right to terminate this Charter with immediate effect and will not be liable to pay any compensation to Owners for loss of profits or loss of goodwill or for any other loss or damage howsoever arising as a result of a termination under this Clause 62(m), |
(n) | Where this Charter is terminated in accordance with Clause 62(m), Owners will cease to be entitled to receive any payments which are due or may otherwise be due under the terms of this Charter. Where this Charter is terminated in accordance with Clause 62(m) Charterers will not be obliged to make any payments which are due or may otherwise be due under the terms of this Charter where to do so would violate any law or regulation to which Charterers are subject. |
(o) | Owners indemnify and hold Charterers and its Affiliates harmless from and against any and all claims, damages, liabilities, losses, penalties, fees, costs and expenses arising from or related to, any breach of this Clause 62. |
(p) | The rights and obligations contained in Clauses 62(g), 62(k), 62(1), 62(m), 62(n) and 62(o) will survive the termination or expiration of this Charter, |
(q) | Owners shall require its Service Providers to act in accordance with the requirements of this Clause 62 and Applicable Corruption Law. |
(r) | Owners will operate a program of regular assessments of its Service Providers involved in Matters to verify that they are complying with their obligations as set out in Clause 62(q) above and retain the right to have an independent auditor review and verify their compliance. |
(s) | Owners will procure that provisions no less onerous than those set out in this Clause 62 are incorporated in all documentation issued to, and contracts entered into, with their Service Providers involved in Matters. |
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63. | Owners’ Defaults |
(a) | Each of the following events shall be deemed to be a breach of this Charter and an “ Owners’ Default ” for the purposes of this Charter: |
i) | if any licence, approval, consent, authorisation or registration at any time necessary for Owners to comply with their obligations under this Charter, or in connection with the ownership and operation of the Vessel, is revoked, withheld or expires or is modified so as to prevent or materially delay the lawful performance by Owners of their obligations hereunder (unless remedied, if capable of remedy, within thirty (30) days); |
ii) | if an order is made, or an effective resolution passed, for the compulsory or voluntary winding-up or dissolution of Owners (other than for the purposes of amalgamation or reconstruction in respect of which the prior written consent of Charterers has been obtained) or if Owners suspend payment of or are unable to or admit inability to pay, their debts as they fall due or make any special arrangement or composition with their creditors generally or any class of their creditors; |
iii) | if an administrator, administrative receiver, receiver or trustee or similar official is appointed in respect of the whole, or a material part, of the property, assets or undertaking of Owners, and such appointment is not discharged within thirty (30) days of the date of such appointment (unless such appointment is being contested by Owners in good faith by appropriate proceedings) or if Owners apply for, or consent to, any such appointment; |
iv) | if any event occurs in relation to Owners in any jurisdiction which has an effect equivalent to any of the events specified in ii) and 0 above; |
v) | if an encumbrancer takes possession of, or distress or execution is levied upon, the whole, or a material part, of the property, assets or undertaking of Owners and the same shall not be discharged within thirty (30) days of the date of commencement of such action unless such possession or levy is being contested by Owners in good faith by appropriate proceedings; |
vi) | if Owners cease to carry on their business, or dispose of the whole, or a material part, of their property, assets or undertaking without Charterers’ consent; |
vii) | if Owners cease to be a corporation duly registered in good standing in its place of incorporation without Charterers’ consent; |
viii) | if Owners shall place or permit to exist on the Vessel (A) any mortgage other than a mortgage in respect of which a quiet enjoyment undertaking has been provided in a form approved by Charterers, such approval not to be unreasonably withheld (B) |
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any charge, pledge, consensual security interest, lien or encumbrance of any kind (not occasioned by any act, omission or default of Charterers) for a period of more than thirty (30) days cumulative in one year, other than liens for crew’s wages or salvage or otherwise arising in the ordinary course of trading which are regularly settled or secured; | ||
ix) | if it becomes impossible or unlawful for Owners to fulfil any of their obligations under this Charter, or for Charterers to exercise any of the rights vested in them by this Charter, or this Charter for any reason becomes invalid or unenforceable or ceases to be in full force and effect or Owners repudiate this Charter; |
x) | if the Vessel is arrested as a consequence of any claim or event other than a claim arising by, through or under acts, deeds or omission of Charterers and is not released for any reason from such arrest within thirty (30) days after being arrested; |
xi) | if Owners are in material breach of any other provision of this Charter with serious and adverse consequences to Charterers; and Owners have failed to cure such breach or taken all necessary steps within a reasonable period of time but in no event longer than thirty (30) days after notice of such breach from Charterers (unless such breach has a shorter cure period hereunder, in which case, the shorter period shall apply). |
xii) | if Owners fail to maintain any of the insurances they are obliged to maintain and such failure is not rectified within fourteen (14) days of receipt of notice from the Charterers; |
(b) |
Upon the occurrence of an Owners’ Default and at any time thereafter for so long as
such default is continuing, and whether or not the Charter has commenced, Charterers shall be entitled to terminate this Charter by giving notice in writing to Owners. This Clause 61(b) is without prejudice to any other rights Charterers may have hereunder or at common law. |
64. | Charterers’ Defaults |
(a) | Each of the following events shall be deemed to be a breach of this Charter and a “Charterers’ Default” for the purposes of this Charter: |
i) | if an order is made, or an effective resolution passed, for the compulsory or voluntary winding-up or dissolution of Charterers (other than for the purposes of amalgamation or reconstruction in respect of which the prior written consent of Owners has been obtained) or if Charterers suspend payment of, or are unable to or admit inability to pay, their debts as they fall due or make any special arrangement or composition with their creditors generally or any class of their creditors; |
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ii) | if an administrator, administrative receiver, receiver or trustee or similar official is appointed in respect of the whole, or a material part, of the property, assets or undertaking of Charterers, and such appointment is not discharged within thirty (30) days of the date of such appointment (unless such appointment is being contested by Charterers in good faith by appropriate proceedings) or if Charterers apply for, or consent to, any such appointment; |
iii) | if any event occurs in relation to Charterers in any jurisdiction which has an effect equivalent to any of the events specified in (ii) and (iii) above; |
iv) | if an encumbrancer takes possession of, or distress or execution is levied upon, the whole, or a material part, of the property, assets or undertaking of Charterers and the same shall not be discharged within thirty (30) days of the date of commencement of such action unless such possession or levy is being contested by Charterers in good faith by appropriate proceedings; |
v) | if Charterers cease to carry on their business, or dispose of the whole, or a material part, of their property assets or undertaking without Owners’ consent; |
vi) | if Charterers cease to be a corporation duly registered in good standing in its place of incorporation without Owners’ consent; |
vii) | if it becomes impossible or unlawful for Charterers to fulfil any of their obligations under this Charter or for Owners to exercise any of the rights vested in them by this Charter, or this Charter for any reason becomes invalid or unenforceable or ceases to be in full force and effect or Charterers repudiate this Charter; |
(b) | Upon the occurrence of a Charterers’ Default and at any time thereafter for so long as such default is continuing, and whether or not the Charter has commenced, Owners shall be entitled to terminate this Charter by giving notice in writing to Charterers. This Clause 63(b) is without prejudice to any other rights Owners may have hereunder or at common law. |
65. | Quiet Enjoyment |
Owners acknowledge that Charterers shall be entitled to the quiet enjoyment and use of the Vessel under this Charter throughout the charter period without interruption. Except as expressly permitted by this Charter, the Owners shall not (either prior to or after delivery of the Vessel hereunder) effect or permit to exist any mortgage, lien, claim or encumbrance or security interest of whatsoever nature on the Vessel without the prior consent of the Charterers. The Charterers hereby consent to the Owners executing a mortgage of the Vessel, as security for the financing of the Vessel, in favour of (i) an international bank or other financial institution, or (ii) a controlled affiliate of an international bank or other financial institution, provided that, in either case, the identity of such party has been approved by the Charterers (such approval not to be unreasonably withheld). It is a condition of the Owners’ consent to any such mortgage that the Owners shall
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procure that the relevant mortgagee executes a letter of quiet enjoyment in favour of the Charterers, which shall be substantially in the form included in Appendix G. Owners shall permit Charterers to review the audited financial accounts of Owners within 2 months following publication.
66. | Rights of Third Parties |
No provision of this Charter shall, under the Contracts (Rights of Third Parties) Act 1999, confer any benefit on, nor be enforceable by, any person who is not a party to this Charter.
67. | Consequential Losses |
Without prejudice to any other provision of this Charter, neither Charterers nor Owners (or their Vessel) nor any of the affiliated companies or shareholders of either of them shall be liable (by reason of negligence, breach of contract or otherwise) for loss of business opportunity, earnings, income or profit whether directly or indirectly and whether by the parties hereto or others arising out of, or in any way connected to, the performance or non-performance of this Charter (“Consequential Loss”). For the avoidance of doubt, Consequential Loss within the meaning of this Clause shall not include any hire payable (or which would but for breach have been payable) under this Charter.
68. | Health, Safety, Security, Environment Reporting Requirements |
(a) | If requested by the Charterers and mutually agreed by both parties, Owners may participate in an emergency response exercise; |
(b) | For any incident, Owners shall notify Charterers as per the Charterers’ Instructions. Charterers may be invited to participate in any subsequent incident investigation; |
(c) | Owners shall ensure a Behavioural Based Safety (BBS) system or equivalent and/or a near miss reporting system is implemented. Owners shall share the observations and lessons learned with the Charterers as they occur, but no less than on a monthly basis; |
(d) | Owners shall submit to Charterers a monthly written report, within five (5) days of the end of each month that the Vessel is on hire, detailing all monthly reporting requirements, in accordance with the “ HSSE Monthly Report ” detailed in the Charterers’ Instructions; |
(e) | Owners shall maintain HSSE records sufficient to demonstrate compliance with the requirements of the SMS and provide Charterers the right to confirm compliance with HSSE requirements by audit of Owners, including but not limited to the tight to audit and review Owners’ facilities, services and/or performance of its activities as mutually agreed by the Owners; |
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(f) | Owners shall document and report immediately to Charterers any incidents of environmental damage, any unforeseen activity or event which could have led to environmental damage, a spillage of oil on deck or to the water, release or venting of hydrocarbons, breaches or potential breaches of environmental regulations or complaint from local groups, organisations including enforcement agencies or individuals. |
(g) | Owners shall commit to demonstrating leadership in all aspects of HSSE through open dialogue and active participation in relevant forums. |
(h) | The company owning or operating the Vessel shall be a member of SIGTTO. |
69. | Ballast Water Treatment (BWT) System |
If international regulations require that a BWT system to be fitted during the Firm Period, or the Option Charter Period (s) (if such option is exercised by the Charterers); then the Owners and Charterers shall mutually agree on the BWT system to be installed and Charterers shall pay the direct costs for such BWT system at the time that such system is fitted. The vessel shall not be off-hire during this time. Costs for Owners’ personnel to inspect the fitting shall be borne by Owners.
70. | Counterparts |
This Agreement may be executed in any number of counterparts each of which, when so executed, shall be deemed to be an original but such counterparts shall together constitute but one and the same instrument.
Appendix A: | List of Primary Terminals. |
Appendix B: | Gas Form C for the Vessel |
Appendix C: | Detailed Performance Criteria, as attached, shall be incorporated herein. |
Appendix D: | Crew Matrix |
Appendix E: | BG Business Principles |
Appendix F: | Norwegian Sale Form |
Appendix G: | Letter of Quiet Enjoyment |
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Agreed and signed by Owners | Agreed and signed by Charterers | |
/s/ Graham Westgarth | /s/ Hector Armando Rosales-Macedo | |
Name: Graham Westgarth | Name: Hector Armando Rosales-Macedo | |
Title: Director | Title: Attorney-in-fact | |
Date: 4 April 2014 | Date: 4 April 2014 |
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APPENDIX A – Terminal Compatibility List
Load | Country | Status | ||
Gladstone | Australia | *2 | ||
Withnell Bay | Australia | 1 | ||
Pluto | Australia | l | ||
Idku | Egypt | l | ||
Damietta | Egypt | 1 | ||
Punta Europa | Equatorial Guinea | 1 |
Discharge | Country | Status | ||
Bahia Blanca FSRU | Argentina | 1 | ||
Zeebrugge | Belgium | 1 | ||
Pecem | Brazil | 1 | ||
Guanabara Bay | Brazil | 1 | ||
Canaport | Canada | 1 | ||
Mejillones | Chile | 1 | ||
Quintero | Chile | 1 | ||
Dalian | China | 1 | ||
Fujian | China | 1 | ||
Guangdong | China | 1 | ||
Jiangsu | China | 1 | ||
Shanghai | China | 1 | ||
Zhejiang | China | 1 | ||
Zhuhai | China | *2 | ||
Montoir | France | 1 | ||
Revithoussa | Greece | 1 | ||
Dahej | India | 1 | ||
Hazira | India | 1 | ||
Chita | Japan | 1 | ||
Futtsu | Japan | 1 | ||
Himeji | Japan | 1 | ||
Senboku II | Japan | 1 | ||
Kawagoe | Japan | 1 | ||
Sodeshi | Japan | 1 | ||
Niigata | Japan | 1 | ||
Tobata | Japan | 1 | ||
Hitachi | Japan | *2 | ||
Joetsu Thermal Power | Japan | 1 | ||
INPEX Naoetsu | Japan | 1A | ||
Negishi | Japan | 1 | ||
Yanai | Japan | 1 | ||
Sodegaura | Japan | 1 | ||
Ohgishima | Japan | 1 | ||
Oita | Japan | 1 | ||
Sakai | Japan | 1 |
Load | Country | Status | ||
Bonny Island (Jetty 1,2) | Nigeria | 1 | ||
Snohvit | Norway | *4 | ||
Point Fortin | Trinidad | l | ||
Das Island | UAE | l | ||
Lake Charles | USA | 1 | ||
Sabine Pass (Cheniere)* | USA | 1 |
Discharge | Country | Status | ||
Incheon | Korea | 1 | ||
Pyeongtack | Korea | 1 | ||
Tongyeong | Korea | 1 | ||
Gwang Yang | Korea | 1 | ||
Mina Al Ahmadi | Kuwait | 1 | ||
Bintulu | Malaysia | 1 | ||
Altamira | Mexico | 1 | ||
Costa Azul | Mexico | 1 | ||
Sines | Portugal | 1 | ||
Ras Laffan | Qatar | 1 | ||
Singapore | Singapore | 1 | ||
Barcelona | Spain | 1 | ||
Bilbao | Spain | 1 | ||
Cartagena | Spain | 1 | ||
Huelva | Spain | 1 | ||
Sagunto | Spain | 1 | ||
Map Ta Phut | Thailand | 1 | ||
Rotterdam | The Netherlands | 1 | ||
Yung-An | Taiwan | 1 | ||
Taichung | Taiwan | 1 | ||
Aliaga | Turkey | 1 | ||
Marmara Ereglisi | Turkey | *3 | ||
Jebel Ali FSRU | UAE | 1 | ||
Elba Island | USA | 1 | ||
Cameron | USA | 1 | ||
Pascagoula | USA | 1 | ||
Freeport | USA | 1 | ||
Isle of Grain | UK | 1 | ||
Dragon | UK | 1 |
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1 Primary Terminals
* 1 A - Primary Terminals - Pending
Signifies terminals where some terminal data is not complete, but which will be treated as Primary Terminals so long as, in order for the Vessel to be accepted by the terminal, no changes are required to the principal dimensions of the Vessel, including: length, breadth, draft, displacement, location of cargo manifolds and lay-out of cargo manifolds (pipe size, layout of liquid and vapour lines, manifold dimensions, etc). Owners and Charterers to cooperate to complete any missing terminal data and to achieve Terminal acceptance and any minor changes to the Vessel (gangway landing areas/rails, etc.) will be the responsibility of the Owners.
*2 Terminals Under Construction
Signifies terminals that are under construction at the date of signing the Charter party and are not Primary Terminals (“Terminals Under Construction”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Terminals Under Construction are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Terminal Under Construction. Once Owners are reasonably satisfied that a Terminal Under Construction is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Terminal Under Construction has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Terminal Under Construction to the list of Primary Terminals.
*3 Terminals With Compatibility Issues
Signifies terminals which have identified compatibility issues and are not Primary Terminals. However, Owners agree to allow the Vessel to call at such terminals provided: (i) they are reasonably satisfied that there is sufficient compatibility to allow safe navigation, loading and/or discharge; and (ii) the terminal have confirmed to Owners their acceptance of the Vessel to call, and carry out cargo operations at their terminal.
*4 Terminals Pending Further Data
Signifies terminals in respect of which, at the date hereof, there is insufficient information available in order to allow Owners to assess whether the terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge (“Pending Terminals”). Owners and Charterers agree to work together in good faith in order to obtain: (i) the necessary relevant information to enable Owners to reasonably assess whether each of the Pending Terminals are in all material respects compatible with the Vessel; and (ii) acceptance of the Vessel by the Pending Terminals. Once Owners are reasonably satisfied that a Pending Terminal is in all material respects compatible with the Vessel so as to allow safe navigation, loading and/or discharge, and the Pending Terminal has confirmed to Owners that they are prepared to accept the vessel to call and carry out cargo operations at their terminal (once completed), Owners agree to add such Pending Terminals to the list of Primary Terminals.
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GAS FORM C DESCRIPTION OF
THE VESSEL
METHANE JANE ELIZABETH
SHI – HULL 1554
1. | GENERAL | ||||
1.1 | Vessel Name and Hull Number | : | Methane Jane Elizabeth | ||
SHI - HN 1554 | |||||
1.2 | Builder and Yard | : | Samsung Heavy Industries | ||
Geoje Island, Korea | |||||
1.3 | Year Built | : | 2006 | ||
1.4 | Containment System | : | Membrane Type GTT Mark III | ||
1.5 | Country of Registry | : | Bermuda | ||
1.6 | Port of registration | : | Hamilton | ||
1.7 | Classification Society | : | American Bureau of Shipping | ||
HA1
|
|||||
2. | DIMENSIONS, TONNAGE | ||||
2.1 | Length Overall | : | 283.062 metres | ||
2.2 | Length between Perpendiculars | : | 270.0 metres | ||
2.3 | Beam (moulded) | : | 43.40 metres | ||
2.4 | Depth to upper deck, moulded | : | 26.0 metres | ||
2.5 | Scantling Draft, moulded (in seawater of specific gravity of 1.025) | : | 12.4 metres | ||
2.6 | Design Draft, moulded (in seawater of specific gravity of 1.025) | : | 11.4 metres | ||
2.7 | Summer Draft (extreme) | : | 12.025 metres | ||
2.8 | Air Draft | : | Maximum 40.26m with radar mast in lowered position and about 46.26m with radar mast in raised position. Ballast draught 9,74m | ||
3. | TONNAGE | ||||
3.1 | Deadweight at Design Draft, extreme | : | 72,932.7 metric tonnes | ||
at Summer Draft, extreme | : | 78,984.3 metric tonnes | |||
3.2 | Lightweight | : | 29,602.0 metric tonnes | ||
3.3 | Displacement at Summer Freeboard (8.751m) | : | 108,586.3 metric tonnes | ||
3.4 | Gross Tonnage (International) | : | 95,753 | ||
3.5 | Net Register Tonnage | : | 28,726 | ||
3.6 | Suez Canal Gross Tonnage | : | 99,138.45 | ||
3.7 | Suez Canal Net Tonnage | : | 86,082.93 |
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4. | MACHINERY | |||
4.1
|
Propelling Machinery,
Type and Make |
:
|
Steam Turbine, Reversible Geared, Cross Compound, Steam Driven (UA-400) / Kawasaki Heavy Industries Limited |
|
Maximum Continuous Rating | : | 39,500 PS @ 90 RPM | ||
Normal Service Rating | : | 35,550 PS @ 86.9 RPM | ||
4.2 | Main Boilers | |||
Type, Make and Number |
:
|
Two Water tube, forced draft, marine boiler, (UME 65/52) Kawasaki Heavy Industries Limited |
||
Maximum Evaporation |
:
|
Total 65 Te/h, each
(incl. 4 Te/h desuperheated steam) |
||
4.3
|
Electrical Generating Plan
Type, Maximum Output per |
:
|
Two (2) sets of turbo generator, 4,312.5 kVA (3,450 kW), 6,600 VAC, 60 Hz, 3
Phase / Mitsubishi Heavy Industries
kVA (3,450 kW), 6,600 VAC, 60 Hz, 3
Phase / Wärtsilä
1,062 kVA (850 kW), 450V AC, 60 Hz, 3 Phase / STX--Cummins |
|
4.4 | Bow Thruster | : | Controllable Pitch Propeller (C.P.P.) | |
Electric motor | : | 2,500 kW, 6,600V | ||
No of blades | : | Four (4) (Ni-Al-Bronze) |
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No. 1 tank : 22,131.271 m 3 | No. 2 tank : 42,929.076 m 3 |
No. 3 tank : 42,909.076 m 3 | No. 4 tank : 37,703.495 m 3 |
7.8
|
The Vessel’s cargo tanks can be cooled down from ambient temperature to the loading condition in less than 10 hours (-130°C , mean temp. of cargo tanks). |
8 | CARGO LOADING AND DISCHARGE PERFORMANCE |
(a) |
The ship shall be able to load the bulk of the cargo (excluding slow starting and topping off) through two (2) liquid manifolds in approximately 12 hours at pressure of 240 kPa(G) inboard of the manifold strainer. |
|
(b) | The ship shall be able to discharge the bulk cargo through three (3) liquid manifolds in approximately 12 hours (excluding slow starting and stripping) against a backpressure of 100 MLC measured inboard of the manifold strainer with cargo tanks at mid-level. |
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16. | CARGO INSTRUMENTATION | |||||
16.1 | Liquid Level Gauge | |||||
Primary | ||||||
Type | : | Radar/Saab | ||||
Number per Tank | : | 1 | ||||
Accuracy | : | 7.5 mm | ||||
Measuring range | : | 26.52 m | ||||
Secondary | ||||||
Type | : | Float / Whessoc | ||||
Number per Tank | : | 1 | ||||
Accuracy | : | 7.5 mm | ||||
Measuring range | : | 26.52 m | ||||
16.2 | Temperature Sensor | |||||
Type | : | High Accuracy | ||||
Number per Tank | : | 5 pair | ||||
Accuracy |
:
|
+0.2°C between -165°C and -145°C, rising to +1.5°C at +50°C |
||||
Measuring range | : | -165°C to +50°C | ||||
16.3 | Pressure Sensor System | |||||
Number per Tank | : | 1 | ||||
Accuracy |
:
|
+ 1% of span with deck temperature ranging between -30°C and +60°C |
||||
Measuring range | : | 800 - 1,400 mbar | ||||
16.4 | Ship shore communication system |
:
|
Fibre optic, electrical intrinsically safe and pneumatic types |
|||
17. | NITROGEN GENERATION | |||||
17.1 | Type and Make |
: |
Membrane permeation type / Air Product AS |
|||
17.2 | Capacity | : | 2 off 100 Nm 3 /h | |||
17.3 | Pressure Tank | : | 10 bar g | |||
18. | INERT GAS GENERATION | |||||
18.1 | Type and Make |
: |
Stoichiometric combustion of fuel oil / Smit Gas System |
|||
18.2 | Capacity | : | 14,000 Nm3/h inert gas or dry air | |||
18.3 | Quality of Gas | : | Dew point -45°C at 760 mmHg | |||
O 2 | : max. 1.0% by vol. | |||||
CO | : max. 100 ppm | |||||
SOx | : max. 10 ppm | |||||
NOx | : max. 100 ppm | |||||
Soot | : Bacharach 0 | |||||
HC | : 0% | |||||
CO 2 | : max. 14% by volume | |||||
Remainder | : N 2 , H 2 , Ar | |||||
19. | GAS COMPRESSORS | |||||
19.1 | High Duty | |||||
Type and Make | : | Horizontal, single stage centrifugal / |
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Cryostar | ||||
Number and Capacity | 2 off 26,000 m3/h | |||
Discharge Pressure | 200 kPa A | |||
Suction Press and Temp | -140°C, 103 kPa A | |||
19.2 | Low Duty | |||
Type and Make |
: |
Horizontal, single stage centrifugal / Cryostar | ||
Number and Capacity | : | 2 off 8,000 m 3 /h | ||
Discharge Pressure | : | 200 kPa A | ||
Suction Press and Temp | : | -40°C, 106 kPa A | ||
20. | FORCING VAPORIZER | |||
20.1 | Capacity | : | 8,000 kg/h from -163°C to -40°C / Cryostar | |
21. | DECK MACHINERY | |||
21.1 | Winches | |||
Number, Position, Type
(incl. windlass) |
:
|
4 for’d (2 combined with windlass) 5 aft, Electro-hydraulic self contained power pack, non auto-tension type mooring winches & windlasses / Kochs |
||
21.2 | Holding Power of Brake |
: |
80% of mooring line MBL (design) set at 60% |
|
21.4
|
Size of Wires and whether fitted with Tails State Length, Material |
: |
Twenty-two (22) sets including two (2) spares, each 200 m long and 44 mm diameter of spectra rope or equivalent with each 11 / 22 m long nylon / polyester tails. |
|
21.5 | Derrick, cranes, etc. | |||
Type and Capacity |
:
|
Electro-hydraulic driven single jib
crane
|
||
22. | NAVIGATION AND RADIO | |||
22.1 | Navigation Aids and Radio Equipment |
:
|
VHF radio telephones
GMDSS distress message controller Display units for radars (X and S-bands), ECDIS and conning display Auto pilot operating unit CCTV control station for mooring area camera and night vision camera UHF base station DGPS navigator Echo sounder recorder Master electric clock system Speed log main unit Navtex receiver Signal light control panel Inmarsat-F (Fleet 77) Inmarsat-C |
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23. | OTHER | ||||
23.1 | Bilge Oily Water Monitor | : | 1 X m3/h (15 ppm) | ||
23.2 | Incinerator |
:
|
1 X 500,000 kcal/h for solid garbage waste and sludge oil having flash point above 60°C |
||
23.3 | Sewage Treatment Plant |
: |
One (1) biological type for 45 persons |
||
23.4 |
CCTV system with 11 cameras and monitors in wheelhouse, engine control room and cargo control room; |
||||
23.5 | Loading computer including damage stability calculations | ||||
23.6 | Shipboard management system | ||||
23.7 | Public address system | ||||
23.8 |
UHF onboard radio communication with 2 base stations, l base repeater station and twelve portable sets |
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APPENDIX C – Detailed Performance Criteria
CONTENTS
Article 1. | Speed Warranties | |
Article 2. | Timeliness | |
Article 3. | Guaranteed Daily Fuel Consumption | |
Article 4. | Definitions for Fuel Consumption Calculations | |
Article 5. | Basis of Calculation for Fuel Consumption | |
Article 6. | Actual Fuel Consumption on a Voyage | |
Article 7. | Guaranteed Maximum Boil-Off | |
Article 8. | Boil-Off Calculations | |
Article 9. | Spray Cooling, Forced Vaporisation and use of Boil-Off | |
Article 10. | Provisions for Gauging | |
Article 11. | Underwater Cleaning / Waiting at Anchorage | |
Article 12. | Interpretation | |
Article 13. | Weather Limits for Performance Warranties | |
Article 14 | Claim Validity Period |
1. | Speed Warranties |
(a) | Owners guarantee that the Vessel is capable of steaming and, subject to Article 1(b), shall steam at the Laden Service Speed or the Ballast Service Speed as set out in Clause 26(a) and (b) as applicable (the “ Service Speed ” ). |
(b) | Charterers may order the Vessel to steam at the Service Speed or at any lesser average speed but not less than the Minimum Speed as set out in Clause 26(c) and not at a greater average speed, except with Owners’ consent, which shall not be unreasonably withheld. For the avoidance of doubt, it is agreed that Owners may decline orders to steam at any lesser average speed than the Minimum Speed or at any greater average speed than the Service Speed for operational reasons. |
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2. | Timeliness |
(a) | Prior to each voyage Charterers may, subject to Article 1(b), instruct the Vessel to proceed so as to arrive at the pilot boarding station at each port at a given date and time (the “ Scheduled Arrival Time ” or “ SAT ” ). Provided however: |
(i) | In the event that Charterers fail to provide a SAT to Owners the SAT shall be deemed to be the estimated arrival time of the Vessel assuming the Vessel steams at the Service Speed by the shortest safe route to the named port measured from pilot station to pilot station (a “ Sea Passage ” ) (or the route specified by Charterers, if different) from the time Charterers instruct the Vessel to proceed. |
(ii) | The SAT shall in any event not be earlier than the estimated arrival time calculated in accordance with Article 2(a)(i). |
(iii) | Subject to Article 1(b), Charterers may amend the SAT from time to time during or prior to each voyage to accommodate changes in circumstances concerning the voyage (the “ Amended SAT ” ). |
(iv) | The speed at which the Vessel needs to steam in order to meet the SAT or the Amended SAT or any permissible speed ordered by the Charterers shall be a “ Guaranteed Speed ” . |
(b) | Charterers shall compare the actual time of arrival of the Vessel at the pilot station at each port with the SAT save that if the SAT was amended solely for reasons not attributable to any failure in performance by the Vessel, then such comparison shall be made with the Amended SAT. |
(c) | If the Vessel arrives at the pilot station at the arrival port not later than ***** after the SAT or Amended SAT, where applicable, the Vessel shall be deemed to have arrived “ On Time ” . If the Vessel arrives at the pilot station more than ***** after the SAT, or Amended SAT where applicable, the Vessel shall be deemed to have arrived “ Late ” . |
(d) | Subject to Article 2(e) and (f), Charterers shall be entitled to make a deduction from hire in respect of any period by which the Vessel arrives Late. |
(e) | Notwithstanding the foregoing but subject to Article 2(f), Charterers shall not be entitled to make any deduction from hire if the Vessel arrives Late to the extent that such late arrival is caused by one or more of the following during the voyage and is not indirectly or directly due to Owners’ negligence: |
(i) | the incidence of bad weather, being any day in which the Vessel has to proceed in wind force in excess of Beaufort Force 5 for more than ***** hours noon to noon, or |
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(ii) | poor visibility, or |
(iii) | congested waters, or |
(iv) | alterations in speed or course to avoid areas of bad weather, or |
(v) | any period spent at a waiting area following arrival, or |
(vi) | the saving of life or (with Charterers’ consent) property, or |
(vii) | time lost waiting for or as a result of a canal transit, or |
(viii) | time taken for bunkering during a sea passage in accordance with Charterers’ instructions, or |
(ix) | time spent steaming at a reduced speed by mandatory order of regulatory bodies having jurisdiction over the Vessel, or |
(x) | time spent steaming at reduced speed as a result of fouling caused by extraordinary delays in port beyond Owners’ control or as a result of lay-up or usage as storage vessel (if mutually agreed), or |
(xi) | time lost for safe navigation and navigating restricted areas |
(xii) | time lost in order to observe recommendations as to traffic separation and routing as issued by the International Maritime Organisation, or any state or agencies whose waters the Vessel may pass. |
(Article 2(e)(i)(ii)(iii)(iv)(v),(vi)(vii),(viii),(ix),(x),(xi) and (xii) being known as “ Restricted Periods ” ), or
(xii) | any period when the Vessel is off-hire at sea on any individual voyage. The master shall record in his daily noon report the time lost in the previous 24 hours due to any of the matters referred to in this Article 2(e). |
(f) | If the Vessel arrives Late the following calculation shall be made to assess the period in respect of which Charterers shall be entitled to deduct hire. The speed of the Vessel shall be calculated over the Sea Passage excluding all Restricted Periods (the “ Achieved Speed ” ). If the Achieved Speed equals or exceeds the Guaranteed Speed Owners shall be deemed to have met the speed warranties. If the Achieved Speed is less than the Guaranteed Speed Charterers shall apply the Achieved Speed to the total Sea Passage and the time at which the Vessel would have arrived if steaming at the Achieved Speed shall be the Deemed Arrival Time. Charterers shall be entitled to deduct hire to the extent to which the Deemed Arrival Time exceeds the SAT by more than ***** hours. |
(g) | The relationship between this Article 2 and Clause 22 shall be as follows: |
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(i) | Periods of off-hire under Clause 22 shall be excluded for all purposes from calculations under this Article 2. |
(ii) | Article 2 shall apply to deal with lateness to which Clause 22 does not apply pursuant to Clause 22(b). |
3. | Guaranteed Daily Fuel Consumption |
(a) | Owners guarantee that subject to the other provisions of Appendix C, the maximum daily fuel consumption of the Vessel for all purposes shall not exceed the quantities tabulated in Clause 26(e) and, where applicable shall be prorated between the speeds shown. |
(b) | The average speed in knots on any Voyage (as defined in Article 4) shall be calculated by reference to the observed distance steamed and the duration of the Voyage, but excluding from the calculation of average speed the duration of all off-hire periods and distance covered in such periods and excluding the distance covered during any deviation which is not an off-hire period because the Vessel arrives On Time. |
4. | Definitions for Fuel Consumption |
(a) | In this Appendix C: |
(i) | “ EOP ” means the time the Vessel records End of Passage on arrival after any voyage. |
(ii) | “ FAOP ” means the time the Vessel proceeds Full Away On Passage from her departure point on a voyage. |
(iii) | “ fuel ” refers collectively to its two components, fuel oil and Boil-Off, measured in tonnes |
(b) | For the purpose of fuel consumption calculations a voyage shall, where applicable, be divided into separate segments (each a “ Voyage ” ). A Voyage shall be deemed to have started either: |
(i) | at FAOP or |
(ii) | immediately after an off-hire period, or |
(iii) | at the time the Vessel alters speed to comply with an amended SAT or otherwise pursuant to Charterers’ orders as the case may be. |
(c) | A Voyage shall be deemed to have ended either: |
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(i) | at EOP, or |
(ii) | immediately before an off-hire period, or |
(iii) | at the time the Vessel alters speed to comply with an amended SAT or otherwise pursuant to Charterers’ orders as the case may be. |
5. | Basis of Calculation for Fuel Consumption |
(a) | For each Voyage the guaranteed fuel consumption shall be calculated by multiplying the maximum daily consumption as determined pursuant to Article 3 by the duration of the Voyage calculated on the assumption that the Vessel steamed at the Guaranteed Speed. In calculating both the guaranteed fuel consumption and the actual fuel consumption Restricted Periods pursuant to Article 2(e) shall be excluded. Subject as hereinafter provided, there shall be a saving of fuel for that Voyage equal to the amount by which the guaranteed fuel consumption exceeds the actual fuel consumption and an excess consumption for that Voyage equal to the amount by which the actual fuel consumption exceeds the guaranteed fuel consumption. Such saving or excess shall be adjusted to take into account the Restricted Periods by dividing such saving or excess by the number of miles over which the fuel consumption has been calculated and multiplying by the same number of miles plus the miles steamed during the Restricted Periods in order to establish the total saving or excess in fuel consumption for the Voyage. |
(b) | If on any Voyage the Vessel has to steam faster than the Service Speed or slower than the Minimum Speed pursuant to Charterers’ orders, or in order to achieve the SAT (provided this is not attributable to any failure of performance by the Vessel), the Vessel shall be deemed to have complied with the fuel consumption guarantees for the duration of such Voyage. |
(c) | Owners’ warranties relating to speed and fuel consumption shall not apply to the period between the end of one Voyage and the start of the next Voyage as described in Article 4. |
(d) | As soon as practicable after receipt of the necessary voyage returns, Charterers shall furnish Owners with their calculations determining fuel consumption on each Voyage. |
(e) | At the conclusion of the charter period or annually (whichever occurs first) (the “ Performance Period ” ), the quantities of excess fuel used and the quantities of fuel saved on all voyages in the Performance Period shall each be added up. The total of fuel saved for the Performance Period shall then be subtracted from the total of excess fuel used for the Performance Period and if the balance is positive Charterers shall deduct from hire due under Clause 11 an amount calculated by multiplying the net excess quantity of fuel consumed for the Performance Period by the weighted average price paid by the Charterers for fuel oil for the Vessel over the Performance Period in question. If the balance is zero or negative, Owners shall be deemed to have complied with their Fuel consumption obligations for the Performance Period. |
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6. | Actual Fuel Consumption on a Voyage |
(a) | The actual fuel consumption on a Voyage shall, subject to Article 6(b), be the sum of, |
(i) | the fuel oil consumed during the Voyage (expressed in tonnes ) and excluding any fuel oil used in any off-hire period on that voyage; and |
(ii) | the fuel equivalent of the total volume of cargo lost as Boil-Off during the Voyage (expressed in tonnes of Fuel Oil Equivalent) excluding any Boil-Off in any off-hire period on that voyage and excluding any Boil-Off in excess of guaranteed maximum Boil-Off under the provisions of Article 8, except the excess that is a result of Charterers’ orders as per Article 7(b). |
(b) | For the purpose of this Article 6 the Fuel Oil Equivalent of the LNG lost as Boil-Off which is available as fuel during the voyage shall be assumed to be the total volumetric loss of the cargo, measured in cubic meters, as determined from the difference between gaugings at the loading and discharging ports (in accordance with Article 9), pro rated for the difference between the on hire voyage and gauging times and multiplied by the Fuel Oil Equivalent factor set out in Clause 26(f). |
7. | Guaranteed Maximum Boil-Off |
(a) | Owners guarantee that Boil-Off shall not exceed: |
(i) | the maximum laden Boil-Off percentage stated in Clause 26(g); and |
(ii) | the maximum ballast Boil-Off percentage stated in Clause 26(h). |
(b) | If Charterers give orders that require the temperature or vapour pressure of a cargo to fall during a laden sea passage and that order is complied with, the Boil-Off guarantee shall be deemed to have been complied with on that sea passage. |
8. | Boil-Off Calculations |
(a) | The Boil-Off excess or saving on any sea passage shall be calculated by comparing the guaranteed Boil-Off for the sea passage (i.e. the daily guaranteed maximum Boil-Off multiplied by the time between gaugings) with the actual Boil-Off. |
(b) | The actual amount of Boil-Off on a sea passage shall be calculated by subtracting the volume of LNG contained in the Vessel’s tanks at gauging after the sea passage from the volume therein at gauging before the sea passage. |
(c) | If the Vessel was off-hire during any sea passage the excess or saving shall be pro rated in the same proportion as the time on hire is to the total time between gaugings. |
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(d) | At the conclusion of the charter period or annually (whichever occurs first) (the “ Performance Period ” ), the quantities of excess Boil-Off and the quantities of Boil-Off saved on all trips in the Performance Period shall each be added up. The total Boil-Off saved for any such period shall then be subtracted from the total excess Boil-Off in the same period and if the balance is positive Charterers may deduct from hire due under Clause 11 an amount calculated by multiplying the said balance by the LNG Price or, if more than one LNG Price is applicable during the Performance Period, the arithmetical average of such LNG Prices. If the balance is zero or negative, then Owners shall be deemed to have complied with this Clause for the Performance Period. |
9. | Spray Cooling, Forced Vaporisation and use of Boil-Off |
(a) | If on any sea passage, Charterers order the Vessel to force vaporise LNG to eliminate or minimise the use of bunkers and the order is complied with, the Boil-Off guarantee shall be deemed to have been complied with on that sea passage. |
(b) | The master shall notify Charterers if he/she is of the opinion that the Vessel will not, on arrival at the loading port, be able to commence bulk loading within half an hour after cooling of the loading arms without spray cooling on the ballast sea passage. |
(c) | Without prejudice to any of Owners’ or Charterers’ obligations under this Article 9, if Owners intend to order spray cooling at any time during the charter period, Owners agree, if requested by Charterers, to discuss the reasons and technical basis for spray cooling. |
(d) | Subject to the provisions of this Charter, Owners shall have free use of Boil-Off. At no time during the charter period, (except for safety reasons) shall the Vessel use the vent system as a primary means of controlling the cargo tank pressures. Any such safety related venting, or venting caused by any other reason, shall immediately be reported to Charterers (as per Clause 68(d)) with full explanation as to why venting was required and duration and quantity of venting. |
(e) | Each of the Vessel’s four diesel generators is to be equipped with a dual system to burn either Boil-Off gas from the LNG carried (together with a diesel pilot oil) or, diesel oil alone or heavy fuel oil (together with a diesel pilot oil) as independent of the other engines as the Vessel’s design allows. The Vessel shall, at Charterers’ option, use the available Boil-Off gas, or fuel, or complement the boil-off gas being used as fuel by forced vaporised natural gas or by fuel oil, within such limits as may be imposed by Charterers and, in any event, by safety regulations and the safety of the Vessel. |
10. | Provisions for Gauging |
(a) | The time at which any volume of LNG is determined is referred to in this Charter as a gauging time. |
(b) |
In relation to any laden sea passage the cargo volume on loading at the start of the laden sea passage shall be the volume of LNG contained in the Vessel’s cargo tanks measured |
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promptly after the closing of the Vessel’s manifold vapour return valve in the loading port and on discharge at the end of the laden sea passage shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly before the opening of the Vessel’s manifold vapour return valve in the discharge port. | ||
(c) | In relation to any ballast sea passage the LNG heel volume after discharge (i.e. at the start of the ballast sea passage) shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly after the closing of the manifold vapour return valve in the discharge port and the LNG heel volume on loading (i.e. at the end of the ballast sea passage) shall be the volume of LNG contained in the Vessel’s cargo tanks measured promptly before the opening of the Vessel’s manifold vapour return valve in the loading port. |
11. | Underwater Cleaning / Waiting at Anchorage |
(a) | Charterers may request Owners at any time to arrange for the cleaning afloat of the Vessel’s underwater hull and propeller whereupon Owners shall arrange for the said cleaning to take place provided that: |
(i) | the Vessel is free of cargo but may be under vapour if permitted by the port authority and; |
(ii) | in Owners’ opinion such cleaning will not damage in any way the Vessel’s underwater hull coatings and the cleaning method is approved by the coating manufacturer, and; |
(iii) | such cleaning afloat can be carried out safely at a place approved by Owners and where the water is sufficiently clear for an underwater survey to be made of cleanliness of the Vessel’s hull and propeller immediately thereafter. The Vessel shall be considered clean when the hull is substantially free from macroscopic and microscopic biofouling. |
(iv) | Charterers may request Owners to perform underwater cleaning to be carried out when the vessel is fully loaded to enable access to entire underwater area. Owners and Charterers shall agree whether this procedure can be safely carried out. |
(b) | The cost of such underwater hull and propeller cleaning and underwater survey referred to in Article 11(a) shall be for Charterers’ account and the Vessel shall remain on hire for their duration. If the underwater survey shows that both the Vessel’s underwater hull and propeller are substantially free from macroscopic and microscopic biofouling, a successful cleaning shall be deemed to have occurred. |
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(c) | If Charterers order the Vessel to wait at anchorage or in lay up for more than 20 days on any one occasion or more than 60 days comprising periods of not less than 5 days each in any period of 6 months, and, if as a result of such waiting or lay up Owners have good reason to believe that the performance of the Vessel or her fuel consumption is affected and speed and/or fuel warranties can no longer be met because of fouling then Owners shall so state by written notice to Charterers and if Charterers request, shall carry out an underwater inspection at Charterers’ expense to see if there is fouling of the hull and/or propeller. |
To prevent hull fouling from marine growth during charter period, wherever practically possible, Charterers are required to steam the Vessel for a period of 24 hours, every 7 days after anchoring, at a speed between 14 and 15 knots.
(d) | If as a result of the aforesaid inspection, Owners consider that there is evidence of such fouling then if Charterers so request, Owners shall arrange and carry out cleaning afloat of the Vessel’s underwater hull and propeller provided that the provisions of Article 11 (a)(i), (ii) and (iii) apply. |
(e) | The cost of such underwater hull and propeller cleaning and underwater survey referred to in Article 11(d) shall be for Charterers’ account and the Vessel shall remain on hire for their duration. If the underwater survey shows that both the Vessel’s underwater hull and propeller are substantially free from macroscopic and microscopic biofouling, a successful cleaning shall be deemed to have occurred. |
(f) | If any inspection pursuant to Article 11(c) reveals the presence of hull or propeller fouling, or if Charterers decline to request an inspection following receipt of a notice from Owners under Article 11(c), then from the time Owners give written notice that performance is affected by fouling, Owners shall be deemed to have complied with the speed and fuel warranties until the completion of the next periodic dry-docking or successful cleaning, whichever occurs sooner. |
12. | Interpretation |
(a) | In this Appendix C, “ Article ” shall mean an Article of this Appendix, and “ Clause ” shall mean a Clause of the Charter. |
(b) | In the event of any conflict between the Charter and Appendix C, Appendix C shall prevail. |
13. | Weather Limits for Performance Warranties |
Speed, boil-off and fuel consumption warranties defined in this Appendix are not valid under weather conditions in which the Vessel has to proceed in wind force in excess of Beaufort Force 5 for more than ***** hours noon to noon.
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For the purposes of calculating claims, the Wind Force reported in the Master’s noon report shall be used. Charterers may employ the services of a reputable weather reporting company at their own cost.
In the event of a consistent discrepancy between deck logs and weather reporting company’s reports, Owners and Charterers shall meet in good faith to agree which numbers shall be used.
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APPENDIX D - Crew Matrix
Steam LNG Engineer Officer | ||||||||||||
Rank | Chief Engineer | 2nd Engineer | Cargo Engineer | 3rd Engineer | 3rd Engineer | Electronic | ||||||
Work Hours | Dayworker | Day/Watch | Dayworker | Day/Watch | Day/Watch | Dayworker | ||||||
STCW Certificate of Competency | Class 1 | Class 2 | Class 3 | Class 3 | Class 3 | Electro-Technical | ||||||
Tanker Certification | G - O | G - O | G | G | G | G | ||||||
STCW V/1-2 para 2 or para 4 for LNG | 4 | 4 | 4 | 2 | 2 | 2 | ||||||
Combined sea time on all vessels | 4 years at Second engineer or above | |||||||||||
Individual minimum sea time as Certificated Officer | 4 years | 2 years | 1 year | 1 year | ||||||||
Combined sea time on LNG Vessels | 2 years In rank on LNG vessels | |||||||||||
Individual minimum sea time on LNG Vessels |
4 years diesel sea time with a minimum of 30 days intensive training + completion of SIGTTO competency standards training for LNG + Completion of SIGTTO competency standards for steam engineers and the appropriate steam endorsement for the rank.
or, 2 years steam sea time and completion of SIGTTO competency standards for steam engineers or, 2 year steam LNG sea time |
2 years diesel sea time with a minimum of 30 days intensive training + completion of SIGTTO competency standards training for LNG + Completion of SIGTTO competency standards for steam engineers
or, 1 year steam sea time and completion of SIGTTO competency standards for steam engineers
or, 1 year steam LNG sea time. |
1 year as a certified engineering officer on an LNGC + management level (STCW V/1.2 paragraph 4) cargo endorsement for liquefied gas tanker cargo operations. (Note 4) | |||||||||
Tanker Certification: G=Gas O=Oil | STCW V V/1-2: 2=Operational 4=Management |
APPENDIX E - BG Business Principles
The BG Group Business Principles are set out below.
Conduct
· | We act with integrity, fairness and transparency. |
· | We comply with legal, regulatory and license requirements. |
· | We do not tolerate corruption in any form, whether direct or indirect. |
· | Our investment criteria take account of economic returns, environmental impacts, social consequences and human rights. |
· | High standards of corporate governance are integral to the way we manage our business. |
People
· | We treat people with fairness, respect and decency. |
· | We help employees to develop their potential. |
· | We believe that all injuries are preventable. |
· | We provide healthy, safe and secure work environments. |
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Society
· | We work to ensure that neighboring communities benefit from our presence on an enduring basis. |
· | We listen to neighboring communities and take account of their interests. |
· | We support human rights within our areas of influence. |
Environment
· | We make a positive contribution to the protection of the environment. |
· | We go beyond compliance with local environmental regulation to meet internationally accepted best practice. |
· | We reduce to the minimum practicable any adverse effects of our operations on the environment. |
For further information on BG Group’s Business Principles and how to implement BG Group’s Business Principles refer to ‘Principles into Practice at
http://www.bg-group.com/sustainability/Principles/Pages/BusinessPrinciples.aspx
Any breach or potential breach of BG Group’s Business Principles should be reported through BG Group’s Speak Up facility via the confidential website www.bg-speakup.com or confidential telephone line 1-866-482-5517.
BUSINESS PRINCIPLES RISK ASSESSMENT
AND REPORTING
For the purposes of this Clause “Material Risks” means any potential events or actions in connection with the performance of the Services/Work under the Charter that may compromise the Charterers’ ability to operate in accordance with BG Group’s Business Principles. Table 1 below provides examples to assist in assessing Material Risks and materiality thresholds.
Prior to commencement of the Charter; Owners, if requested, shall participate in a joint risk assessment meeting to analyse Material Risks and identify and allocate actions to mitigate such risks.
Owners shall maintain a ‘Risk Register’ (in addition to any required by the HSSE provisions in the Charter). This ‘Risk Register’ shall:
(a) | identify Material Risks, and any actions to mitigate those Material Risks, that are the Owners’ responsibility, resulting from the risk assessment meetings; and |
(b) | monitor and document the implementation of Owners’ actions to mitigate Material Risks. |
The Parties shall also periodically conduct joint risk assessment meetings to assess any additional Material Risks and mitigating steps as the Charter progresses. Owners’ Risk Register shall be updated to reflect the outcome of such meetings.
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Table 1 – Examples of Thresholds for Determining Material Risk
Impact Score | 1 | 2 | 3 | 4 | ||||
Descriptor | Insignificant | Less significant | Significant | Very Significant | ||||
Reputation | No adverse publicity likely | Adverse coverage for BG Group/asset at local level | Adverse coverage for BG Group/asset or subsidiaries at national and/or industry level | Adverse coverage for BG Group/asset or partners at international level | ||||
Legal | Failure to comply with legal, regulatory or license requirements | |||||||
Health | Minor transient health issue | Medical treatment | Widespread debilitating illnesses or diseases (i.e. Malaria) / fatality caused by occupational illness | Loss of lives, fatalities caused by occupational illness | ||||
Safety | Minor / No Injury to workers or the public caused by work-related activity | Reportable injury to workers caused by work-related activity | Fatality / Major injury to workers or the public caused by work-related activity | Multiple Fatalities to workers or the public caused by work-related activity | ||||
Security | Minor/No intimidation or threats to security | Burglary / Robbery / Assault | Fatality / Security incidents involving firearms / Threats to life | Multiple fatalities /Direct terrorist attack | ||||
Environmental Impact | Slight or negligible effect / Oil spill < 1 barrel | Minor effect / Single breach of prescribed limits / Public complaint / Oil spill < 1 tonne | Local effect / Significant damage / Repeated breach of statutory or prescribed limits / Oil spill 1-100 tonnes | Persistent damage / Severe nuisance over large area / Constant or extended breach of statutory or prescribed limits / Oil spill >100 tonnes |
Likelihood Score | 1 | 2 | 3 | 4 | ||||
Descriptor | Unlikely | Possible | Probable | Almost certain | ||||
Percentage | <5% | 5-49% (~30%) | 50-90% (~70%) | >90% |
Likelihood | Impact | |||||
1 | 2 | 3 | 4 | |||
1 | ||||||
2 | ||||||
3 | ||||||
4 |
INCIDENTS
In this Section “Incident” means an event or action in connection with the performance under this Charter by the Owners, their representatives or subcontractors that compromises or has the potential to compromise the Charterers’ ability to operate in accordance with BG Group’s Business Principles.
Owners’ obligations in this Section are subject only to any legal obligations restricting the disclosure of information or any information that is agreed between the Parties to be subject to legal professional privilege.
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Within a reasonable time of Owners’ actual knowledge of an Incident occurring, Owners shall document and report it to the Charterers. Subject to any obligations on the Charterers to disclose information, the Charterers shall treat Incident reports as confidential.
Where the Charterers has reasonable grounds for believing that an Incident,
· | is at risk of occurring; or |
· | has occurred; or |
· | is reported to the Charterers by Owners, its representatives or subcontractor or by a third-party (e.g. through Owners’ ‘whistle blower’ or grievance facility, or the Speak-Up facility or risk assessment meetings); |
the Charterers are entitled to enquire
of relevant documents and personnel of the Owners in
order to provide assurance that the Incident, or potential Incident, is being effectively managed. Owners shall cooperate with
and respond to Charterers enquiries promptly.
Enquiries shall be conducted in a spirit of collaboration between the parties, initially through a meeting and subsequently, if required, through self-assessment questionnaires, visits by the Charterers or its representatives to relevant sites and facilities, or through other appropriate means discussed by the Parties.
INFORMING SUB-CONTRACTORS
Prior to commencement of the Charter, Owners shall ensure that all representatives and subcontractors are made aware of BG Group’s Business Principles and the BG Group Speak-Up facility.
AUDITING COMPLIANCE WITH PROVISIONS
In addition to any entitlement to audit under this Charter, the Charterers reserve the right at all times to audit, by itself or by a third-party, Owners’ compliance with the provisions of the Business Principles Clause and this Exhibit.
GIFTS AND HOSPITALITY REGISTRATION
Regarding Gifts and Hospitality given by Owners to Charterers, Owners agree to comply with Annex 1 below.
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Annex 1 - Gifts and Hospitality Registration/Approval Values
Position |
Single gifts/hospitality events
greater than this value must be registered |
Single gifts/hospitality greater
|
||||||||||||||
Column A |
Column B |
|||||||||||||||
Gifts |
|
Hospitality |
Gifts |
Hospitality |
||||||||||||
Senior Vice President, Asset General Manager and Head Function | $ | 85 | $ | 425 | $ | 425 | $ | 850 | ||||||||
All other employees | $ | 45 | $ | 170 | $ | 85 | $ | 425 |
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APPENDIX F – Norwegian Sale Form
To be attached
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APPENDIX G - Letter of Quiet Enjoyment
LETTER OF QUIET ENJOYMENT
[ Letterhead of Mortgagee ]
[ To Charterers ]
[ ] 2014
Dear Sirs,
Re: [ ] (the “ Vessel ” )
We refer to:
a. | the time charter dated [ ] (the “ Time Charter ” ) made between [ ] as owners and you (the “ Time Charterer ” ) as charterers in respect of the Vessel; |
b. | a facility agreement dated [ ] (the “ Loan Agreement ” ) made between [ ] (the “ Owner ” ) as borrower, us as agent and as security agent and trustee (the “ Security Agent ” ), and the financial institutions named on the signature pages therein as lenders the “ Finance Parties ” ); and |
c. | [ ] the first priority mortgage executed or to be executed by the Owner over the Vessel in our favour between the Owners and us (the “ Mortgage ” ). |
1. | References in this Letter to the Time Charter or to the Loan Agreement and the Mortgage (together the “ Finance Documents ” ) shall include such documents as amended, supplemented or varied from time to time so long as any such amendment, supplement or variation has been notified to, and agreed by, us. References to paragraphs are to paragraphs of this Letter. |
2. | The Security Agent confirms that: |
a. it has received a copy of the Time Charter and is familiar with its terms; and
b. it consents to the Owners’ execution of the Time Charter.
3 | In consideration of the sum of US$10.00 and for other good and valuable consideration (receipt and the sufficiency of which the Security Agent acknowledges), the Security Agent undertakes for itself and on behalf of the other Finance Parties not, without the Time Charterer’s prior written consent, but subject as provided below and subject to this undertaking expiring on the expiry of the charter period to: |
(a) | issue any arrest, detention or similar proceedings against the Vessel in any jurisdiction; or |
(b) |
exercise any power of sale or other disposal of the Vessel or of foreclosure to which the Security Agent may be entitled or make any application for the sale of the Vessel or any
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share therein in any part of the world whether by public auction or private treaty or otherwise (excluding, for the avoidance of doubt, any steps to be taken solely to protect, but not enforce, the Finance Parties’ rights in any arrest proceedings or applications for sale made against the Vessel by any third parties, but only insofar as any such proceedings or applications are continuing and not permanently stayed, and subject to the condition that the Security Agent shall cease any such action upon the relevant proceedings or application being permanently stayed (and release any arrest, or caveat against release, upon the relevant third party arrest being released) and the Security Agent shall notify the Time Charterer in writing promptly upon taking or ceasing any such action); or | ||
(c) | take possession of the Vessel; or |
(d) | appoint a receiver in respect of the Vessel; or |
(e) | exercise against the Vessel any right or remedy which would diminish, prejudice or interfere with the Time Charterer’s rights, options, benefits or privileges under the Time Charter or otherwise interfere with the quiet use and enjoyment of the Vessel by the Time Charterer under the Time Charter; or |
(f) | take any step to wind up, liquidate, or place in administration or receivership the Owner nor commence or continue any analogous steps, actions or proceedings in any jurisdiction (excluding, for the avoidance of doubt, proving in a liquidation commenced by any third party, but only insofar as any such steps, actions or proceedings are continuing and not permanently stayed, and subject to the condition that the Security Agent shall cease any such steps, actions or proceedings upon the relevant third party steps, actions or proceedings being permanently stayed and the Security Agent shall notify the Time Charterers in writing promptly upon taking or ceasing any such steps, actions or proceedings); |
SUBJECT ALWAYS:
(i) | to there having occurred no event under the Time Charter (a “ Charterers’ Termination Event ” ) in consequence of which the Owner, is entitled to terminate and has lawfully terminated the Time Charter in accordance with its terms including, without limitation, withdrawal of the Vessel from the Time Charter by the Owner under the terms of the Time Charter for non-payment of hire; and |
(ii) | to the Vessel not having become an actual, agreed, arranged or constructive total loss and being no longer available to the Owner; |
4. | The Security Agent agrees that unless the Time Charterer is no longer entitled to the use and quiet enjoyment of the Vessel under paragraph 3 above, if the Security Agent enforces or exercises its rights pursuant to the Finance Documents in accordance with the terms thereof, the Security Agent may only sell or transfer the Vessel expressly subject to the terms of the Time Charter (a “ Permitted Transfer ” ) and provided that: |
(a) the rights of the Time Charterer under the Time Charter shall be fully preserved and protected following the Permitted Transfer; and
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(b) before the Permitted Transfer, if the Owners’ rights as “Owners” under the Time Charter are to be assigned or transferred to a third party, such third party (the “Substitute”) has assumed the rights and obligations of the Owner under the Time Charter and this Letter; and
(c) the Substitute is acceptable to the Time Charterer acting reasonably.
The Time Charterer shall give its consent to the proposed Substitute if the Time Charterer is satisfied, acting reasonably, that the validity and enforceability of the Time Charter will not in any way be prejudiced, and if that Substitute (not being a competitor of the Time Charterer) has such (i) legal capacity (ii) technical competence and (iii) financial capability as are reasonably required to become a party and to perform the obligations of the Owner under the Time Charter, and, provided that (but without prejudice to such Substitute’s ability to meet the foregoing criteria in other circumstances):
(a) | arrangements concluded with third parties by the proposed Substitute shall be taken into account in evaluating its technical competence and financial capability; and |
(b) | in the case of any proposed Substitute which is an affiliate of the Security Agent or a Finance Party, evidence that it is controlled by the Security Agent or a Finance Party shall be sufficient evidence of financial capability for the purposes of this paragraph 4(a); |
The Owner undertakes not to make any claim against the Vessel and/or Substitute and/or the Time Charterer arising directly from a Permitted Transfer made under this Letter.
The Time Charterer shall use all reasonable endeavours to co-operate with the Security Agent in order to effect a Permitted Transfer at the expense of the Security Agent.
5. | By countersigning this Letter, the Time Charterer hereby acknowledges and agrees that: |
(a) | subject to the provisions of paragraphs 3 and 4, the enforcement, in accordance with the terms of the Finance Documents, by the Security Agent of any security interests granted in favour of the Security Agent pursuant to the Finance Documents or the sale or transfer of the Vessel pursuant to the Finance Documents to any other person shall not constitute a disturbance of the Time Charter or the Time Charterer’s use and quiet enjoyment of the Vessel in accordance with the terms of the Time Charter; |
(b) | the covenant by the Security Agent in this Letter is the sole covenant by the Security Agent in respect of quiet enjoyment and is in substitution for, and to the exclusion of, any other covenant for quiet enjoyment which may have otherwise been given by any other party or implied at law or otherwise. |
6. | The Time Charterer agrees that: |
(a) |
without prejudice to any other rights the Time Charterer may have in respect of any default by the Owner of any of its obligations under the Time Charter, the Time Charterer will not take any enforcement action in respect of or otherwise terminate the Time Charter without first notifying the Security Agent in writing and giving the Security Agent the opportunity to remedy (or procure the remedy of) any default by the Owner of any of its obligations under or in connection with the Time Charter within the relevant period referred to below. Unless the Security Agent notifies the Time Charterer in writing that it does not wish to exercise any remedy rights, the Time Charterer will not
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terminate the Time Charter if the Security Agent does so remedy (or procure the remedy of) the default within thirty (30) days of the Time Charterer giving notice to the Owner (copied to the Security Agent) of the default by the Owner to perform its obligations under the Time Charter (which cure period shall be extended to sixty (60) days if it is demonstrated to the Time Charterer (acting reasonably) that the Security Agent is continuing to diligently remedy (or procure the remedy of) the default); | ||
(b) | if the Security Agent, pursuant to a Permitted Transfer, exercises the power of sale under the Mortgage and/or assigns or transfers the rights of the “Owners” under the Time Charter to the Substitute, the Time Charterer will not terminate the Time Charter by reason solely of such transfer (without prejudice to any accrued rights). In such circumstances, the Time Charterer agrees that the Substitute shall, with effect from the date of the Permitted Transfer and notwithstanding any other provisions thereof, become a party to the Time Charter in place of the Owner and shall be treated for all purposes as if the Substitute had originally been named a party in place of the Owner (without prejudice to any accrued rights). |
7. | The Security Agent acknowledges that the Time Charterer is not a party to and is not bound by the provisions of any of the Finance Documents. |
8. | The Security Agent acknowledges that the terms of this Letter shall (subject to such beneficiary similarly confirming and consenting to the terms of this Letter) enure to the benefit of the successors and assigns of the Time Charterer under the Time Charter. |
9. | The Security Agent confirms that it has been duly authorised to issue this Letter on behalf of the Finance Parties and that its issuance conforms with the Loan Agreement and, without limitation, the agency provisions described therein. |
10. | The terms of this Letter (including any non-contractual obligations in connection with this Letter) shall be governed by and construed in accordance with English law and the provisions of Clause 47 ( Law and litigation ) of the Time Charter shall apply, mutatis mutandis, to any dispute arising out of this Letter (including any non-contractual obligations in connection with this Letter) as if such provisions were set out in this Letter. |
Please acknowledge your receipt of and your agreement to the terms of this Letter by signing the attached copy where indicated and returning it to us.
Each of the parties signing this Letter intends that the agreement constituted by this Letter shall take effect as a deed notwithstanding the fact that a party may only sign this Letter under hand.
Yours faithfully,
for and on behalf of
[ ]
[Security Agent]
We, [ ], for the consideration aforesaid, hereby confirm our agreement to the provisions of this Letter.
Page 88 of 89 |
|
Private and Confidential
Dated:
for and on behalf of
[ ]
[Charterer]
We, [ ], for the consideration aforesaid , hereby confirm our agreement to the provisions of this
Letter.
Dated:
for and on behalf of
[ ]
[Owner]
Page 89 of 89 |
Exhibit 10.25
Private & Confidential
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH FIVE ASTERISKS (*****).
Dated 1 April 2014
THE ENTITIES LISTED IN SCHEDULE 1
as Borrowers
arranged by
CITIBANK, N.A., LONDON BRANCH
with
CITIBANK, N.A., LONDON BRANCH
as Bookrunner
CITIBANK INTERNATIONAL PLC
as Agent
CITIBANK, N.A., LONDON BRANCH
as Security Agent
THE FINANCIAL INSTITUTIONS LISTED IN SCHEDULE
1
as Lenders
FACILITY AGREEMENT
for
$325,500,000 Loan Facility
|
Contents
|
22 | Condition and operation of Ships | 62 |
23 | Insurance | 66 |
24 | Minimum security value | 69 |
25 | Bank accounts | 72 |
26 | Business restrictions | 73 |
27 | Events of Default | 75 |
SECTION 8 - CHANGES TO PARTIES | 81 | |
28 | Changes to the Lenders | 81 |
29 | Changes to the Obligors/Restriction on Debt Purchase Transactions | 84 |
SECTION 9 - THE FINANCE PARTIES | 86 | |
30 | Roles of Agent, Security Agent and Arranger | 86 |
31 | Conduct of business by the Finance Parties | 105 |
32 | Sharing among the Finance Parties | 106 |
SECTION 10 - ADMINISTRATION | 108 | |
33 | Payment mechanics | 108 |
34 | Set-off | 111 |
35 | Notices | 111 |
36 | Calculations and certificates | 113 |
37 | Partial invalidity | 114 |
38 | Remedies and waivers | 114 |
39 | Amendments and grant of waivers | 114 |
40 | Counterparts | 117 |
41 | Confidentiality | 117 |
SECTION 11 - GOVERNING LAW AND ENFORCEMENT | 120 | |
42 | Governing law | 120 |
43 | Enforcement | 120 |
Schedule 1 The original parties | 121 | |
Schedule 2 Ship information | 123 | |
Schedule 3 Conditions precedent | 125 | |
Schedule 4 Utilisation Request | 131 |
|
Schedule 5 Selection Notice | 132 |
Schedule 6 Form of Transfer Certificate | 133 |
Schedule 7 Forms of Notifiable Debt Purchase Transaction Notice | 136 |
|
THIS AGREEMENT is dated 1 April 2014, and made between:
(1) | THE ENTITIES listed in Schedule 1 ( The original parties ) as borrowers (the Borrowers ); |
(2) | CITIBANK, N.A., LONDON BRANCH as mandated lead arranger (the Arranger ); |
(3) | THE FINANCIAL INSTITUTIONS listed in Schedule 1 ( The original parties ) as lenders (the Original Lenders ); |
(4) | CITIBANK, N.A., LONDON BRANCH as bookrunner (the Bookrunner ); |
(5) | CITIBANK INTERNATIONAL PLC as agent of the other Finance Parties (the Agent ); and |
(6) | CITIBANK, N.A., LONDON BRANCH as security agent and trustee for and on behalf of the other Finance Parties (the Security Agent ). |
IT IS AGREED as follows:
SECTION 1 - INTERPRETATION
1 | Definitions and interpretation |
1.1 | Definitions |
In this Agreement and (unless otherwise defined in the relevant Finance Document) the other Finance Documents:
Acceptable Bank means:
(a) | a bank or financial institution which has a rating for its long-term unsecured and non credit-enhanced debt obligations of “A-” or higher by Standard & Poor’s Rating Services or Fitch Ratings Ltd or “Baa1” or higher by Moody’s Investor Services Limited or a comparable rating from another internationally recognised credit rating agency; or |
(b) | any other bank or financial institution approved by the Majority Lenders, |
and which is approved by the Borrowers.
Account means any bank account, deposit or certificate of deposit opened, made or established in accordance with clause 25 ( Bank accounts ).
Account Bank means, in relation to any Account, Citibank International plc, acting through its branch at 47-49 Akti Miaouli, 185 36 Piraeus, Greece or another bank or financial institution approved by the Majority Lenders at the request of the Borrowers.
Account Holder(s) means, in relation to any Account, the Obligor(s) in whose name(s) that Account is held.
Account Security means, in relation to an Account, a deed or other instrument executed by the relevant Account Holder(s) in favour of the Security Agent and/or any other Finance Parties in an agreed form conferring a Security Interest over that Account.
Accounting Reference Date means 31 December or such other date as may be approved by the Majority Lenders.
Advance means each borrowing of a proportion of the Total Commitments by the Borrowers at any relevant time (and, in relation to a Ship, such borrowing as has been or is to be drawn in connection with that Ship under the Ship Commitment for that Ship at that time) or (as the context may require) the outstanding principal amount of such borrowing.
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Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
Agent includes any person who may be appointed as agent under clause 30.12 ( Resignation of the Agent ) or any other provision of this Agreement.
Annual Financial Statements has the meaning given to it in clause 18 ( Information undertakings ).
Approved Exchange means NYSE or NASDAQ or any other reputable stock exchange agreed by GasLog and the Majority Lenders.
Approved Flag State means each of the Bahamas, Hong Kong or the Marshall Islands.
Auditors means one of Moore Stephens, PricewaterhouseCoopers, Ernst & Young, KPMG or Deloitte & Touche or another approved firm (provided that if the approval of Auditors as set out in this definition becomes contrary to any applicable law, directive or regulation, and the Majority Lenders so require, the Obligors agree that they will make such amendment to this definition as will be agreed between the Borrower and the Majority Lenders so as to ensure compliance with such law, directive or regulation).
Available Facility means, at any relevant time, such part of the Total Commitments which is available for borrowing under this Agreement at such time in accordance with clause 4 ( Conditions of Utilisation ) to the extent that such part of the Total Commitments is not cancelled or reduced under this Agreement.
Basel II Accord means the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 as updated prior to, and in the form existing on, the date of this Agreement, excluding any amendment thereto arising out of the Basel III Accord.
Basel II Approach means, in relation to any Finance Party, either the Standardised Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel II Accord) adopted by that Finance Party (or any of its Affiliates) for the purposes of implementing or complying with the Basel II Accord.
Basel II Regulation means:
(a) | any law or regulation implementing the Basel II Accord; or |
(b) | any Basel II Approach adopted by a Finance Party or any of its Affiliates, |
but excludes any law or regulation implementing the Basel III Accord save and to the extent that it is a re-enactment of any law or regulation referred to in paragraph (a) of this definition.
Basel III Accord means, together:
(a) | the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated; |
(b) | the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text” published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and |
(c) | any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”. |
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Basel III Increased Cost means an Increased Cost which is attributable to the implementation or application of or compliance with any Basel III Regulation (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates).
Basel III Regulation means any law or regulation implementing the Basel III Accord save and to the extent that it re-enacts a Basel II Regulation.
Break Costs means the amount (if any) by which:
(a) | the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in the Loan or Unpaid Sum to the last day of the current Interest Period in respect of the Loan or Unpaid Sum had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period; |
exceeds:
(b) | the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period. |
Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London, Athens, Piraeus, Monaco, Frankfurt (Main) and New York.
Change of Control occurs if:
(a) | two or more persons acting in concert or any individual person (other than the current ultimate beneficial owners of Relevant Company A and Relevant Company B) (i) acquire, legally and/or beneficially and either directly or indirectly, in excess of 50% of the issued share capital (or equivalent) of GasLog or (ii) have the right or ability to control, either directly or indirectly, the affairs or the composition of the majority of the board of directors (or equivalent) of GasLog; or |
(b) | the current ultimate beneficial owners of Relevant Company A and Relevant Company B cease to hold, in aggregate, legally and/or beneficially, and either directly or indirectly, at least: |
(i) | from the date of this Agreement until 28 March 2014 (the First Anniversary ), 25%; |
(ii) | from the First Anniversary until the date falling 12 months thereafter (the Second Anniversary ), 20%; and |
(iii) | from the Second Anniversary and at all other times thereafter, 15%, |
of the issued share capital of GasLog (or such other public vehicle owning the Borrowers); or
(c) | GasLog ceases to control, directly or indirectly, the affairs or the composition of the board of directors (or equivalent) of the MLP (if it is formed and following its formation) or the Borrowers or the Holding Company of the Borrowers, |
in any case without the prior written consent of the Agent (acting with the authorisation of the Majority Lenders).
Charged Property means all of the assets of the Obligors which from time to time are, or are expressed or intended to be, the subject of the Security Documents.
Charter means, in relation to a Ship, the charter commitment for that Ship details of which are provided in Schedule 2 ( Ship information) and Charters means all of them.
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Charter Assignment means, in relation to a Ship and its Charter Documents, an assignment by the relevant Owner of its interest in such Charter Documents in favour of the Security Agent in the agreed form.
Charter Documents means, in relation to a Ship, the Charter (if any) of that Ship, any documents supplementing it and any guarantee or security given by any person for the Charterer’s obligations under it.
Charterer means, in relation to a Ship and a Charter of that Ship, the charterer named in Schedule 2 ( Ship information) as charterer of that Ship.
Classification means, in relation to a Ship, the classification specified in respect of such Ship in Schedule 2 ( Ship information )) with the relevant Classification Society or another classification approved by the Majority Lenders as its classification, at the request of the relevant Owner.
Classification Society means, in relation to a Ship, the classification society specified in respect of such Ship in Schedule 2 ( Ship information ) or another classification society (being a member of the International Association of Classification Societies (IACS) or, if such association no longer exists, any similar association nominated by the Agent) approved by the Majority Lenders as its Classification Society, at the request of the relevant Owner.
Code means the US Internal Revenue Code of 1986.
Commercial Manager means, in relation to a Ship, GasLog or another manager appointed as the commercial manager of that Ship by the relevant Owner in accordance with clause 20.3 ( Manager ).
Commitment means:
(a) | in relation to an Original Lender, the amount set opposite its name under the heading “Commitment” in Schedule 1 ( The original parties ) and the amount of any other Commitment assigned to it under this Agreement; and |
(b) | in relation to any other Lender, the amount of any Commitment assigned to it under this Agreement, |
to the extent:
(i) | not cancelled, reduced or assigned by it under this Agreement; and | |
(ii) | not deemed to be zero pursuant to clauses 29.2.2 to 29.2.5 ( Prohibition on Debt Purchase Transactions by the Group ). |
Confidential Information means all information relating to an Obligor, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:
(a) | any member of the Group or any of its advisers; or |
(b) | another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers, |
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i) | is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of clause 41 ( Confidentiality ); or |
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(ii) | is identified specifically in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or |
(iii) | is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality. |
Constitutional Documents means, in respect of an Obligor, such Obligor’s memorandum and articles of association, by-laws or other constitutional documents including as referred to in any certificate relating to an Obligor delivered pursuant to Schedule 3 ( Conditions precedent ).
Contract means, in relation to a Ship, the memorandum of agreement made or (as the context may require) to be made between the relevant Owner as buyer and the relevant Seller as seller, in respect of the Ship.
Contract Price means, in relation to a Ship, the purchase price of the Ship payable by the relevant Owner under the Contract for such Ship, being on the date of this Agreement in the amount specified in Schedule 2 ( Ship information ) in respect of the relevant Ship.
Debt Purchase Transaction means, in relation to a person, a transaction where such person:
(a) | purchases by way of assignment or transfer; |
(b) | enters into any sub-participation in respect of; or |
(c) | enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of, |
any Commitment or amount outstanding under this Agreement.
Deed of Covenant means, in relation to a Ship, a first deed of covenant in respect of such Ship by the relevant Owner in favour of the Security Agent in the agreed form.
Default means an Event of Default or any event or circumstance which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of them) be an Event of Default.
Defaulting Lender means any Lender:
(a) | which has failed to make its participation in the Loan or any part thereof available or has notified the Agent that it will not make its participation in any part of the Loan available by the Utilisation Date of that part of the Loan in accordance with clause 5.4 ( Lenders’ participation ); |
(b) | which has otherwise rescinded or repudiated a Finance Document; or |
(c) | with respect to which an Insolvency Event has occurred and is continuing, |
unless, in the case of paragraph (a) above:
(i) | its failure to pay is caused by: |
(A) | administrative or technical error; or |
(B) | a Disruption Event; and, |
payment is made within 3 Business Days of its due date; or
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(ii) | the Lender is disputing in good faith whether it is contractually obliged to make the payment in question. |
Delivery means, in relation to a Ship, the delivery and acceptance of the Ship by the relevant Owner under the relevant Contract.
Disposal Repayment Date means, in relation to:
(a) | a Total Loss of a Mortgaged Ship, the applicable Total Loss Repayment Date; or |
(b) | a sale of a Mortgaged Ship (including a reversal of sale by the relevant Owner returning the relevant Ship to the relevant Seller under any relevant provisions of the relevant Contract, if applicable) by the relevant Owner, the date upon which such sale is completed by the transfer of title to the purchaser in exchange for payment of all or part of the relevant purchase price. |
Disruption Event means either or both of:
(a) | a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or |
(b) | the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party: |
(i) | from performing its payment obligations under the Finance Documents; or |
(ii) | from communicating with other Parties in accordance with the terms of the Finance Documents, |
(and which (in either such case)) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Earnings means, in relation to a Ship and a person, all money at any time payable to that person for or in relation to the use or operation of such Ship including (without limitation) freight, hire and passage moneys, money payable to that person for the provision of services by or from such Ship or under any charter commitment, requisition for hire compensation, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach and payments for termination or variation of any charter commitment.
Enforcement Costs means any costs, expenses, liabilities or other amounts in respect of which any amount is payable under clauses 14.4 ( Indemnity concerning security ) or 16.3 ( Enforcement preservation and other costs ) or under any other Finance Document to which those provisions apply and any remuneration payable to a Receiver in connection with any Security Documents.
Environmental Claims means:
(a) | enforcement, clean-up, removal or other governmental or regulatory action or orders or claims instituted or made pursuant to any Environmental Laws or resulting from a Spill; or |
(b) | any claim made by any other person relating to a Spill. |
Environmental Incident means any Spill from any Fleet Vessel in circumstances where:
(a) | any Fleet Vessel or its owner, operator or manager may be liable for Environmental Claims arising from the Spill (other than Environmental Claims arising and fully satisfied before the date of this Agreement); and/or |
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(b) | any Fleet Vessel may be arrested or attached in connection with any such Environmental Claim. |
Environmental Laws means all laws, regulations and conventions concerning pollution or protection of human health or the environment.
Event of Default means any event or circumstance specified as such in clause 27 ( Events of Default ).
Facility means the term loan facility made available under this Agreement as described in clause 2 ( The Facility ).
Facility Office means:
(a) | in respect of a Lender, the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office through which it will perform its obligations under this Agreement; and |
(b) | in respect of any other Finance Party, the office in the jurisdiction in which it is resident for Tax purposes. |
Facility Period means the period from and including the date of this Agreement to and including the date on which the Total Commitments have reduced to zero and all indebtedness of the Obligors under the Finance Documents has irrevocably and unconditionally been fully paid and discharged.
FATCA means:
(a) | sections 1471 to 1474 of the Code or any associated regulations or other official guidance; |
(b) | any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or |
(c) | any agreement pursuant to the implementation of paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction. |
FATCA Application Date means:
(a) | in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014; |
(b) | in relation to a “withholdable payment” described in section 1473(1)(A)(ii) of the Code (which relates to “gross proceeds” from the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or |
(c) | in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017, |
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
FATCA Deduction means a deduction or withholding from a payment under a Finance Document required by FATCA.
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FATCA Exempt Party means a Party that is entitled to receive payments free from any FATCA Deduction.
FATCA FFI means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if any Finance Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.
FATCA Protected Lender means any Lender irrevocably designated as a “FATCA Protected Lender” by the Borrowers by notice to that Lender and the Agent at least six months prior to the earliest FATCA Application Date for a payment by a Party to that Lender (or to the Agent for the account of that Lender).
Fee Letters means the letters dated on or about the date of this Agreement between the Arranger and the Borrowers (or the Agent and the Borrowers or the Security Agent and the Borrowers) setting out any of the fees referred to in clause 11 ( Fees ) and Fee Letter means any one of them.
Finance Documents means this Agreement, the Fee Letters, the Security Documents and any other document designated as such by the Agent and the Borrowers.
Finance Party means the Agent, the Security Agent, the Arranger or a Lender.
Financial Indebtedness means any indebtedness for or in respect of:
(a) | monies borrowed; |
(b) | any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; |
(c) | any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; |
(d) | any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease; |
(e) | receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); |
(f) | any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close out of that Treasury Transaction, that amount) shall be taken into account); |
(g) | any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; |
(h) | any amount of any liability under an advance or deferred purchase agreement if (a) one of the primary reasons behind entering into the agreement is to raise finance or (b) the agreement is in respect of the supply of assets or services and payment is due more than 180 days after the date of supply; |
(i) | any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing or otherwise classified as borrowings under GAAP; and |
(j) | the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) to (i) above. |
Flag State means, in relation to a Ship, the country specified in respect of such Ship in Schedule 2 ( Ship information ) or another Approved Flag State (provided that the provisions of clause 20.1(b) ( Ship’s name and registration ) are complied with), or such other state or territory as may be approved by the Agent (acting on the instructions of the Majority Lenders), at the request of the relevant Owner, as being the Flag State of such Ship for the purposes of the Finance Documents.
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Fleet Vessel means each Mortgaged Ship and any other vessel directly or indirectly owned by any Obligor or any Subsidiary of an Obligor.
GAAP means International Accounting Standards, International Financial Reporting Standards and related interpretations as amended, supplemented, issued or adopted from time to time by the International Accounting Standards Board to the extent applicable to the relevant financial statements.
GasLog means the company described as such in Schedule 1 ( The original parties ).
GasLog Carriers means the company described as such in Schedule 1 ( The original parties ).
GasLog Carriers Guarantee means the guarantee executed by GasLog Carriers in favour of the Security Agent in the agreed form.
GasLog Guarantee means the guarantee executed by GasLog in favour of the Security Agent in the agreed form.
Group means GasLog and its Subsidiaries for the time being and, for the purposes of clause 18.1 ( Financial statements ) or clause 5 ( Financial covenants ) of the GasLog Guarantee, any other entity required to be treated as a subsidiary in its consolidated accounts in accordance with GAAP and/or any applicable law.
Group Member means any Obligor and any other entity which is part of the Group.
Guarantees means the GasLog Guarantee, the GasLog Carriers Guarantee and, if executed pursuant to clause 27.21, the MLP Guarantee and Guarantee means any of them.
Guarantors means GasLog, GasLog Carriers and, if a MLP Guarantee is executed pursuant to clause 27.21, MLP and Guarantor means any of them.
Half-Yearly Financial Statements has the meaning given to it in clause 18 ( Information undertakings ).
Holding Company means, in relation to a company or corporation or other person, any other company or corporation or other person in respect of which it is a Subsidiary.
Impaired Agent means the Agent at any time when:
(a) | it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment; |
(b) | the Agent otherwise rescinds or repudiates a Finance Document; |
(c) | (if the Agent is also a Lender) it is a Defaulting Lender under paragraph (a) or (b) of the definition of Defaulting Lender ; or |
(d) | an Insolvency Event has occurred and is continuing with respect to the Agent; |
unless, in the case of paragraph (a) above:
(i) | its failure to pay is caused by: |
(A) | administrative or technical error; or |
(B) | a Payment Disruption Event; and |
payment is made within 3 Business Days of its due date; or
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(ii) | the Agent is disputing in good faith whether it is contractually obliged to make the payment in question. |
Increased Costs has the meaning given to it in clause 13.1.2 ( Increased Costs ).
Indemnified Person means:
(a) | each Finance Party and each Receiver and any attorney, agent or other person appointed by them under the Finance Documents; |
(b) | each Affiliate of those persons; and |
(c) | any officers, employees or agents of any of the above persons. |
Insolvency Event in relation to a Finance Party means that the Finance Party:
(a) | is dissolved (other than pursuant to a consolidation, amalgamation or merger); |
(b) | becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; |
(c) | makes a general assignment, arrangement or composition with or for the benefit of its creditors; |
(d) | institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official; |
(e) | has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in paragraph (d) above and: |
(i) | results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or |
(ii) | is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; |
(f) | has exercised in respect of it one or more of the stabilisation powers pursuant to Part 1 of the Banking Act 2009 and/or has instituted against it a bank insolvency proceeding pursuant to Part 2 of the Banking Act 2009 or a bank administration proceeding pursuant to Part 3 of the Banking Act 2009; |
(g) | has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); |
(h) | seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; |
(i) | has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; |
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(j) | causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in paragraphs (a) to (i) above; or |
(k) | takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts. |
Insurance Notice means, in relation to a Ship, a notice of assignment in the form scheduled to the Deed of Covenant for that Ship or in another approved form.
Insurances means, in relation to a Ship:
(a) | all policies and contracts of insurance; and |
(b) | all entries in a protection and indemnity or war risks or other mutual insurance association |
in the name of such Ship’s Owner or the joint names of its Owner and any other person in respect of or in connection with such Ship and/or its Owner’s Earnings from the Ship and includes all benefits thereof (including the right to receive claims and to return of premiums).
Interbank Market means the London interbank market.
Interest Period means, in relation to the Loan or any part thereof, each period determined in accordance with clause 9 ( Interest Periods ) and, in relation to an Unpaid Sum, each period determined in accordance with clause 8.3 ( Default interest ).
Interpolated Screen Rate means in relation to LIBOR and the Loan or any part of it or any Unpaid Sum, the rate which results from interpolating on a linear basis between:
(a) | the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the relevant Interest Period for the Loan (or the relevant part of it) or the relevant Unpaid Sum; and |
(b) | the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the relevant Interest Period for the Loan (or the relevant part of it) or the relevant Unpaid Sum, |
each as of 11:00 am on the relevant Quotation Day.
Last Availability Date means, in respect of each Advance, 30 April 2014 (or such later date as may be approved by all the Lenders).
Legal Reservations means:
(a) | the principle that equitable remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors; |
(b) | the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for, or indemnify a person against, non-payment of UK stamp duty may be void and defences of set-off or counterclaim; and |
(c) | similar principles, rights and defences under the laws of any Relevant Jurisdiction. |
Lender means:
(a) | any Original Lender; and |
(b) | any bank, financial institution, trust, fund or other entity which has become a Party as a Lender in accordance with clause 28 ( Changes to the Lenders ), |
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which in each case has not ceased to be a Lender in accordance with the terms of this Agreement. |
LIBOR means, in relation to the Loan or any part of it or any Unpaid Sum:
(a) | the applicable Screen Rate; or |
(b) | if no Screen Rate is available for the relevant Interest Period, the Interpolated Screen Rate for the Loan (or the relevant part of it) or that Unpaid Sum; or |
(c) | if: |
(i) | no Screen Rate is available for the relevant currency; or | |
(ii) | no Screen Rate is available for the relevant Interest Period and it is not possible to calculate an Interpolated Screen Rate for the Loan (or the relevant part of it) or that Unpaid Sum, |
the Reference Bank Rate,
as of 11:00 a.m. on the Quotation Day for the offering of deposits in dollars for a period comparable to the Interest Period for the Loan or relevant part of it or Unpaid Sum and if that rate is less than zero, LIBOR shall be deemed to be zero.
Loan means the loan made or to be made available under the Facility (comprising the Advances) or the principal amount outstanding for the time being of that loan.
Losses means any costs, expenses (including, but not limited to, legal fees), payments, charges, losses, demands, liabilities, taxes (including VAT), claims, actions, proceedings, penalties, fines, damages, judgments, orders or other sanctions.
Loss Payable Clauses means, in relation to a Ship, the provisions concerning payment of claims under the Ship’s Insurances in the form scheduled to the Ship’s Deed of Covenant or in another approved form.
Major Casualty means any casualty to a vessel for which the total insurance claim, inclusive of any deductible, exceeds or may exceed the Major Casualty Amount.
Major Casualty Amount means, in relation to a Ship, the amount specified as such against the name of that Ship in Schedule 2 ( Ship information ) or the equivalent in any other currency.
Majority Lenders means:
(a) | if no part of the Loan is then outstanding, a Lender or Lenders whose Commitments aggregate more than 66.67% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66.67% of the Total Commitments immediately prior to the reduction); or |
(b) | at any other time, a Lender or Lenders whose participations in the Loan aggregate more than 66.67% of the Loan. |
Manager means the Commercial Manager or the Technical Manager (as the case may be) and Managers means both of them.
Manager’s Undertaking means, in relation to a Ship, an undertaking by any manager of the Ship to the Security Agent in the agreed form pursuant to clause 20.3 ( Manager ).
Margin means 2.50% per annum.
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Material Adverse Effect means, in the reasonable opinion of the Majority Lenders, a material adverse effect on:
(a) | the business, operations, property, performance or condition (financial or otherwise) of any of the Obligors or of the Group taken as a whole; or |
(b) | the ability of an Obligor to perform its obligations under any of the Finance Documents; or |
(c) | the validity or enforceability of, or the effectiveness or ranking of any Security Interest granted or purporting to be granted pursuant to any of, the Finance Documents or the rights or remedies of any Finance Party under any of the Finance Documents. |
Minimum Value means the amount in dollars which is at any relevant time 120% of the Loan.
MLP means a master limited partnership which may be formed under the laws of the Marshall Islands or another approved jurisdiction and listed with an Approved Exchange which acquires, with approval pursuant to clause 27.21 ( Legal and beneficial ownership ), legal and/or beneficial ownership of the shares in each of the Borrowers and/or GasLog Carriers.
MLP Guarantee means the guarantee to be executed by MLP in favour of the Security Agent in the agreed form pursuant to clause 27.21 ( Legal and beneficial ownership ).
Mortgage means, in relation to a Ship, a first priority mortgage of the Ship in the agreed form by the relevant Owner in favour of the Security Agent.
Mortgage Period means, in relation to a Mortgaged Ship, the period from the date the Mortgage over that Ship is executed and registered until the date such Mortgage is released and discharged or, if earlier, its Total Loss Repayment Date.
Mortgaged Ship means, at any relevant time, any Ship which has been delivered to the relevant Owner under the relevant Contract and is subject to a Mortgage and/or whose Earnings, Insurances and Requisition Compensation are subject to a Security Interest under the Finance Documents.
Notifiable Debt Purchase Transaction has the meaning given to that term in clause 29.2 ( Prohibition on Debt Purchase Transactions by the Group ).
Obligors means the parties to the Finance Documents (including GasLog) (other than Finance Parties and the Managers of each Ship) and Obligor means any one of them.
OFAC has the meaning given to it in clause 19.13.3 ( Sanctions ).
Original Financial Statements means:
(a) | the audited consolidated financial statements of the Group for its financial year ended 31 December 2012; and |
(b) | the audited financial statements of GasLog Carriers for its financial year ended 31 December 2012. |
Original Jurisdiction means, in relation to an Original Obligor, the jurisdiction under whose laws that Obligor is incorporated as at the date of this Agreement or, in the case of any other Obligor, as at the date on which that Obligor becomes an Obligor.
Original Obligor means each party to this Agreement and the Original Security Documents (other than a Finance Party and the Managers).
Original Security Documents means:
(a) | the GasLog Guarantee and the GasLog Carriers Guarantee; |
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(b) | the Mortgages; |
(c) | the Deeds of Covenant; |
(d) | the Charter Assignment in relation to each Ship’s Charter Documents; |
(e) | the Account Security; |
(f) | any Quiet Enjoyment Agreement; and |
(g) | any Manager’s Undertaking if required under clause 20.3 ( Manager ). |
Owner means, in relation to a Ship, the Borrower specified against the name of that Ship in Schedule 2 ( Ship information ).
Participating Member State means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
Party means a party to this Agreement.
Payment Disruption Event means either or both of:
(a) | a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or |
(b) | the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party: |
(i) | from performing its payment obligations under the Finance Documents; or |
(ii) | from communicating with other Parties in accordance with the terms of the Finance Documents, |
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
Permitted Maritime Liens means, in relation to a vessel:
(a) | unless a Default is continuing, any ship repairer’s or outfitter’s possessory lien in respect of such vessel for an amount not exceeding the Major Casualty Amount for such vessel; |
(b) | any lien on such vessel for master’s, officer’s or crew’s wages outstanding in the ordinary course of its trading; |
(c) | liens for master’s disbursements incurred in the ordinary course of business and any other lien arising by operation of law in the ordinary course of the business, repair or maintenance of such vessel, each securing obligations not more than 30 days overdue; and |
(d) | any lien on such vessel for salvage. |
Permitted Security Interests means, in relation to any Mortgaged Ship, any Security Interest over it which is:
(a) | a Permitted Maritime Lien; or |
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(b) | granted by the Finance Documents; or |
(c) | created in favour of a claimant or defendant in any proceedings or arbitration as security for costs and expenses while the relevant Owner is actively pursuing a claim or defending such proceedings or arbitration in good faith; or |
(d) | created by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps; or |
(e) | approved by the Majority Lenders, |
PROVIDED that in the case of (c) and (d) above the relevant liens (or any claim relating thereto) are, in the reasonable opinion of the Agent, covered by insurance or, as the case may be, appropriate reserves held with the Account Bank in an Account acceptable to the Agent.
Pollutant means and includes crude oil and its products, any other polluting, toxic or hazardous substance and any other substance whose release into the environment is regulated or penalised by Environmental Laws.
Quiet Enjoyment Agreement means, in respect of each Charter, a letter by the Security Agent addressed to, and acknowledged by, the relevant Charterer and the relevant Owner in the agreed form.
Quotation Day means, in relation to any period for which an interest rate is to be determined, two Business Days before the first day of that period unless market practice differs in the Interbank Market for a currency, in which case the Quotation Day for that currency shall be determined by the Agent in accordance with market practice in the Interbank Market (and if quotations would normally be given by leading banks in the Interbank Market on more than one day, the Quotation Day will be the last of those days).
Receiver means a receiver or a receiver and manager or an administrative receiver appointed in relation to the whole or any part of any Charged Property under any relevant Security Document.
Reference Bank Rate means the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request by the Reference Banks as the rate at which the relevant Reference Bank could borrow funds in the Interbank Market, in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
Reference Banks means, in respect of LIBOR, the principal offices of Citibank, N.A. and DVB Bank S.E., in London and such other banks as may be appointed by the Agent with the consent of the Borrowers.
Registry means , in relation to each Ship, such registrar, commissioner or representative of the relevant Flag State who is duly authorised and empowered to register the relevant Ship, the relevant Owner’s title to such Ship and the relevant Mortgage under the laws of its Flag State.
Relevant Company A means a person acceptable to the Lenders in their discretion which shall on or before the date of this Agreement be identified to the Lenders.
Relevant Company B means a person acceptable to the Lenders in their discretion which shall on or before the date of this Agreement be identified to the Lenders.
Relevant Jurisdiction means, in relation to an Obligor:
(a) | its jurisdiction of incorporation; |
(b) | any jurisdiction where any Charged Property owned by it is situated; |
(c) | any jurisdiction where it conducts its business; and |
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(d) | any jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it. |
Repayment Date means, in relation to each Advance and subject to clause 33.7 ( Business Days ), the date falling 24 months after the Utilisation Date for that Advance.
Repeating Representations means each of the representations and warranties set out in clauses 17.1 ( Status ) to 17.10 ( Ranking and effectiveness of security ), 17.17 ( No breach of laws ), 17.19 ( Taxation ), 17.20 ( Security and Financial Indebtedness ), 17.21 ( Legal and beneficial ownership ), 17.22 ( Shares ), 17.24 ( No adverse consequences ), 17.25 ( Copies of documents ), 17.27 ( No immunity ), 17.31 ( Other Finance Arrangements ) and 17.32 ( Money Laundering ).
Representative means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
Requisition Compensation means, in relation to a Ship, any compensation paid or payable by a government entity for the requisition for title, confiscation or compulsory acquisition of such Ship.
Revenue Account means an Account designated as a “ Revenue Account ” under clause 25 ( Bank accounts ).
Screen Rate means the London Interbank offered rate administered by ICE Benchmark Administration Limited (or if ICE Benchmark Administration Limited ceases to act in the role of administering and publishing LIBOR rates, the equivalent rate published by a subsequently appointed administrator of LIBOR) for dollars for the relevant period displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrowers and the Lenders.
Security Agent includes any person as may be appointed security agent and trustee for the other Finance Parties under this Agreement.
Security Documents means:
(a) | the Original Security Documents; |
(b) | any other document as may after the date of this Agreement be executed to guarantee and/or secure any amounts owing to the Finance Parties under this Agreement or any other Finance Document. |
Security Interest means a mortgage, charge, pledge, lien, assignment, trust, hypothecation or other security interest of any kind securing any obligation of any person or any other agreement or arrangement having a similar effect.
Security Value means, at any time, the amount in dollars which, at that time, is the aggregate of (a) the value of all of the Mortgaged Ships which have not then become a Total Loss (or, if less, the maximum amount capable of being secured by the Mortgages over the Mortgaged Ships) and (b) the value of any additional security then held by the Security Agent or any other Finance Party provided under clause 24 ( Minimum security value ), in each case as most recently determined in accordance with this Agreement.
Selection Notice means a notice substantially in the form set out in Schedule 5 ( Selection Notice ) given in accordance with clause 9 ( Interest Periods ).
Seller means, in relation to a Ship, the Seller specified in Schedule 2 ( Ship information ) in respect of such Ship.
Ship Commitment means, in relation to a Ship, the amount specified as such in respect of such Ship in Schedule 2 ( Ship information ), as cancelled or reduced pursuant to any provision of this Agreement.
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Ship Representations means each of the representations and warranties set out in clauses 17.28 ( Ship status ) and 17.29 ( Ship’s employment ).
Ships means each of the ships (to be delivered to the relevant Owners under the Contracts) described in Schedule 2 ( Ship information ), and Ship means any of them.
Spill means any spill, release or discharge of a Pollutant into the environment.
Subsidiary of a person means any other person:
(a) | directly or indirectly controlled by such person; or |
(b) | of whose dividends or distributions on ordinary voting share capital such person is entitled to receive more than 50%. |
Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) and Taxation shall be construed accordingly.
Technical Manager means, in relation to a Ship, GasLog LNG Services Ltd. or another manager appointed as the technical manager of that Ship by the relevant Owner in accordance with clause 20.3 ( Manager ).
Total Commitments means the aggregate of the Commitments, being $325,500,000 at the date of this Agreement.
Total Loss means, in relation to a vessel, its:
(a) | actual, constructive, compromised or arranged total loss; or |
(b) | requisition for title, confiscation or other compulsory acquisition by a government entity; or |
(c) | condemnation, capture, seizure, arrest or detention for more than 30 days; or |
(d) | hijacking or theft for more than 60 days. |
Total Loss Date means, in relation to the Total Loss of a vessel:
(a) | in the case of an actual total loss, the date it happened or, if such date is not known, the date on which the vessel was last reported; |
(b) | in the case of a constructive, compromised, agreed or arranged total loss, the earliest of: |
(i) | the date notice of abandonment of the vessel is given to its insurers; or |
(ii) | if the insurers do not admit such a claim, the date later determined by a competent court of law to have been the date on which the total loss happened; or |
(iii) | the date upon which a binding agreement as to such compromised or arranged total loss has been entered into by the vessel’s insurers; |
(c) | in the case of a requisition for title, confiscation or compulsory acquisition, the date it happened; |
(d) | in the case of condemnation, capture, seizure, arrest or detention, the date 30 days after the date upon which it happened; and |
(e) | in the case of hijacking or theft, the date 60 days after the date upon which it happened. |
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Total Loss Repayment Date means, where a Mortgaged Ship has become a Total Loss after its Delivery, the earlier of:
(a) | the date 180 days after its Total Loss Date; and |
(b) | the date upon which insurance proceeds or Requisition Compensation for such Total Loss are paid by insurers or the relevant government entity. |
Transfer Certificate means a certificate substantially in the form set out in Schedule 6 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Borrowers or, at any time after the occurrence of an Event of Default, required by the Agent.
Transfer Date means, in relation to a transfer pursuant to a Transfer Certificate, the later of:
(a) | the proposed Transfer Date specified in the Transfer Certificate; and |
(b) | the date on which the Agent executes the Transfer Certificate. |
Treasury Transaction means any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price.
Trust Property means, collectively:
(a) | all moneys duly received by the Security Agent under or in respect of the Finance Documents; |
(b) | any portion of the balance on any Account held by or charged to the Security Agent at any time; |
(c) | the Security Interests, guarantees, security, powers and rights given to the Security Agent under and pursuant to the Finance Documents including, without limitation, the covenants given to the Security Agent in respect of all obligations of any Obligor and any Manager; |
(d) | all assets paid or transferred to or vested in the Security Agent or its agent or received or recovered by the Security Agent or its agent in connection with any of the Finance Documents whether from any Obligor, any Manager or any other person; and |
(e) | all or any part of any rights, benefits, interests and other assets at any time representing or deriving from any of the above, including all income and other sums at any time received or receivable by the Security Agent or its agent in respect of the same (or any part thereof). |
Unpaid Sum means any sum due and payable but unpaid by an Obligor under the Finance Documents.
US Tax Obligor means:
(a) | a Borrower if it is resident for tax purposes in the United States of America; or |
(b) | an Obligor some or all of whose payments under the Finance Documents are from sources within the United States for US federal income tax purposes. |
Utilisation means the making of an Advance.
Utilisation Date means the date on which a Utilisation is made.
Utilisation Request means a notice substantially in the form set out in Schedule 4 ( Utilisation Request ).
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VAT means:
(a) | any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and |
(b) | any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or imposed elsewhere. |
1.2 | Construction |
1.2.1 | Unless a contrary indication appears, any reference in any of the Finance Documents to: |
(a) | Sections, clauses and Schedules are to be construed as references to the Sections and clauses of, and the Schedules to, the relevant Finance Document and references to a Finance Document include its Schedules; |
(b) | a Finance Document or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as it may from time to time be amended, restated, novated or replaced, however fundamentally; |
(c) | words importing the plural shall include the singular and vice versa; |
(d) | a time of day is to London time; |
(e) | any person includes its successors in title, permitted assignees or transferees; |
(f) | the knowledge, awareness and/or beliefs (and similar expressions) of any Obligor shall be construed so as to mean the knowledge, awareness and beliefs of the director and officers of such Obligor, having made due and careful enquiry; |
(g) | two or more persons are acting in concert if pursuant to an agreement or understanding (whether formal or informal) they actively co-operate, through the acquisition (directly or indirectly) of shares in an entity by any of them, either directly or indirectly to obtain or consolidate control of that entity; |
(h) | agreed form means: |
(i) | where a Finance Document has already been executed by all of the relevant parties to it, such Finance Document in its executed form; |
(ii) | prior to the execution of a Finance Document, the form of such Finance Document separately agreed in writing between the Agent (acting on the instructions of all the Lenders) and the Borrowers, whether before or after the date of this Agreement, as the form in which that Finance Document is to be executed or another form approved at the request of the Borrowers or, if not so agreed or approved, in the form reasonably required by the Agent; |
(i) | approved by the Majority Lenders or approved by the Lenders means approved in writing by the Agent acting on the instructions of the Majority Lenders or, as the case may be, all of the Lenders (on such conditions as they may respectively impose) and otherwise approved means approved in writing by the Agent acting on the instructions of the Majority Lenders (on such conditions as the Agent (acting on the instructions of the Majority Lenders) may impose) and approval and approve shall be construed accordingly; |
(j) | assets includes present and future properties, revenues and rights of every description; |
(k) | an authorisation means any authorisation, consent, concession, approval, resolution, licence, exemption, filing, notarisation or registration; |
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(l) | charter commitment means, in relation to a vessel, any charter or contract for the use, employment or operation of that vessel or the carriage of people and/or cargo or the provision of services by or from it and includes any agreement for pooling or sharing income derived from any such charter or contract; |
(m) | control of an entity means: |
(i) | the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to: |
(A) | cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of that entity; or |
(B) | appoint or remove all, or the majority, of the directors or other equivalent officers of that entity; or |
(C) | give directions with respect to the operating and financial policies of that entity with which the directors or other equivalent officers of that entity are obliged to comply; and/or |
(ii) | the holding beneficially of more than 50% of the issued share capital of that entity (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) (and, for this purpose, a Security Interest over share capital shall be disregarded in determining the beneficial ownership of such share capital), |
and controlled shall be construed accordingly;
(n) | the term disposal or dispose means a sale, transfer or other disposal (including by way of lease or loan but not including by way of loan of money) by a person of all or part of its assets, whether by one transaction or a series of transactions and whether at the same time or over a period of time, but not the creation of a Security Interest; |
(o) | dollar, $ and USD means the lawful currency of the United States of America; |
(p) | the equivalent of an amount specified in a particular currency (the specified currency amount ) shall be construed as a reference to the amount of the other relevant currency which can be purchased with the specified currency amount in the London foreign exchange market at or about 11:00 a.m. on the date the calculation falls to be made for spot delivery, as conclusively determined by the Agent (with the relevant exchange rate of any such purchase being the Agent’s spot rate of exchange ); |
(q) | a government entity means any government, state or agency of a state; |
(r) | a group of Lenders includes all the Lenders; |
(s) | a guarantee means any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness; |
(t) | indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; |
(u) | month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that: |
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(i) | if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that month (if there is one) or on the immediately preceding Business Day (if there is not); and |
(ii) | if there is no numerically corresponding day in that month, that period shall end on the last Business Day in that month, |
and the above rules in paragraphs (i) to (ii) will only apply to the last month of any period;
(v) | an obligation means any duty, obligation or liability of any kind; |
(w) | something being in the ordinary course of business of a person means something that is in the ordinary course of that person’s current day-to-day operational business (and not merely anything which that person is entitled to do under its Constitutional Documents); |
(x) | pay , prepay or repay in clause 26 ( Business restrictions ) includes by way of set-off, combination of accounts or otherwise; |
(y) | a person includes any individual, firm, company, corporation, government entity or any association, trust, joint venture, consortium or partnership or other entity (whether or not having separate legal personality); |
(z) | a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation and includes (without limitation) any Basel II Regulation or Basel III Regulation; |
(aa) | right means any right, privilege, power or remedy, any proprietary interest in any asset and any other interest or remedy of any kind, whether actual or contingent, present or future, arising under contract or law, or in equity; |
(bb) | trustee , fiduciary and fiduciary duty has in each case the meaning given to such term under applicable law; |
(cc) | (i) the liquidation , winding up , dissolution , or administration of person or (ii) a receiver or administrative receiver or administrator in the context of insolvency proceedings or security enforcement actions in respect of a person shall be construed so as to include any equivalent or analogous proceedings or any equivalent and analogous person or appointee (respectively) under the law of the jurisdiction in which such person is established or incorporated or any jurisdiction in which such person carries on business including (in respect of proceedings) the seeking or occurrences of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors; |
(dd) | an entity is a wholly-owned subsidiary of another entity if it has no members except that other entity and that other entity’s wholly-owned Subsidiaries or persons acting on behalf of that other entity or its wholly-owned Subsidiaries; and |
(ee) | a provision of law is a reference to that provision as amended or re-enacted. |
1.2.2 | Where in this Agreement a provision includes a monetary reference level in one currency, unless a contrary indication appears, such reference level is intended to apply equally to its equivalent in other currencies as of the relevant time for the purposes of applying such reference level to any other currencies. |
1.2.3 | Section, clause and Schedule headings are for ease of reference only. |
1.2.4 | Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement. |
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1.2.5 | A Default (other than an Event of Default) is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived or remedied to the satisfaction of the Agent acting on the instructions of the Lenders. |
1.2.6 | Unless a contrary indication appears, in the event of any inconsistency between the terms of this Agreement and the terms of any other Finance Document when dealing with the same or similar subject matter, the terms of this Agreement shall prevail. |
1.3 | Third party rights |
1.3.1 | Unless expressly provided to the contrary in a Finance Document for the benefit of a Finance Party or another Indemnified Person, a person who is not a party to a Finance Document has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act ) to enforce or to enjoy the benefit of any term of the relevant Finance Document. |
1.3.2 | Any Finance Document may be rescinded or varied by the parties to it without the consent of any person who is not a party to it (unless otherwise provided by this Agreement). |
1.3.3 | An Indemnified Person who is not a party to a Finance Document may only enforce its rights under that Finance Document through a Finance Party and if and to the extent and in such manner as the Finance Party may determine. |
1.4 | Finance Documents |
Where any other Finance Document provides that this clause 1.4 shall apply to that Finance Document, any other provision of this Agreement which, by its terms, purports to apply to all or any of the Finance Documents and/or any Obligor shall apply to that Finance Document as if set out in it but with all necessary changes.
1.5 | Conflict of documents |
The terms of the Finance Documents (other than as relates to the creation and/or perfection of security) are subject to the terms of this Agreement and, in the event of any conflict between any provision of this Agreement and any provision of any Finance Document (other than in relation to the creation and/or perfection of security) the provisions of this Agreement shall prevail.
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SECTION 2 - THE FACILITY
2 | The Facility |
2.1 | The Facility |
Subject to the terms of this Agreement, the Lenders make available to the Borrowers a term loan facility in an aggregate amount equal to the Total Commitments.
2.2 | Finance Parties’ rights and obligations |
2.2.1 | The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents. |
2.2.2 | The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt. |
2.2.3 | A Finance Party may, except as otherwise stated in the Finance Documents (including clauses 30.26 ( All enforcement action through the Security Agent ) and 31.2 ( Finance Parties acting together )), separately enforce its rights under the Finance Documents. |
2.3 | Borrowers’ rights and obligations |
2.3.1 | The obligations of each Borrower under this Agreement are joint and several. Failure by a Borrower to perform its obligations under this Agreement shall constitute a failure by all of the Borrowers. |
2.3.2 | Each Borrower irrevocably and unconditionally jointly and severally with each other Borrower: |
(a) | agrees that it is responsible for the performance of the obligations of each other Borrower under this Agreement; |
(b) | acknowledges and agrees that it is a principal and original debtor in respect of all amounts due from the Borrowers under this Agreement; and |
(c) | agrees with each Finance Party that, if any obligation of another Borrower under this Agreement is or becomes unenforceable, invalid or illegal for any reason it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any and all Losses it incurs as a result of another Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by that other Borrower under this Agreement. The amount payable under this indemnity shall be equal to the amount which that Finance Party would otherwise have been entitled to recover. |
2.3.3 | The obligations of each Borrower under the Finance Documents shall continue until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably and unconditionally paid or discharged in full, regardless of any intermediate payment or discharge in whole or in part. |
2.3.4 | If any discharge, release or arrangement (whether in respect of the obligations of a Borrower or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Borrowers under this Agreement will continue or be reinstated as if the discharge, release or arrangement had not occurred. |
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2.3.5 | The obligations of each Borrower under the Finance Documents shall not be affected by an act, omission, matter or thing which, but for this clause (whether or not known to it or any Finance Party), would reduce, release or prejudice any of its obligations under the Finance Documents including: |
(a) | any time, waiver or consent granted to, or composition with, any Obligor or other person; |
(b) | the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any other Obligor; |
(c) | the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; |
(d) | any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person; |
(e) | any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security; |
(f) | any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or |
(g) | any insolvency or similar proceedings. |
2.3.6 | Each Borrower waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Borrower under any Finance Document. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary. |
2.3.7 | Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably and unconditionally paid or discharged in full, each Finance Party (or any trustee or agent on its behalf) may: |
(a) | refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Borrower will be entitled to the benefit of the same; and |
(b) | hold in an interest-bearing suspense account any money received from any Borrower or on account of any Borrower’s liability under any Finance Document. |
2.3.8 | Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs (on such terms as it may require), no Borrower shall exercise any rights (including rights of set-off) which it may have by reason of performance by it of its obligations under the Finance Documents: |
(a) | to be indemnified by another Obligor; |
(b) | to claim any contribution from any other Obligor or any guarantor of any Obligor’s obligations under the Finance Documents; and/or |
(c) | to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party; and/or |
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(d) | to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which that Borrower is liable under this Agreement or any of the other Finance Documents; and/or |
(e) | to exercise any right of set-off against any other Obligor; and/or |
(f) | to claim or prove as a creditor of any other Obligor in competition with any Finance Party. |
If a Borrower receives any benefit, payment or distribution in relation to such rights it will promptly pay an equal amount to the Agent for application in accordance with clause 33 ( Payment mechanics ). This only applies until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full.
3 | Purpose |
3.1 | Purpose |
The Borrowers shall apply all amounts borrowed under the Facility in accordance with this clause 3.
3.2 | Use on Delivery |
The Ship Commitment for each Ship shall be made available solely for the purpose of assisting the relevant Owner to finance part of the Contract Price of that Ship payable on its Delivery by paying the same to the relevant Seller.
3.3 | Monitoring |
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4 | Conditions of Utilisation |
4.1 | Initial conditions precedent |
The Borrowers may not deliver a Utilisation Request unless the Agent, or its duly authorised representative, has received all of the documents and other evidence listed in Part 1 of Schedule 3 ( Initial c onditions precedent ) in form and substance satisfactory to the Agent.
4.2 | Ship and security conditions precedent |
The Ship Commitment in respect of a Ship may only be drawn down under this Agreement if on or before the Utilisation of the relevant Advance for that Ship, the Agent, or its duly authorised representative, has received all of the documents and evidence listed in Part 2 of Schedule 3 ( Ship and security conditions precedent ) in relation to such Ship in form and substance satisfactory to the Agent.
4.3 | Notice to Lenders |
The Agent shall notify the Borrowers and the Lenders promptly after receipt by it of the documents and evidence referred to in this clause 4 in form and substance satisfactory to it. Other than to the extent that the Majority Lenders notify the Agent in writing to the contrary before the Agent gives any such notification, the Lenders authorise (but do not require) the Agent to give that notification. The Agent shall not be liable for any damages, costs or losses whatsoever as a result of giving any such notification.
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4.4 | Further conditions precedent |
The Lenders will only be obliged to comply with clause 5.4 ( Lenders’ participation ) if on the date of the Utilisation Request and on the proposed Utilisation Date for an Advance:
(a) | no Default is continuing or would result from the proposed Utilisation; |
(b) | the Repeating Representations and, in relation to the first Utilisation, all of the other representations set out in clause 17 ( Representations ) (except the Ship Representations), are true; |
(c) | no events, facts, conditions or circumstances shall exist or have arisen or occurred (and neither the Agent nor any Lender shall have become aware of other events, facts, conditions or circumstances not previously known to it), which the Agent (acting on the instructions of the Majority Lenders) shall determine, have had or could reasonably be expected to have, a Material Adverse Effect; |
(d) | the Ship Representations are true so far as they relate to the Ship relating to the Utilisation being made; and |
(e) | no Total Loss Date has occurred in relation to a Total Loss. |
4.5 | Waiver of conditions precedent |
The conditions in this clause 4 are inserted solely for the benefit of the Finance Parties and may be waived on their behalf in whole or in part and with or without conditions by the Agent acting on the instructions of the Majority Lenders.
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SECTION 3 - UTILISATION
5 | Utilisation |
5.1 | Delivery of a Utilisation Request |
The Borrowers may utilise the Facility by delivery to the Agent of a duly completed Utilisation Request not later than 11:00 a.m. three (3) Business Days before the proposed Utilisation Date.
5.2 | Completion of a Utilisation Request |
5.2.1 | A Utilisation Request is irrevocable and will not be regarded as having been duly completed unless: |
(a) | the proposed Utilisation Date in respect of an Advance is a Business Day falling not later than the Last Availability Date for that Advance; |
(b) | the currency and amount of the Utilisation comply with clause 5.3 ( Currency and amount ); |
(c) | the proposed Interest Period complies with clause 9 ( Interest Periods ); and |
(d) | it identifies the purpose for the Utilisation and that purpose complies with clause 3 ( Purpose ) and it identifies the relevant Ship Commitment to which it relates . |
5.2.2 | The Ship Commitment in respect of a Ship may only be drawn down in a single amount in one Advance. |
5.3 | Currency and amount |
5.3.1 | The currency specified in a Utilisation Request must be dollars. |
5.3.2 | Only one Advance under one Utilisation may be made in respect of each Ship Commitment. |
5.3.3 | The amount available under an Advance and the amount of a proposed Advance specified in a Utilisation Request and advanced in respect of a Ship, shall not exceed the lower of: |
(a) | the Ship Commitment for the Ship to which the proposed Advance relates; and |
(b) | the amount in dollars which is equal to 70% of the Contract Price of that Ship; and |
(c) | the amount of the Available Facility. |
5.4 | Lenders’ participation |
5.4.1 | If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Advance available by the relevant Utilisation Date through its Facility Office. |
5.4.2 | The amount of each Lender’s participation in each Advance will be equal to the proportion borne by its undrawn Commitment to the undrawn Total Commitments immediately prior to making the Advance. |
5.4.3 | The Agent shall promptly notify each Lender of the amount of the Advance and the amount of its participation in the Advance, in each case three Business Days before the proposed Utilisation Date. |
5.4.4 | The Agent shall pay all amounts received by it in respect of each Advance (and its own participation in it, if any) to the Borrowers or for the account of any of them or to the relevant Seller, in each case in accordance with the instructions contained in the relevant Utilisation Request. |
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5.5 | Pre-placement of Advances |
5.5.1 | Notwithstanding that the Borrowers may have not yet satisfied all of the conditions precedent set out in Schedule 3 ( Conditions precedent ), in order to facilitate compliance by any Owner with a Contract, and provided that: |
(a) | the Borrowers have submitted a Utilisation Request in respect of an Advance in accordance with this clause 5; |
(b) | the Borrowers have satisfied the conditions precedent set out in paragraphs 1, 3, 4, 5(a), 5(b), 5(c), 5(f), 5(g), 5(h), 6 (other than in relation to the Account Security), 7 and 8 of Part 1 of Schedule 3 ( Initial c onditions precedent ); and |
(c) | in the opinion of the Agent (acting on the instructions of the Majority Lenders) the Borrowers are reasonably likely to satisfy all remaining and outstanding conditions precedent set out in Part 1 of Schedule 3 ( Initial conditions precedent ) and in Part 2 of Schedule 3 (Ship and security c onditions precedent ) in relation to the Ship to which such Advance relates within 10 Business Days from the Utilisation Date for such Advance and in any event on or before the Release for such Advance (as defined below in clause 5.5.2), |
the Agent (acting on the instructions of the Majority Lenders) may, subject to the other terms and conditions of this clause 5.5 and the other provisions of this Agreement, make such Advance, on the date specified in the relevant Utilisation Request, being the date on which the 90% balance of the relevant Contract Price is required to be deposited in accordance with the relevant Contract with the bank nominated by the relevant Seller in the relevant Contract (a Seller’s Bank ).
5.5.2 | An Advance utilised pursuant to this clause 5.5 (a Pre-placed Advance ) shall (subject to the other provisions of this Agreement) be remitted by the Agent to the Revenue Account of the Owner of the relevant Ship and each Borrower hereby irrevocably undertakes with the Finance Parties forthwith upon crediting to such Revenue Account, to instruct the Account Bank to immediately remit the Pre-placed Advance to the relevant Seller’s Bank as a cash deposit in the Agent’s name with the relevant Seller’s Bank (the Bank Account ) with its correspondent bank in New York, and will be held by the relevant Seller’s Bank to the order of the Agent for release by the Agent to the relevant Seller (a Release ) and only subject to such irrevocable instructions addressed from the Agent to the relevant Seller’s Bank as are acceptable to the Agent ( Irrevocable Instructions ). |
5.5.3 | Any such Irrevocable Instructions in relation to a Pre-placed Advance shall in any event provide (inter alia) that the relevant Pre-placed Advance shall not be released to the relevant Seller or to its order, and the Agent (and the authorised representatives of the Agent specified in the Irrevocable Instructions) shall not agree to counter-sign the “Protocol of Delivery and Acceptance” in respect of the relevant Ship nor release the relevant Pre-placed Advance to the relevant Seller or its order, unless and until: |
(a) | the Agent is satisfied that the “Protocol of Delivery and Acceptance” in respect of that Ship has been signed by the relevant Seller and the relevant Owner; and |
(b) | the Agent is satisfied that all the conditions precedent set out in Part 1 of Schedule 3 (Initial c onditions precedent ) and Part 2 of Schedule 3 ( Ship and security conditions precedent ) in relation to such Ship have been satisfied in full. |
5.5.4 | Each Borrower hereby irrevocably and unconditionally undertakes that it shall not give any instructions to a relevant Seller’s Bank in respect of a Pre-placed Advance that are inconsistent with any Irrevocable Instructions in respect of that Pre-placed Advance. |
5.5.5 | The Borrowers shall immediately prepay a Pre-placed Advance, together with interest thereon (calculated in accordance with clause 8.1 ( Calculation of interest )), on the date on which the relevant Seller’s Bank is required to return the moneys funded by that Pre-placed Advance to the Agent in accordance with the relevant Irrevocable Instructions (and regardless of whether the relevant Seller’s Bank has then carried out such instructions), provided that any moneys actually |
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returned to the Agent from the relevant Seller’s Bank shall be applied by the Agent in satisfaction of such prepayment obligation of the Borrowers and in payment of any amounts payable by the Borrowers under clause 7.8 ( Restrictions ) as a result of such prepayment.
5.5.6 | In case of application of this clause 5.5 in respect of any Pre-placed Advance, each Pre-placed Advance shall accrue interest in accordance with the terms of clause 8.1 ( Calculation of interest ) from the Utilisation Date for that Advance. |
5.5.7 | Any amount prepaid under clause 5.5.5 in respect of an Advance shall be, subject to the other terms of this Agreement, available to be redrawn by the Borrowers where Delivery of the relevant Ship has been delayed, in again assisting the relevant Owner to satisfy its obligations under the relevant Contract. |
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SECTION 4 - REPAYMENT, PREPAYMENT AND CANCELLATION
6 | Repayment |
The Borrowers shall repay each Advance in full on its Repayment Date.
7 | Illegality, prepayment and cancellation |
7.1 | Illegality |
If it becomes unlawful or otherwise impossible in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or any of the other Finance Documents, or for any Lender to fund or maintain its participation in the Loan:
(a) | that Lender shall promptly notify the Agent upon becoming aware of that event; |
(b) | upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled and the remaining Ship Commitments and the Total Commitments shall each be reduced rateably; and |
(c) | the Borrowers shall repay that Lender’s participation in the Loan on the last day of the Interest Period occurring after the Agent has notified the Borrowers or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law). |
7.2 | Change of Control |
7.2.1 | If there is a Change of Control: |
(a) | the Borrowers shall promptly notify the Agent of the same upon its occurrence; and |
(b) | the Agent, upon becoming notified by any Party of a Change of Control may, and if instructed by the Majority Lenders shall, by notice to the Borrowers cancel the Total Commitments, with effect from the date on which such Change of Control occurs, and the Borrowers shall forthwith prepay the Loan in full together with all other amounts outstanding under this Agreement and the other Finance Documents. |
7.2.2 | If GasLog ceases to be listed on an Approved Exchange, the Borrowers shall notify the Agent of the same upon its occurrence, and the Agent, upon being notified may, and if instructed by the Majority Lenders shall, cancel the Total Commitments, with effect from the date on which such de-listing occurs, and the Borrowers shall forthwith prepay the Loan in full together with all other amounts outstanding under this Agreement and the other Finance Documents. |
7.3 | Voluntary cancellation |
The Borrowers may, if they give the Agent not less than ten (10) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of $5,000,000) of the Facility. Upon any such cancellation the Total Commitments shall be reduced by the same amount and the relevant Commitments of the Lenders reduced pro rata.
7.4 | Voluntary prepayment |
The Borrowers may, if they give the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior written notice, prepay the whole or any part of an Advance (but if in part, being an amount that reduces the amount of such Advance by a minimum amount of $5,000,000 and is a multiple of $5,000,000), on the last day of an Interest Period in respect of the amount to be prepaid or on any other date subject to paying any Break Costs.
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7.5 | Right of replacement or cancellation and prepayment in relation to a single Lender/right of cancellation in relation to a Defaulting Lender |
7.5.1 | If: |
(a) | any sum payable to any Lender by an Obligor is required to be increased under clause 12.2 ( Tax gross-up ); or |
(b) | any Lender claims indemnification from the Borrowers under clause 12.3 ( Tax indemnity ) or clause 13.1 ( Increased Costs ); or |
(c) | any FATCA Protected Lender notifies the Agent of a FATCA Event pursuant to clause 7.9 ( Mandatory repayment and cancellation of FATCA Protected Lenders ), |
the Borrowers may, whilst the circumstance giving rise to the requirement for that increase or indemnification or FATCA Event continues for a maximum period of 30 days, give the Agent notice of cancellation of the Commitment of that Lender and their intention to procure the repayment of that Lender’s participation in the Loan or give the Agent notice of their intention to replace that Lender in accordance with clause 7.5.4.
7.5.2 | On receipt of a notice referred to in clause 7.5.1 above, the Commitment of that Lender shall immediately be reduced to zero and (unless the Commitment of the relevant Lender is replaced in accordance with clause 7.5.4) the remaining Ship Commitments and the Total Commitments shall each be reduced rateably. |
7.5.3 | On the last day of each Interest Period which ends after the Borrowers have given notice under clause 7.5.1 above in relation to a Lender (or, if earlier, the date specified by the Borrowers in that notice), the Borrowers shall repay that Lender’s participation in the Loan. |
7.5.4 | The Borrowers may, in the circumstances set out in clause 7.5.1, on 15 Business Days’ prior notice to the Agent and that Lender, replace that Lender by requiring that Lender to transfer (and, to the extent permitted by law, that Lender shall transfer) pursuant to clause 28 ( Changes to the Lenders ) all (and not part only) of its rights under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity selected by the Borrowers which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with clause 28 ( Changes to the Lenders ) for a purchase price in cash or other cash payment payable at the time of the transfer equal to the aggregate of: |
(a) | the outstanding principal amount of such Lender’s participation in the Loan; |
(b) | all accrued interest owing to such Lender to the extent that the Agent has not given a notification under clause 28.8 ( Pro-rata interest settlement ); |
(c) | the Break Costs which would have been payable to such Lender pursuant to clause 10.4 ( Break Costs ) had the Borrowers prepaid in full that Lender’s participation in the Loan on the date of the transfer; and |
(d) | all other amounts payable to that Lender under the Finance Documents on the date of the transfer. |
7.5.5 | The replacement of a Lender pursuant to clause 7.5.4 shall be subject to the following conditions: |
(a) | the Borrowers shall have no right to replace the Agent; |
(b) | neither the Agent nor any Lender shall have any obligation to find a replacement Lender; |
(c) | in no event shall the Lender replaced under clause 7.5.4 be required to pay or surrender any of the fees received by such Lender pursuant to the Finance Documents; and |
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(d) | the Lender shall only be obliged to transfer its rights pursuant to clause 7.5.4 above once it is satisfied that it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to that transfer. |
7.5.6 | If any Lender becomes a Defaulting Lender, the Borrowers may, at any time whilst the Lender continues to be a Defaulting Lender, give the Agent 5 Business Days’ notice of cancellation of the Commitment of that Lender. |
7.5.7 | On the notice referred to in clause 7.5.6 above becoming effective, the Commitment of the Defaulting Lender shall immediately be reduced to zero and (unless the Commitment of the relevant Lender is replaced in accordance with clause 39.6 ( Replacement of a Defaulting Lender )) the remaining Ship Commitments and the Total Commitments shall each be reduced rateably. |
7.5.8 | A Lender shall perform the checks described in clause 7.5.5(d) above as soon as reasonably practicable following delivery of a notice referred to in clause 7.5.4 above and shall notify the Agent and the Borrowers when it is satisfied that it has complied with those checks. |
7.6 | Sale or Total Loss |
On a Mortgaged Ship’s Disposal Repayment Date the Borrowers shall prepay in full the Advance relevant to such Ship.
7.7 | Automatic cancellation |
Any part of the Total Commitments relating to an Advance which has neither become available nor been utilised by the Last Availability Date for that Advance shall be automatically cancelled at close of business in London on the Last Availability Date for that Advance.
7.8 | Restrictions |
7.8.1 | Any notice of cancellation or prepayment given by any Party under this clause 7 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment and, in the case of a prepayment under clause 7.4 ( Voluntary prepayment ), the relevant Advance to be prepaid. |
7.8.2 | Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty. |
7.8.3 | The Borrowers may not re-borrow any part of the Facility which is repaid or prepaid (subject as provided in clause 5.5.7 ( Pre-placement of Advances ). |
7.8.4 | The Borrowers shall not repay or prepay all or any part of the Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement. |
7.8.5 | No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated. |
7.8.6 | If the Agent receives a notice under this clause 7 it shall promptly forward a copy of that notice to either the Borrowers or the affected Lender, as appropriate. |
7.8.7 | If the Total Commitments are partially reduced under this Agreement (other than under clause 7.1 ( Illegality ), clause 7.5 ( Right of replacement or cancellation and prepayment in relation to a single Lender/Right of cancellation in relation to a Defaulting Lender ) and clause 7.9 ( Mandatory repayment and cancellation of FATCA Protected Lenders )), the Commitments of the Lenders shall be reduced rateably and in all cases where the Total Commitments are partially reduced under this Agreement (other than in relation to a cancellation of all of the Ship Commitment for a Ship) the remaining Ship Commitments shall be reduced rateably. |
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7.8.8 | If the Loan is partially prepaid under this Agreement (other than under clause 7.1 ( Illegality ), clause 7.5 ( Right of replacement or cancellation and prepayment in relation to a single Lender/Right of cancellation in relation to a Defaulting Lender ) and clause 7.9 ( Mandatory repayment and cancellation of FATCA Protected Lenders )), the amount prepaid shall reduce the participation of the Lenders in the Loan rateably. |
7.8.9 | If the Loan is partially prepaid under this Agreement (other than under clause 7.4 ( Voluntary prepayment ) or clause 7.6 ( Sale or Total Loss )), all remaining Advances shall be reduced rateably. |
7.9 | Mandatory repayment and cancellation of FATCA Protected Lenders |
7.9.1 | If on the date falling three months before the earliest FATCA Application Date for any payment by a Party to a FATCA Protected Lender (or to the Agent for the account of that Lender), that Lender is not a FATCA Exempt Party and, in the opinion of that Lender (acting reasonably), that Party will, as a consequence, be required to make a FATCA Deduction from a payment to that Lender (or to the Agent for the account of that Lender) on or after that FATCA Application Date (a FATCA Event ): |
(a) | that Lender shall, reasonably promptly after that date, notify the Agent of that FATCA Event and the relevant FATCA Application Date; |
(b) | if, on the date falling one month before such FATCA Application Date, that FATCA Event is continuing and that Lender has not been repaid or replaced pursuant to clause 7.5 ( Right of replacement or cancellation and prepayment in relation to a single Lender / Right of cancellation in relation to a Defaulting Lender ) (other than by reason of that Lender’s failure to comply with its obligations pursuant to clause 7.5.4): |
(i) | that Lender may, at any time between one month and two weeks before such FATCA Application Date, notify the Agent; |
(ii) | upon the Agent notifying the Borrowers, the Commitment of that Lender will be immediately cancelled; and |
(iii) | the Borrowers shall repay that Lender’s participation in the Loan made to the Borrowers on the last day of the Interest Period for the Loan occurring after the Agent has notified the Borrowers or, if earlier, the last Business Day before the relevant FATCA Application Date. |
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SECTION 5 - COSTS OF UTILISATION
8 | Interest |
8.1 | Calculation of interest |
The rate of interest on each Advance for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
(a) | Margin; and |
(b) | LIBOR. |
8.2 | Payment of interest |
The Borrowers shall pay accrued interest on each Advance on the last day of each Interest Period for that Advance (and, if an Interest Period is longer than six months, on the dates falling at six monthly intervals after the first day of that Interest Period).
8.3 | Default interest |
8.3.1 | If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to clause 8.3.2 below, is 2 per cent. higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted the Loan for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing in accordance with this clause 8.3 shall be immediately payable by the Obligors on demand by the Agent. |
8.3.2 | If any overdue amount consists of all or part of the Loan which became due on a day which was not the last day of an Interest Period relating to the Loan or the relevant part of it: |
(a) | the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to the Loan; and |
(b) | the rate of interest applying to the overdue amount during that first Interest Period shall be 2 per cent. higher than the rate which would have applied if the overdue amount had not become due. |
8.3.3 | Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable. |
8.4 | Notification of rates of interest |
The Agent shall notify the Lenders and the Borrowers of the determination of a rate of interest under this Agreement on the Quotation Day.
9 | Interest Periods |
9.1 | Selection of Interest Periods |
9.1.1 | The Borrowers may select an Interest Period for an Advance in the Utilisation Request for such Advance or (if such Advance has already been borrowed) in a Selection Notice. |
9.1.2 | Each Selection Notice is irrevocable and must be delivered to the Agent by the Borrowers not later than 11:00 a.m. three Business Days before the last day of the then current Interest Period. |
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9.1.3 | If the Borrowers fail to deliver a Selection Notice to the Agent in accordance with clause 9.1.2, the relevant Interest Period will be 6 months. |
9.1.4 | Subject to this clause 9, the Borrowers may select an Interest Period of 6 months or any other period not exceeding 12 months agreed between the Borrowers and the Agent on the instructions of all the Lenders. |
9.1.5 | No Interest Period in respect of an Advance shall extend beyond the Repayment Date for that Advance. |
9.1.6 | The first Interest Period for an Advance shall start on the Utilisation Date of that Advance and each subsequent Interest Period for that Advance shall start on the last day of its preceding Interest Period. |
9.2 | Non-Business Days |
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
10 | Changes to the calculation of interest |
10.1 | Absence of quotations |
Subject to clause 10.2 ( Market Disruption Event ), if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by 11:00 a.m. on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.
10.2 | Market Disruption Event |
10.2.1 | If a Market Disruption Event occurs in relation to the Loan for any Interest Period, then the rate of interest on each Lender’s share of the Loan for the Interest Period shall be the percentage rate per annum which is the sum of: |
(a) | the Margin; and |
(b) | the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in the Loan from whatever source it may reasonably select. |
10.2.2 | If a Market Disruption Event occurs the Agent shall, as soon as practicable, notify the Borrowers. |
10.2.3 | In this Agreement Market Disruption Event means that: |
(a) | at or about noon on the Quotation Day for the relevant Interest Period LIBOR is to be determined by reference to the Reference Banks and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR for the relevant Interest Period; or |
(b) | before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in the Loan equal or exceed 50% of the Loan) or, if prior to the first Utilisation Date, whose Commitments equal or exceed 50% of the Total Commitments) that the cost to it of funding its participation in the Loan from whatever source it may reasonably select would be in excess of LIBOR. |
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10.3 | Alternative basis of interest or funding |
10.3.1 | If a Market Disruption Event occurs and the Agent or the Borrowers so require, the Agent and the Borrowers shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest. |
10.3.2 | Any alternative basis agreed pursuant to clause 10.3.1 above shall, with the prior consent of all the Lenders be binding on all Parties. |
10.4 | Break Costs |
10.4.1 | The Borrowers shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of the Loan or Unpaid Sum being paid by the Borrowers on a day other than the last day of an Interest Period for the Loan or Unpaid Sum or relevant part of it. |
10.4.2 | Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue. |
11 | Fees |
11.1 | Commitment commission |
11.1.1 | The Borrowers shall pay to the Agent (for the account of each Lender) a fee in dollars computed at the rate of 1.00% per annum on the undrawn and uncancelled portion of that Lender’s Commitment calculated on a daily basis from the date of this Agreement (the start date ). |
11.1.2 | The Borrowers shall pay the accrued commitment commission on (a) the earlier of (i) the first Utilisation Date and (ii) the last day of the period of six months commencing on the start date, (b) on the last day of each successive period of six months and (c) on the Last Availability Date to occur and, if cancelled in full, on the cancelled amount of the relevant Lender’s Commitment at the time the cancellation is effective. |
11.1.3 | No commitment commission is payable to the Agent (for the account of a Lender) on the undrawn portion of the Commitment of that Lender for any day on which that Lender is a Defaulting Lender. |
11.2 | Arrangement fee |
The Borrowers shall pay to the Arranger (for distribution to the Arranger and the Lenders in a manner agreed between the Arranger and the Lenders in the Arranger’s discretion) an arrangement fee in the amount and at the times agreed in a Fee Letter.
11.3 | Agency fees |
The Borrowers shall pay to the Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.
11.4 | Security agency fee |
The Borrowers shall pay to the Security Agent (for its own account) a security agency fee in the amount and at the times agreed in a Fee Letter.
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SECTION 6 - ADDITIONAL PAYMENT OBLIGATIONS
12 | Tax gross-up and indemnities |
12.1 | Definitions |
12.1.1 | In this Agreement: |
Protected Party means a Finance Party or, in relation to clause 14.4 (Indemnity concerning security) and clause 14.7 (Interest) insofar as it relates to interest on any amount demanded by that Indemnified Person under clause 14.4 (Indemnity concerning security) , and any Indemnified Person, which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
Tax Deduction means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
Tax Payment means either the increase in a payment made by an Obligor to a Finance Party under clause 12.2 ( Tax gross-up ) or a payment under clause 12.3 ( Tax indemnity ).
12.1.2 | Unless a contrary indication appears, in this clause 12 a reference to determines or determined means a determination made in the absolute discretion of the person making the determination. |
12.2 | Tax gross-up |
12.2.1 | Each Obligor shall make all payments to be made by it under any Finance Document without any Tax Deduction, unless a Tax Deduction is required by law. |
12.2.2 | The Borrowers shall, promptly upon any of them becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction), notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Borrowers and that Obligor. |
12.2.3 | If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor under the relevant Finance Document shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required. |
12.2.4 | If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law. |
12.2.5 | Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party (including by way of receipts) that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority. |
12.3 | Tax indemnity |
12.3.1 | The Borrowers shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document. |
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12.3.2 | Clause 12.3.1 above shall not apply: |
(a) | with respect to any Tax assessed on a Finance Party: |
(i) | under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or |
(ii) | under the law of the jurisdiction in which that Finance Party’s Facility Office is located in respect of amounts received or receivable in that jurisdiction, |
if that Tax is imposed on or calculated by reference to the overall net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
(b) | to the extent a loss, liability or cost is compensated for by an increased payment under clause 12.2 (Tax gross-up ); |
(c) | to the extent a loss, liability or cost is compensated for by a payment under clause 12.4 ( Indemnities on after Tax basis ); or |
(d) | to the extent a loss, liability or cost relates to a FATCA Deduction required to be made by a Party. |
12.3.3 | A Protected Party making, or intending to make a claim under clause 12.3.1 above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Borrowers. |
12.3.4 | A Protected Party shall, on receiving a payment from an Obligor under this clause 12.3, notify the Agent. |
12.4 | Indemnities on after Tax basis |
12.4.1 | If and to the extent that any sum payable to any Protected Party by the Borrowers under any Finance Document by way of indemnity or reimbursement proves to be insufficient, by reason of any Tax suffered thereon, for that Protected Party to discharge the corresponding liability to a third party, or to reimburse that Protected Party for the cost incurred by it in discharging the corresponding liability to a third party, the Borrowers shall pay that Protected Party such additional sum as (after taking into account any Tax suffered by that Protected Party on such additional sum) shall be required to make up the relevant deficit. |
12.4.2 | If and to the extent that any sum (the Indemnity Sum ) constituting (directly or indirectly) an indemnity to any Protected Party but paid by the Borrowers to any person other than that Protected Party, shall be treated as taxable in the hands of the Protected Party, the Borrowers shall pay to that Protected Party such sum (the Compensating Sum ) as (after taking into account any Tax suffered by that Protected Party on the Compensating Sum) shall reimburse that Protected Party for any Tax suffered by it in respect of the Indemnity Sum. |
12.4.3 | For the purposes of this clause 12.4 a sum shall be deemed to be taxable in the hands of a Protected Party if it falls to be taken into account in computing the profits or gains of that Protected Party for the purposes of Tax and, if so, that Protected Party shall be deemed to have suffered Tax on the relevant sum at the rate of Tax applicable to that Protected Party’s profits or gains for the period in which the payment of the relevant sum falls to be taken into account for the purposes of such Tax. |
12.5 | FATCA Information |
12.5.1 | Subject to clause 12.5.3 below, each Party shall, within ten Business Days of a reasonable request by another Party: |
(a) | confirm to that other Party whether it is: |
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(i) | a FATCA Exempt Party; or |
(ii) | not a FATCA Exempt Party; and |
(b) | supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable “passthru payment percentage” or other information required under the US Treasury Regulations or other official guidance including intergovernmental agreements) as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA. |
12.5.2 | If a Party confirms to another Party pursuant to clause 12.5.1(a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly. |
12.5.3 | Clause 12.5.1 above shall not oblige any Finance Party to do anything which would or might in its reasonable opinion constitute a breach of: |
(a) | any law or regulation; |
(b) | any fiduciary duty; or |
(c) | any duty of confidentiality. |
12.5.4 | If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with clause 12.5.1 above (including, for the avoidance of doubt, where clause 12.5.3 above applies), then: |
(a) | if that Party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such Party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and |
(b) | if that Party failed to confirm its applicable “passthru payment percentage” then such Party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable “passthru payment percentage” is 100%, |
until (in each case) such time as the Party in question provides the requested confirmation, forms, documentation or other information.
12.6 | FATCA Deduction |
12.6.1 | Each Party may make any FATCA Deduction it is required by FATCA to make, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. |
12.6.2 | Each Party shall promptly upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction) notify the Party to whom it is making the payment and, in addition, shall notify the Borrowers, the Agent and the other Finance Parties. |
12.7 | Stamp taxes |
The Borrowers shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
12.8 | Value added tax |
12.8.1 | All amounts set out, or expressed in a Finance Document to be payable by any party to a Finance Party which (in whole or in part) constitute the consideration for a supply or supplies for VAT |
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purposes shall be deemed to be exclusive of any VAT which is chargeable on such supply or supplies, and accordingly, subject to clause 12.8.3 below, if VAT is or becomes chargeable on any supply made by any Finance Party to any party under a Finance Document, and such Finance Party is required to account to the relevant tax authority for the VAT, that party shall pay to the Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such party).
12.8.2 | If VAT is or becomes chargeable on any supply made by any Finance Party (the Supplier ) to any other Finance Party (the Recipient ) under a Finance Document, and any party to a Finance Document other than the Recipient (the Subject Party ) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration): |
(a) | (where the Supplier is the person required to account to the relevant tax authority for the VAT) the Subject Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this paragraph (i) applies) promptly pay to the Subject Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and |
(b) | (where the Recipient is the person required to account to the relevant tax authority for the VAT) the Subject Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT. |
12.8.3 | Where a Finance Document requires any party to it to reimburse or indemnify a Finance Party for any cost or expense, that party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment of in respect of such VAT from the relevant tax authority. |
12.8.4 | Any reference in this clause 12.8 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term “representative member” to have the same meaning as in the Value Added Tax Act 1994). |
12.8.5 | In relation to any supply made by a Finance Party to any party under a Finance Document, if reasonably requested by such Finance Party, that party must promptly provide such Finance Party with details of that party’s VAT registration and such other information as is reasonably requested in connection with such Finance Party’s VAT reporting requirements in relation to such supply. |
13 | Increased Costs |
13.1 | Increased Costs |
13.1.1 | Subject to clause 13.3 ( Exceptions ), the Borrowers shall, within three Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Cost incurred by that Finance Party or any of its Affiliates which: |
(a) | arises as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement; and/or |
(b) | is a Basel III Increased Cost. |
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13.1.2 | In this Agreement Increased Costs means: |
(a) | a reduction in the rate of return from the Facility or on a Finance Party’s (or its Affiliate’s) overall capital; |
(b) | an additional or increased cost; or |
(c) | a reduction of any amount due and payable under any Finance Document, |
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
13.2 | Increased Cost claims |
13.2.1 | A Finance Party intending to make a claim pursuant to clause 13.1 ( Increased Costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers. |
13.2.2 | Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs. |
13.3 | Exceptions |
13.3.1 | Clause 13.1 ( Increased Costs ) does not apply to the extent any Increased Cost is: |
(a) | attributable to a Tax Deduction required by law to be made by an Obligor; |
(b) | compensated for by clause 12.3 ( Tax indemnity ) (or would have been compensated for under clause 12.3 ( Tax indemnity ) but was not so compensated solely because any of the exclusions in clause 12.3.2 applied); |
(c) | attributable to a FATCA Deduction required to be made by a Party; or |
(d) | attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation. |
13.3.2 | In this clause 13.3, a reference to a Tax Deduction has the same meaning given to the term in clause 12.1 ( Definitions ). |
14 | Other indemnities |
14.1 | Currency indemnity |
14.1.1 | If any sum due from an Obligor under the Finance Documents (a Sum ), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the First Currency ) in which that Sum is payable into another currency (the Second Currency ) for the purpose of: |
(a) | making or filing a claim or proof against that Obligor; and/or |
(b) | obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings, |
that Obligor shall, as an independent obligation, within three Business Days of demand by a Finance Party, indemnify each Finance Party to whom that Sum is due against any Losses arising out of or as a result of the conversion including any discrepancy between (i) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (ii) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
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14.1.2 | Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable. |
14.2 | Other indemnities |
14.2.1 | The Borrowers shall (or shall procure that another Obligor will), within three Business Days of demand by a Finance Party, indemnify each Finance Party against any Losses incurred by that Finance Party as a result of: |
(a) | the occurrence of any Event of Default; |
(b) | a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any Losses arising as a result of clause 32 ( Sharing among the Finance Parties ); |
(c) | funding, or making arrangements to fund, its participation in the Loan requested by the Borrowers in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or |
(d) | the Loan (or part of the Loan) not being prepaid in accordance with a notice of prepayment given by the Borrowers. |
14.2.2 | The Borrowers shall (or shall procure that another Obligor will), within three Business Days of demand by an Indemnified Person, indemnify each Indemnified Person against any and all Losses, joint or several that may be incurred by or asserted or awarded against any Indemnified Person, in each case arising out of or in connection with or relating to any claim investigation, litigation or proceeding (or the preparation of any defence with respect thereto) commenced or threatened in relation to this Agreement (or the transactions contemplated hereby) or any use made or proposed to be made with the proceeds of the Facility (including an Environmental Claim made or asserted against such Indemnified Person if such Environmental Claim would not have been, or been capable of being, made or asserted against such Indemnified Person if the Finance Parties had not entered into any of the Finance Documents and/or exercised any of their rights, powers and discretions thereby conferred and/or performed any of their obligations thereunder and/or been involved in any of the transactions contemplated by the Finance Documents). This indemnity shall apply whether or not such claims, investigation, litigation or proceedings is brought by any Obligor, any other Group Member, any of their shareholders, their Affiliates, or creditors, or an Indemnified Person or any other person, or an Indemnified Person is otherwise a party thereto, except to the extent such Losses are found in a final non-appealable judgement by a court of competent jurisdiction to have resulted from such Indemnified Person’s gross negligence or wilful default. Each Indemnified Person may enforce and enjoy the benefit of this clause 14.2.2 under the Third Parties Act. |
14.3 | Indemnity to the Agent and the Security Agent |
The Borrowers shall promptly indemnify the Agent and the Security Agent against:
14.3.1 | any and all Losses incurred by the Agent or the Security Agent as a result of: |
(a) | without prejudice to clause 30.7.2(a) as extended to the Security Agent by clause 30.22 ( Application of certain clauses to Security Agent ), investigating any event which it reasonably believes is a Default; |
(b) | acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; |
(c) | instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts as permitted under this Agreement; or |
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(d) | any action taken by the Agent or the Security Agent or any of their representatives, agents or contractors in connection with any powers conferred by any Security Document to enforce any Security Interest thereunder or to remedy any breach of any Obligor’s obligations under the Finance Documents; and |
14.3.2 | any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent or the Security Agent (otherwise than by reason of the Agent’s or the Security Agent’s gross negligence or wilful default) (or, in the case of any cost, loss or liability pursuant to clause 33.11 ( Disruption to payment systems etc. ) notwithstanding the Agent’s or the Security Agent’s negligence, gross negligence or any other category of liability whatsoever (but not including any claim based on the fraud of the Agent) in acting as Agent or the Security Agent under the Finance Documents. |
14.4 | Indemnity concerning security |
14.4.1 | The Borrowers shall (or shall procure that another Obligor will) promptly indemnify each Indemnified Person against any and all Losses incurred by it in connection with: |
(a) | any failure by the Borrowers to comply with clause 16 ( Costs and expenses ); |
(b) | acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; |
(c) | the taking, holding, protection or enforcement of the Security Documents; |
(d) | the exercise or purported exercise of any of the rights, powers, discretions, authorities and remedies vested in the Security Agent and/or any other Finance Party and each Receiver by the Finance Documents or by law unless and to the extent that it was caused by its gross negligence or wilful default; |
(e) | any claim (whether relating to the environment or otherwise) made or asserted against the Indemnified Person which would not have arisen but for the execution or enforcement of one or more Finance Documents (unless and to the extent it is caused by the gross negligence or wilful default of that Indemnified Person); or |
(f) | any breach by an Obligor of any of its obligations expressed to be assumed by it in the Finance Documents. |
14.4.2 | The Security Agent may, in priority to any payment to the other Finance Parties, indemnify itself out of the Trust Property in respect of, and pay and retain, all sums necessary to give effect to the indemnity in this clause 14.4 and shall have a lien on the Security Documents and the proceeds of the enforcement of those Security Documents for all moneys payable to it. |
14.5 | Continuation of indemnities |
The indemnities by the Borrowers in favour of the Indemnified Persons contained in this Agreement shall continue in full force and effect notwithstanding any breach by any Finance Party or the Borrowers of the terms of this Agreement, the repayment or prepayment of the Loan, the cancellation of the Total Commitments or the repudiation by the Agent or the Borrowers of this Agreement.
14.6 | Third Parties Act |
Each Indemnified Person may rely on the terms of clause 14.4 (Indemnity concerning security) and clauses 12 (Tax gross-up and indemnities) and 14.7 (Interest) insofar as it relates to interest on any amount demanded by that Indemnified Person under clause 14.4 (Indemnity concerning security) , subject to clause 1.3 ( Third party rights ) and the provisions of the Third Parties Act.
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14.7 | Interest |
Moneys becoming due by the Borrowers to any Indemnified Person under the indemnities contained in this clause 14 or elsewhere in this Agreement shall be paid on demand made by such Indemnified Person and shall be paid together with interest on the sum demanded from the date of demand therefor to the date of reimbursement by the Borrowers to such Indemnified Person (both before and after judgment) at the rate referred to in clause 8.3 (Default interest) .
14.8 | Exclusion of liability |
No Indemnified Person will be in any way liable or responsible to any Obligor (whether as mortgagee in possession or otherwise) who is a Party or is a party to a Finance Document to which this clause applies for any loss or liability arising from any act, default, omission or misconduct of that Indemnified Person, except to the extent caused by its own gross negligence or wilful default. Any Indemnified Person may rely on this clause 14.8 subject to clause 1.3 ( Third party rights ) and the provisions of the Third Parties Act.
14.9 | Fax and email indemnity |
The Borrowers shall indemnify each Finance Party against any Losses together with any VAT thereon which any of the Finance Parties may sustain or incur as a consequence of any fax or email communication purporting to originate from the Borrowers to the Agent or the Security Agent being made or delivered fraudulently or without proper authorisation (unless such Losses are the direct result of the gross negligence or wilful default of the relevant Finance Party or the Agent or the Security Agent).
14.10 | Waiver |
In no event shall any of the Finance Parties be liable on any theory of liability for any special, indirect, consequential or punitive damages and the Obligors hereby waive, release and agree (for and on behalf of themselves and on behalf of the other Group Members and their respective Affiliates and shareholders) not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in their favour.
15 | Mitigation by the Lenders |
15.1 | Mitigation |
15.1.1 | Each Finance Party shall, in consultation with the Borrowers, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of clause 7.1 ( Illegality ), clause 12 ( Tax gross-up and indemnities ), clause 13 ( Increased Costs ) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office. |
15.1.2 | Clause 15.1.1 does not in any way limit the obligations of any Obligor under the Finance Documents. |
15.2 | Limitation of liability |
15.2.1 | The Borrowers shall promptly indemnify each Finance Party for all costs and expenses incurred by that Finance Party as a result of steps taken by it under clause 15.1 ( Mitigation ). |
15.2.2 | A Finance Party is not obliged to take any steps under clause 15.1 ( Mitigation ) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it. |
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16 | Costs and expenses |
16.1 | Transaction expenses |
The Borrowers shall promptly within five Business Days of demand pay the Agent, the Arranger and the Security Agent the amount of all costs and expenses (including fees, costs and expenses of legal advisers and, subject to clause 23.17 ( Independent report ), insurance and other consultants and advisers) properly incurred by any of them (and by any Receiver) in connection with the negotiation, preparation, printing, execution, syndication, registration and perfection and any release, discharge or reassignment of:
(a) | this Agreement and any other documents referred to in this Agreement and the Original Security Documents; |
(b) | any other Finance Documents executed or proposed to be executed after the date of this Agreement including any executed to provide additional security under clause 24 ( Minimum security value );or |
(c) | any Security Interest expressed or intended to be granted by a Finance Document. |
16.2 | Amendment costs |
If an Obligor requests an amendment, waiver or consent, the Borrowers shall, within five Business Days of demand by the Agent or the Security Agent, reimburse the Agent or the Security Agent for the amount of all costs and expenses (including fees, costs and expenses of legal advisers and insurance and other consultants and advisers) reasonably incurred by the Agent or properly incurred by the Security Agent (and by any Receiver) in responding to, evaluating, negotiating or complying with that request or requirement.
16.3 | Enforcement, preservation and other costs |
The Borrowers shall within five (5) Business Days from demand by a Finance Party, pay to each Finance Party (through the Agent, except where a payment is to be made to the Security Agent, in which case such payment shall be made directly to the Security Agent) the amount of all costs and expenses (including fees, costs and expenses of legal advisers and insurance and other consultants, brokers, surveyors and advisers) properly incurred by that Finance Party in connection with:
(a) | the enforcement of, or the preservation of any rights under, any Finance Document and any proceedings initiated by or against any Indemnified Person and as a consequence of holding the Charged Property or enforcing those rights and any proceedings instituted by or against any Indemnified Person as a consequence of taking or holding the Security Documents or enforcing those rights; |
(b) | any valuation carried out under clause 24 ( Minimum security value ); or |
(c) | any inspection carried out under clause 22.8 ( Inspection and notice of drydockings ) or any survey carried out under clause 22.16 ( Survey report ). |
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SECTION 7 - REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
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17.5 | Validity and admissibility in evidence | ||
17.5.1 | All authorisations required or desirable: | ||
(a) | to enable each Obligor lawfully to enter into, exercise its rights and comply with its obligations under each Finance Document and any Charter Document to which it is a party; | ||
(b) | to make each Finance Document and any Charter Document to which it is a party admissible in evidence in its Relevant Jurisdiction; and | ||
(c) | to ensure that each of the Security Interests created under the Security Documents has the priority and ranking contemplated by them, | ||
have been obtained or effected or (as the case may be) will be obtained or effected when entered into, and are, or (as the case may be) will be when entered into, in full force and effect except any authorisation or filing referred to in clause 17.12 ( No filing or stamp taxes ), which authorisation or filing will be promptly obtained or effected within any applicable period. | |||
17.5.2 | All authorisations necessary for the conduct of the business, trade and ordinary activities of each Obligor and each Manager have been obtained or effected and are in full force and effect if failure to obtain or effect those authorisations might have a Material Adverse Effect. | ||
17.6 | Governing law and enforcement | ||
17.6.1 | The choice of governing law as provided in any Finance Document and any Charter Document will be recognised and enforced in each Obligor’s Relevant Jurisdictions. | ||
17.6.2 | Any judgment obtained in England in relation to an Obligor will be recognised and enforced in each Obligor’s Relevant Jurisdictions. | ||
17.7 | Information | ||
17.7.1 | Any Information is true and accurate in all material respects at the time it was given or made. | ||
17.7.2 | There are no facts or circumstances or any other information which could make the Information incomplete, untrue, inaccurate or misleading in any material respect. | ||
17.7.3 | The Information does not omit anything which could make the Information incomplete, untrue, inaccurate or misleading in any material respect. | ||
17.7.4 | All opinions, projections, forecasts or expressions of intention contained in the Information and the assumptions on which they are based have been arrived at after due and careful enquiry and consideration and were believed to be reasonable by the person who provided that Information as at the date it was given or made. | ||
17.7.5 | For the purposes of this clause 17.7, Information means: any information provided by any Obligor to any of the Finance Parties in connection with the Finance Documents, the Charter Documents or the Contracts or the transactions referred to in them (including that contained in any information memorandum). | ||
17.8 | Original Financial Statements | ||
17.8.1 | The Original Financial Statements were prepared in accordance with GAAP consistently applied. | ||
17.8.2 | The Original Financial Statements give a true and fair view of the financial condition and results of operations of the relevant Obligors and the Group during the relevant financial year. | ||
17.8.3 | There has been no material adverse change in its assets, business or financial condition (or the assets, business or consolidated financial condition of any of the Obligors or the Group) since the date of the Original Financial Statements. |
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18.7 | Use of websites | ||
18.7.1 | The Borrowers may satisfy their obligation under this Agreement to deliver any information in relation to those Lenders (the Website Lenders ) who accept this method of communication by posting this information onto an electronic website designated by the Borrowers and the Agent (the Designated Website ) if: | ||
(a) | the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method; | ||
(b) | both the Borrowers and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and | ||
(c) | the information is in a format previously agreed between the Borrowers and the Agent. | ||
If any Lender (a Paper Form Lender ) does not agree to the delivery of information electronically then the Agent shall notify the Borrowers accordingly and the Borrowers shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Borrowers shall supply the Agent with at least one copy in paper form of any information required to be provided by it. | |||
18.7.2 | The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrowers and the Agent. | ||
18.7.3 | The Borrowers shall promptly upon any of them becoming aware of its occurrence notify the Agent if: | ||
(a) | the Designated Website cannot be accessed due to technical failure; | ||
(b) | the password specifications for the Designated Website change; | ||
(c) | any new information which is required to be provided under this Agreement is posted onto the Designated Website; | ||
(d) | any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or | ||
(e) | any Borrower becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software. | ||
If the Borrowers notify the Agent under paragraphs (a) or (e) above, all information to be provided by the Borrowers under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing. | |||
18.7.4 | Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Borrowers shall comply with any such request within ten Business Days. | ||
18.8 | “Know your customer” checks | ||
18.8.1 | If: | ||
(a) | the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement; | ||
(b) | any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or |
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(i) | enable it to perform its obligations under the Finance Documents, the Charter Documents and the Contracts; | ||
(ii) | ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document, Charter Document or Contract; and | ||
(iii) | carry on its business, where failure to do so has, or is reasonably likely to have, a Material Adverse Effect. |
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contractors with access to, and permit inspection of, books and records of any Group Member, in each case at reasonable times and upon reasonable notice. | ||||
19.16 | Bribery and corruption | |||
19.16.1 | No Obligor shall engage in: | |||
(a) | Corrupt Practices, Fraudulent Practices, Collusive Practices or Coercive Practices, including the procurement or the execution of any contract for goods or works relating to its functions; | |||
(b) | Money Laundering or acted in breach of any applicable law relating to Money Laundering; or | |||
(c) | the Financing of Terrorism. | |||
19.16.2 | Without prejudice to the generality of clause 19.16.1: | |||
(a) | no Obligor or other Group Member will directly or indirectly use the proceeds of the Facility for any purpose which would breach the Bribery Act 2010 or the United States Foreign Corrupt Practices Act of 1977; and | |||
(b) | the Borrowers shall procure that GasLog shall (and GasLog will procure that each other Group Member will): | |||
(i) | conduct its business in compliance with the Bribery Act 2010 or the United States Foreign Corrupt Practices Act of 1977; and | |||
(ii) | maintain policies and procedures designed to promote and achieve compliance with such laws. | |||
19.16.3 | For the purposes of this clause 19.16 and clause 18.9 ( Money Laundering ), the following definitions shall apply: | |||
Collusive Practice means an arrangement between two or more parties without the knowledge, but designed to improperly influence the actions, of another party. | ||||
Corrupt Practice means the offering, giving, receiving, or soliciting, directly or indirectly, anything of value to improperly influence the actions of another party. | ||||
Coercive Practice means impairing or harming or threatening to impair or harm, directly or indirectly, any party or its property or to improperly influence the actions of that party. | ||||
Financing of Terrorism means the act of providing or collecting funds with the intention that they be used, or in the knowledge that they are to be used, in order to carry out terrorist acts. | ||||
Fraudulent Practice means any action, including misrepresentation, to obtain a financial or other benefit or avoid an obligation, by deception. | ||||
Money Laundering means: | ||||
(a) | the conversion or transfer of property, knowing it is derived from a criminal offence, for the purpose of concealing or disguising its illegal origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of its actions; | |||
(b) | the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property knowing that it is derived from a criminal offence; or |
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(c) | the acquisition, possession or use of property knowing at the time of its receipt that it is derived from a criminal offence. | ||
19.17 | Liquidity | ||
The Borrowers shall procure that there are maintained, upon the Utilisation of an Advance for a Ship and at all times thereafter in the Revenue Account of the Owner of that Ship, minimum cash balances of no less than $1,500,000 (namely, at all times $1,500,000 per Revenue Account of each Mortgaged Ship). | |||
20 | Dealings with Ships | ||
Each Borrower undertakes that this clause 20 will be complied with in relation to each Mortgaged Ship throughout the relevant Ship’s Mortgage Period. | |||
20.1 | Ship’s name and registration | ||
(a) | The Ship’s name shall only be changed after prior notice to the Agent. | ||
(b) | The Ship shall be permanently registered with the relevant Registry under the laws of its Flag State. Except with approval, the Ship shall not be registered under any other flag or at any other port or fly any other flag (other than that of its Flag State) provided that no such approval shall be required for the registration of the Ship under the flag of another Approved Flag State as long as replacement Security Interests are granted in respect of the Ship (which are, in the opinion of the Lenders, equivalent to those in place prior to such registration) in favour of the Security Agent and the other Finance Parties immediately following the registration of the Ship under the flag of that Approved Flag State. If that registration is for a limited period, it shall be renewed at least 45 days before the date it is due to expire and the Agent shall be notified of that renewal at least 30 days before that date. | ||
(c) | Nothing will be done and no action will be omitted if that might result in such registration being forfeited or imperilled or the Ship being required to be registered under the laws of another state of registry. | ||
20.2 | Sale or other disposal of Ship | ||
(a) | Except with approval of the Agent (acting on the instructions of all the Lenders), no Owner will sell, or agree to transfer, abandon or otherwise dispose of its Ship or any share or interest in it. | ||
(b) | Paragraph (a) above does not apply to any disposal of a Ship which is in compliance with clause 7.6 ( Sale and Total Loss ) and where, upon completion of the sale of that Ship, the Borrowers prepay the Advance relevant to that Ship in full and pay all other amounts due and payable under this Agreement and the other Finance Documents at the time of such prepayment. | ||
20.3 | Manager | ||
A manager of the Ship (other than the Managers) shall not be appointed unless that manager and the terms of its appointment are approved and it has delivered a duly executed Manager’s Undertaking to the Security Agent. The relevant Owner shall not agree to any change to the terms of appointment of a manager whose appointment has been approved unless such change is also approved. | |||
20.4 | Copy of Mortgage on board | ||
A properly certified copy of the relevant Mortgage shall be kept on board the Ship with its papers and shown to anyone having business with the Ship which might create or imply any commitment |
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20.11 | Payment of Earnings |
The relevant Owner’s Earnings from the Ship shall be paid in the way required by the Ship’s Deed of Covenant and any Charter Assignment. If any Earnings are held by brokers or other agents, they shall be paid to the Security Agent, if it requires this after the Earnings have become payable to it under the Ship’s Deed of Covenant and any Charter Assignment. | |
21 | Chartering undertakings |
Each Borrower undertakes that this clause 21 will be complied with in relation to each Mortgaged Ship and its Charter Documents throughout the Facility Period. | |
21.1 | Variations |
Except with approval (not to be unreasonably withheld or delayed), the Charter Documents shall not be varied (and, for the avoidance of doubt, any assignment, transfer or novation of a Charter Document, whether from the relevant Owner or the relevant Charterer, without approval shall constitute a variation). | |
21.2 | Release of waivers |
Except with approval, there shall be no release by the relevant Owner of any obligation of any other person under the Charter Documents (including by way of novation, assignment or transfer), no waiver of any breach of any such obligation and no consent to anything which would otherwise be such a breach. | |
21.3 | Termination by Owner |
Except with approval, the relevant Owner shall not terminate or rescind any Charter Document or withdraw the Ship from service under the Charter or take any similar action. | |
21.4 | Charter performance |
The relevant Owner shall perform its obligations under the Charter Documents and use its reasonable endeavours to ensure that each other party to them performs their obligations under the Charter Documents. | |
21.5 | Notice of assignment |
The relevant Owner shall give notice of assignment of the Charter Documents to the other parties to such documents in the form specified by the Charter Assignment for that Ship and shall ensure that the Agent receives a copy of that notice acknowledged by each addressee in the form specified therein at the times required under clause 4 ( Conditions of Utilisation ) and Schedule 3 ( Conditions precedent ). | |
21.6 | Payment of Charter Earnings |
All Earnings which the relevant Owner is entitled to receive under the Charter Documents shall be paid in the manner required by the Finance Documents. | |
22 | Condition and operation of Ships |
Each Borrower undertakes that this clause 21 will be complied with in relation to each Mortgaged Ship throughout the relevant Ship’s Mortgage Period. |
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22.1 | Defined terms |
In this clause 21 and in Schedule 3 (Conditions precedent) : | |
applicable code means any code or prescribed procedures required to be observed by the Ship or the persons responsible for its operation under any applicable law (including but not limited to those currently known as the ISM Code and the ISPS Code). | |
applicable law means all laws and regulations applicable to vessels registered in the Ship’s Flag State or which for any other reason apply to the Ship or to its condition or operation at any relevant time. | |
applicable operating certificate means any certificates or other document relating to the Ship or its condition or operation required to be in force under any applicable law or any applicable code. | |
22.2 | Repair |
The Ship shall be kept in a good, safe and efficient state of repair. The quality of workmanship and materials used to repair the Ship or replace any damaged, worn or lost parts or equipment shall be sufficient to ensure that the Ship’s value is not reduced. | |
22.3 | Modification |
Except with approval by the Majority Lenders, the structure, type or performance characteristics of the Ship shall not be modified in a way which could or might materially alter the Ship or materially reduce its value. | |
22.4 | Removal of parts |
Except with approval by the Majority Lenders, no material part of the Ship or any equipment shall be removed from the Ship if to do so would materially reduce its value (unless at the same time it is replaced with equivalent parts or equipment owned by the relevant Owner free of any Security Interest except under the Security Documents). | |
22.5 | Third party owned equipment |
Except with approval by the Majority Lenders, equipment owned by a third party shall not be installed on the Ship unless it can be removed without risk of causing damage to the structure or fabric of the Ship or without incurring significant expense. | |
22.6 | Maintenance of class; compliance with laws and codes |
The Ship’s class shall be the relevant Classification with the relevant Classification Society and neither the Classification nor the Classification Society of the Ship shall be changed without approval. The Ship and every person who owns, operates or manages the Ship shall comply with all laws applicable to vessels in the Flag State of the Ship or which for any other reason apply to the Ship or to its condition or operation and the requirements of all applicable codes. There shall be kept in force and on board the Ship or in such person’s custody any applicable operating certificates which are required by applicable laws or applicable codes to be carried on board the Ship or to be in such person’s custody. | |
22.7 | Surveys |
The Ship shall be submitted to continuous surveys and any other surveys which are required for it to maintain the Classification as its class. Copies of reports of those surveys shall be provided promptly to the Agent if it so requests. |
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22.8 | Inspection and notice of drydockings | ||
The Agent and/or surveyors or other persons appointed by it for such purpose shall be allowed to board the Ship at all reasonable times, subject to prior notice to the relevant Owner and without hindering the Ship’s operations, to inspect it and given all proper facilities needed for that purpose. The Agent shall be given reasonable advance notice of any intended drydocking of the Ship (whatever the purpose of that drydocking). The Borrowers shall bear the cost of only one such inspection of the Ship per calendar year unless there is an Event of Default. | |||
22.9 | Prevention of arrest | ||
All debts, damages, liabilities and outgoings (due and payable and not contested by the relevant Borrower in good faith) which have given, or may reasonably give, rise to maritime, statutory or possessory liens on, or claims enforceable against, the Ship, its Earnings or Insurances shall be promptly paid and discharged. | |||
22.10 | Release from arrest | ||
The Ship, its Earnings and Insurances shall promptly within 15 days (or such longer period as may be approved) be released from any arrest, detention, attachment or levy, and any legal process against the Ship shall be promptly within 15 days (or such longer period as may be approved) discharged, by whatever action is required to achieve that release or discharge. | |||
22.11 | Information about Ship | ||
The Agent shall promptly be given any information which it may reasonably require about the Ship or its employment, position, use or operation, including details of towages and salvages, and copies of all its charter commitments entered into by or on behalf of any Obligor or any Manager, and copies of any applicable operating certificates. | |||
22.12 | Notification of certain events | ||
The Agent shall promptly be notified of: | |||
(a) | any damage to the Ship where the cost of the resulting repairs may exceed the Major Casualty Amount for such Ship; | ||
(b) | any occurrence which may result in the Ship becoming a Total Loss; | ||
(c) | any requisition of the Ship for hire; | ||
(d) | any Environmental Incident involving the Ship and Environmental Claim being made in relation to such an incident; | ||
(e) | any withdrawal of any applicable operating certificate; | ||
(f) | the receipt of notification that any application for such a certificate has been refused; | ||
(g) | any requirement or recommendation made in relation to the Ship by any insurer or the Ship’s Classification Society or by any competent authority which is not, or cannot be, complied with in the manner or time required or recommended; and | ||
(h) | any arrest or detention of the Ship or any exercise or purported exercise of a lien or other claim on the Ship or its Earnings or Insurances. | ||
22.13 | Payment of outgoings | ||
All tolls, dues and other outgoings whatsoever in respect of the Ship and its Earnings and Insurances shall be paid promptly. Proper accounting records shall be kept of the Ship and its Earnings. |
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22.14 | Evidence of payments | ||
The Agent shall be allowed proper and reasonable access, subject to prior written notice and provided that the operations of the relevant Borrower are not in any way hindered, to those accounting records when it reasonably requests it and, when it reasonably requires it, shall be given satisfactory evidence that: | |||
(a) | the wages and allotments and the insurance and pension contributions of the Ship’s crew are being promptly and regularly paid; | ||
(b) | all deductions from its crew’s wages in respect of any applicable Tax liability are being properly accounted for; and | ||
(c) | the Ship’s master has no claim for disbursements other than those incurred by him in the ordinary course of trading on the voyage then in progress. | ||
22.15 | Repairers’ liens | ||
Except with approval by the Majority Lenders, the Ship shall not be put into any other person’s possession for work to be done on the Ship if the cost of that work will exceed or is likely to exceed the Major Casualty Amount unless the relevant Borrower has established to the reasonable satisfaction of the Agent that it has sufficient reserves with the Account Bank to pay for or that person gives the Security Agent a written undertaking in approved terms not to exercise any lien on the Ship or its Earnings for any of the cost of such work. | |||
22.16 | Survey report | ||
As soon as reasonably practicable after the Agent requests it, the Agent shall be given a report on the seaworthiness and/or safe operation of the Ship, from approved surveyors or inspectors. If any recommendations are made in such a report they shall be complied with in the way and by the time recommended in the report. | |||
22.17 | Lawful use | ||
The Ship shall not be employed: | |||
(a) | in any way or in any activity which is unlawful under international law or the domestic laws of any relevant country; | ||
(b) | in carrying illicit or prohibited goods; | ||
(c) | in a way which may make it liable to be condemned by a prize court or destroyed, seized or confiscated; or | ||
(d) | if there are hostilities in any part of the world (whether war has been declared or not), in carrying contraband goods | ||
and the persons responsible for the operation of the Ship shall take all necessary and proper precautions to ensure that this does not happen, including participation in industry or other voluntary schemes available to the Ship and in which leading operators of ships operating under the same flag or engaged in similar trades generally participate at the relevant time. | |||
22.18 | War zones | ||
Except with approval of the Majority Lenders, no Ship shall enter or remain in any zone which has been declared a war zone by any government entity or that Ship’s war risk insurers except if any requirements of that Ship’s insurers necessary to ensure that such Ship remains properly insured in accordance with the Finance Documents and complies with any requirements (including any requirement for the payment of extra insurance premiums) which the insurers specify have been satisfied and written notice has been given to the Agent. |
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23 | Insurance | ||
Each Borrower undertakes that this clause 23 shall be complied with in relation to each Mortgaged Ship and its Insurances throughout the relevant Ship’s Mortgage Period. | |||
23.1 | Insurance terms | ||
In this clause 23: | |||
excess risks means the proportion (if any) of claims for general average, salvage and salvage charges not recoverable under the hull and machinery insurances of a vessel in consequence of the value at which the vessel is assessed for the purpose of such claims exceeding its insured value. | |||
excess war risk P&I cover means cover for claims only in excess of amounts recoverable under the usual war risk cover including (but not limited to) hull and machinery, crew and protection and indemnity risks. | |||
hull cover means insurance cover against the risks identified in clause 23.2(a). | |||
minimum hull cover means, in relation to a Mortgaged Ship, an amount equal at the relevant time to 120% of such proportion of the Loan as is equal to the proportion which the market value of such Mortgaged Ship bears to the aggregate of the market values of all of the Mortgaged Ships at the relevant time. | |||
P&I risks means the usual risks (including liability for oil pollution, excess war risk P&I cover) covered by a protection and indemnity association which is a member of the International Group of protection and indemnity associations (or, if the International Group ceases to exist, any other leading protection and indemnity association or other leading provider of protection and indemnity insurance) (including, without limitation, the proportion (if any) of any collision liability not covered under the terms of the hull cover). | |||
23.2 | Coverage required | ||
The Ship shall at all times be insured: | |||
(a) | against fire and usual marine risks (including excess risks) and war risks (including war protection and indemnity risks and terrorism risks) on an agreed value basis, for at least its minimum hull cover and no less than its market value, and the hull and machinery policy shall be for no less than 80% of the agreed insurable value); | ||
(b) | against P&I risks for the highest amount then available in the insurance market for vessels of similar age, size and type as the Ship (but, in relation to liability for oil pollution, for an amount of not less than $1,000,000,000); | ||
(c) | against such other risks and matters which the Agent (acting on the instructions of all Lenders) notifies it that it considers reasonable for a prudent shipowner or operator to insure against at the time of that notice; and | ||
(d) | on terms which comply with the other provisions of this clause 23. | ||
23.3 | Placing of cover | ||
The insurance coverage required by clause 23.2 ( Coverage required ) shall be: | |||
(a) | in the name of the Ship’s Owner and (in the case of the Ship’s hull cover) no other person (other than any of the Finance Parties if required by the Majority Lenders) (unless such other person is approved and, if so required by the Agent, has duly executed and delivered a first priority assignment of its interest in the Ship’s Insurances to the Security Agent in an |
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Insurances and the amounts, risks and terms in, against and on which the Insurances are proposed to be renewed. | |
23.9 | Instructions for renewal |
At least seven days before any of the Ship’s Insurances are due to expire, instructions shall be given to brokers, insurers and associations for them to be renewed or replaced on or before their expiry. | |
23.10 | Confirmation of renewal |
The Ship’s Insurances shall be renewed upon their expiry in a manner and on terms which comply with this clause 23 and confirmation of such renewal given by approved brokers or insurers to the Agent at least seven days (or such shorter period as may be approved) before such expiry. | |
23.11 | P&I guarantees |
Any guarantee or undertaking required by any protection and indemnity or war risks association in relation to the Ship shall be provided by the relevant Owner when required by the association. | |
23.12 | Insurance documents |
The Agent shall be provided with pro forma copies of all insurance policies and other documentation issued by brokers, insurers and associations in connection with the Ship’s Insurances as soon as they are available after they have been placed or renewed and all insurance policies and other documents relating to the Ship’s Insurances shall be deposited with any approved brokers or (if not deposited with approved brokers) the Agent or some other approved person. | |
23.13 | Letters of undertaking |
Unless otherwise approved where the Agent (upon the instructions of the Majority Lenders) is satisfied that equivalent protection is afforded by the terms of the relevant Insurances and/or any applicable law and/or a letter of undertaking provided by another person, on each placing or renewal of the Insurances, the Agent shall be provided promptly with letters of undertaking in an approved form (having regard to general insurance market practice and law at the time of issue of such letter of undertaking) from the relevant brokers, insurers and associations. | |
23.14 | Insurance Notices and Loss Payable Clauses |
The interest of the Security Agent as assignee of the Insurances shall be endorsed on all insurance policies and other documents by the incorporation of a Loss Payable Clause and an Insurance Notice in respect of the Ship and its Insurances signed by its Owner and, unless otherwise approved, each other person assured under the relevant cover (other than the Security Agent, if it is itself an assured). | |
23.15 | Insurance correspondence |
If so required by the Agent, the Agent shall promptly be provided with copies of all written communications between the assureds and brokers, insurers and associations relating to any of the Ship’s Insurances as soon as they are available. | |
23.16 | Qualifications and exclusions |
All requirements applicable to the Ship’s Insurances shall be complied with and the Ship’s Insurances shall only be subject to approved exclusions or qualifications. |
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23.17 | Independent report |
If the Agent asks the Borrowers for a detailed report from an approved independent firm of marine insurance brokers giving their opinion on the adequacy of the Insurances then the Agent shall be provided promptly by the Borrowers with such a report at no cost to the Agent or (if the Agent obtains such a report itself, which it shall be entitled to do) the Borrowers shall reimburse the Agent for the cost of obtaining that report. The Borrowers shall not bear the cost of more than one such report per Ship per calendar year, unless there is an Event of Default. | |
23.18 | Collection of claims |
All documents and other information and all assistance required by the Agent to assist it and/or the Security Agent in trying to collect or recover any claims under the Ship’s Insurances shall be provided promptly. | |
23.19 | Employment of Ship |
The Ship shall only be employed or operated in conformity with the terms of the Ship’s Insurances (including any express or implied warranties) and not in any other way (unless the insurers have consented and any additional requirements of the insurers have been satisfied). | |
23.20 | Declarations and returns |
If any of the Ship’s Insurances are on terms that require a declaration, certificate or other document to be made or filed before the Ship sails to, or operates within, an area, those terms shall be complied with within the time and in the manner required by those Insurances. | |
23.21 | Application of recoveries |
All sums paid under the Ship’s Insurances to anyone other than the Security Agent shall be applied in repairing the damage and/or in discharging the liability in respect of which they have been paid except to the extent that the repairs have already been paid for and/or the liability already discharged. | |
23.22 | Settlement of claims |
Any claim under the Ship’s Insurances for a Total Loss or Major Casualty shall only be settled, compromised or abandoned with prior approval. | |
24 | Minimum security value |
Each Borrower undertakes that this clause 24 will be complied with throughout the Facility Period. | |
24.1 | Valuation of assets |
For the purpose of the Finance Documents, the value at any time of any Mortgaged Ship or a Ship before its Delivery or any other asset over which additional security is provided under this clause 24 will be its value as most recently determined in accordance with this clause 24. | |
24.2 | Valuation frequency |
Valuation of each Mortgaged Ship and each such other asset in accordance with this clause 24 may be required by the Agent at any time and shall be requested at least semi-annually. | |
24.3 | Expenses of valuation |
The Borrowers shall bear, and reimburse to the Agent where incurred by the Agent, all costs and expenses of providing: |
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(a) | one set of valuations of each Mortgaged Ship per half-year (which shall not include the costs and expenses of providing any valuations required under clause 4 ( Conditions of Utilisation ) which shall also be for the account of the Borrower); and | ||
(b) | in addition to those referred to in (a) above, any sets of valuations carried out at any time when an Event of Default has occurred and is continuing. | ||
24.4 | Valuations procedure | ||
The value of any Mortgaged Ship and each Ship before its Delivery shall be determined in accordance with, and by valuers approved and appointed in accordance with, this clause 24. Additional security provided under this clause 24 shall be valued in such a way, on such a basis and by such persons (including the Agent itself) as may be approved by the Majority Lenders or as may be agreed in writing by the Borrowers and the Agent (acting on the instructions of the Majority Lenders). | |||
24.5 | Currency of valuation | ||
Valuations shall be provided by valuers in dollars or, if a valuer is of the view that the relevant type of vessel is generally bought and sold in another currency, in that other currency. If a valuation is provided in another currency, for the purposes of this Agreement it shall be converted into dollars at the Agent’s spot rate of exchange for the purchase of dollars with that other currency as at the date to which the valuation relates. | |||
24.6 | Basis of valuation | ||
Each valuation will be addressed to the Agent in its capacity as such, it will be not more than 6 weeks old from its delivery to the Agent and made: | |||
(a) | without physical inspection (unless required by the Agent, acting on the instructions of the Majority Lenders); | ||
(b) | on the basis of a sale for prompt delivery for a price payable in full in cash on delivery at arm’s length on normal commercial terms between a willing buyer and a willing seller; and | ||
(c) | without taking into account the benefit (but taking into account the burden) of any charter commitment. | ||
24.7 | Information required for valuation | ||
The Borrowers shall promptly provide to the Agent and any such valuer any information which they reasonably require for the purposes of providing such a valuation. | |||
24.8 | Approval of valuers | ||
All valuers must have been approved (the approved valuers as at the date of this Agreement are E. A. Gibson Shipbrokers Limited, Clarkson plc, Poten & Partners Inc., Fearnleys AS, Simpson, Spence & Young Limited, R.S. Platou ASA, Pareto Shipping A.S. and Braemar Seascope Limited). The Agent may from time to time notify the Borrowers of approval of one or more independent ship brokers as valuers for the purposes of this clause 24. The Agent (upon the instructions of the Majority Lenders) shall respond promptly to any request by the Borrowers for approval of a broker nominated by the Borrowers. The Agent may at any time by notice to the Borrowers withdraw any previous approval of a valuer for the purposes of future valuations. That valuer may not then be appointed to provide valuations unless it is once more approved. If the Agent has not approved at least three brokers as valuers at a time when a valuation is required under this clause 24, the Agent shall promptly notify the Borrowers of the names of at least three valuers which are approved. |
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24.9 | Appointment of valuers | ||
When a valuation is required for the purposes of this clause 24, the Agent or, if so approved at that time, the Borrowers shall promptly appoint approved valuers to provide such a valuation. If the Borrowers are approved to appoint valuers but fail to do so promptly, the Agent may appoint approved valuers to provide that valuation. | |||
24.10 | Number of valuers | ||
Each valuation must be carried out by two approved valuers, both nominated by the Borrowers. If the Borrowers fail promptly to nominate any valuer then the Agent may nominate that valuer. | |||
24.11 | Differences in valuations | ||
If valuations provided by individual valuers differ, the value of the relevant Ship for the purposes of the Finance Documents will be the mean average of those valuations. If the higher of the two valuations obtained pursuant to clause 24.10 ( Number of valuers ) in respect of a Ship is more than 115% of the lower of the two valuations then a third valuation of that Ship shall be obtained from an approved valuer nominated by the Borrowers (failing which, nominated by the Majority Lenders) and the value of that Ship for the purposes of the Finance Documents will be the mean average of those three valuations. | |||
24.12 | Security shortfall | ||
If at any time the Security Value is less than the Minimum Value, the Agent may, and shall, if so directed by the Majority Lenders, by notice to the Borrowers require that such deficiency be remedied. The Borrowers shall then within 30 days of receipt of such notice ensure that the Security Value equals or exceeds the Minimum Value. For this purpose, the Borrowers may, at their option: | |||
(a) | provide additional security over other assets approved by the Majority Lenders in accordance with this clause 24; and/or | ||
(b) | prepay a part of the Loan under clause 7.4 ( Voluntary prepayment ) but on five Business Days’ notice instead of the period required by such clause. | ||
24.13 | Creation of additional security | ||
The value of any additional security which the Borrowers offer to provide to remedy all or part of a shortfall in the amount of the Security Value will only be taken into account for the purposes of determining the Security Value if and when: | |||
(a) | that additional security, its value and the method of its valuation have been approved by the Majority Lenders; | ||
(b) | a Security Interest over that security has been constituted in favour of the Security Agent and/or the other Finance Parties in an approved form and manner; | ||
(c) | this Agreement has been unconditionally amended in such manner as the Agent requires in consequence of that additional security being provided; and | ||
(d) | the Agent, or its duly authorised representative, has received such documents and evidence it may require in relation to that amendment and additional security including documents and evidence of the type referred to in Schedule 3 ( Conditions precedent ) in relation to that amendment and additional security and its execution and (if applicable) registration. |
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26.9 | Acquisitions and investments | ||
Except with approval from the Majority Lenders, no Borrower shall acquire any person, business, assets or liabilities or make any investment in any person or business or enter into any joint-venture arrangement except: | |||
(a) | acquisitions of assets in the ordinary course of business (not being new businesses or vessels); | ||
(b) | the incurrence of liabilities in the ordinary course of its business; | ||
(c) | any loan or credit not otherwise prohibited under this Agreement; or | ||
(d) | pursuant to any Finance Documents, Contracts or Charter Documents to which it is party. | ||
26.10 | Reduction of capital | ||
No Borrower shall redeem or purchase or otherwise reduce any of its equity or any other share capital or any warrants or any uncalled or unpaid liability in respect of any of them or reduce the amount (if any) for the time being standing to the credit of its share premium account or capital redemption or other undistributable reserve in any manner. | |||
26.11 | Increase in capital | ||
No Borrower shall (and it is hereby undertaken by the Borrowers that the Guarantors shall not) issue shares or other equity interests to anyone in a manner which constitutes a Change of Control. | |||
26.12 | Distributions and other payments | ||
None of the Borrowers shall: | |||
(a) | declare or pay (including by way of set-off, combination of accounts or otherwise) any dividend or redeem or make any other distribution or payment (whether in cash or in specie), including any interest and/or unpaid dividends, in respect of its equity or any other share capital or any warrants for the time being in issue; or | ||
(b) | make any payment (including by way of set-off, combination of accounts or otherwise) by way of interest, or repayment, redemption, purchase or other payment, in respect of any shareholder loan, loan stock or similar instrument, | ||
except to its respective Holding Company (and then only in the ordinary course of its business) and provided no Default is continuing or would result from the making of such payment or declaration and such a dividend, distribution or payment is declared and made. | |||
27 | Events of Default | ||
Each of the events or circumstances set out in clauses 27.1 ( Non-payment ) to 27.22 ( Charters ) is an Event of Default. | |||
27.1 | Non-payment | ||
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable provided however that no Event of Default shall occur if a Disruption Event has occurred and such payment is made within three Business Days of the due date. | |||
27.2 | Value of security | ||
The Borrowers do not comply with clause 24.12 ( Security shortfall ). |
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(e) | exercise or direct the Security Agent and/or any other beneficiary of the Security Documents to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents. |
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having a substantially similar economic effect and such agreement or arrangement has not been terminated: | |||
(a) | in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, such Commitment shall be deemed to be zero; and | ||
(b) | for the purposes of clause 39.3 ( All Lenders matters ), such Borrower’s Affiliate or the person with whom it has entered into such sub-participation, other agreement or arrangement shall be deemed not to be a Lender (unless, in the case of a person not being a Borrower’s Affiliate, it is a Lender by virtue otherwise than by beneficially owning the relevant Commitment). | ||
29.2.3 | Each Lender shall, unless such Debt Purchase Transaction is an assignment or transfer, promptly notify the Agent in writing if it knowingly enters into a Debt Purchase Transaction with a Borrower’s Affiliate (a Notifiable Debt Purchase Transaction ), such notification to be substantially in the form set out in Part 1 of Schedule 7 ( Forms of Notifiable Debt Purchase Transaction Notice ). | ||
29.2.4 | A Lender shall promptly notify the Agent if a Notifiable Debt Purchase Transaction to which it is a party: | ||
(a) | is terminated; or | ||
(b) | ceases to be with a Borrower’s Affiliate, | ||
such notification to be substantially in the form set out in Part 2 of Schedule 7 ( Forms of Notifiable Debt Purchase Transaction Notice ). | |||
29.2.5 | Each Borrower’s Affiliate that is a Lender agrees that: | ||
(a) | in relation to any meeting or conference call to which all the Lenders are invited to attend or participate, it shall not attend or participate in the same if so requested by the Agent or, unless the Agent otherwise agrees, be entitled to receive the agenda or any minutes of the same; and | ||
(b) | in its capacity as Lender, unless the Agent otherwise agrees, it shall not be entitled to receive any report or other document prepared at the behest of, or on the instructions of, the Agent or one or more of the Lenders. |
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SECTION 9 - THE FINANCE PARTIES | ||||
30 | Roles of Agent, Security Agent and Arranger | |||
30.1 | Appointment of the Agent | |||
30.1.1 | Each other Finance Party (other than the Security Agent) appoints the Agent to act as its agent under and in connection with the Finance Documents. | |||
30.1.2 | Each other Finance Party (other than the Security Agent) authorises the Agent: | |||
(a) | to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions; and | |||
(b) | to execute each of the Security Documents and all other documents that may be approved by the Majority Lenders for execution by it. | |||
30.2 | Instructions to Agent | |||
30.2.1 | The Agent shall: | |||
(a) | unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by: | |||
(i) | all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and | |||
(ii) | in all other cases, the Majority Lenders; and | |||
(b) | not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (a) above. | |||
30.2.2 | The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group of Lenders, from that Lender or group of Lenders) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Agent may refrain from acting unless and until it receives those instructions or that clarification. | |||
30.2.3 | Save in the case of decisions stipulated to be a matter for any other Lender or group of Lenders under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties. | |||
30.2.4 | The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions. | |||
30.2.5 | In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders. | |||
30.2.6 | The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document. This |
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(b) | assume that: | |||
(i) | any instructions received by it from the Majority Lenders, any Lenders or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and | |||
(ii) | unless it has received notice of revocation, that those instructions have not been revoked; and | |||
(c) | rely on a certificate from any person: | |||
(i) | as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or | |||
(ii) | to the effect that such person approves of any particular dealing, transaction, step, action or thing, | |||
as sufficient evidence that that is the case and, in the case of paragraph (i) above, may assume the truth and accuracy of that certificate. | ||||
30.7.2 | The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the other Finance Parties) that: | |||
(a) | no Default has occurred (unless it has actual knowledge of a Default arising under clause 27.1 ( Non-payment )); | |||
(b) | any right, power, authority or discretion vested in any Party or any group of Lenders has not been exercised; | |||
(c) | any notice or request made by the Borrowers or any of them (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors; and | |||
(d) | no Notifiable Debt Purchase Transaction: | |||
(i) | has been entered into; | |||
(ii) | has been terminated; or | |||
(iii) | has ceased to be with a Borrower Affiliate. | |||
30.7.3 | The Agent may engage, and pay for the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts in the conduct of its obligations and responsibilities under the Finance Documents. | |||
30.7.4 | Without prejudice to the generality of clause 30.7.3 or clause 30.7.5, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be desirable. | |||
30.7.5 | The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying. | |||
30.7.6 | The Agent may act in relation to the Finance Documents through its officers, employees and agents and the Agent shall not: | |||
(a) | be liable for any error of judgment made by any such person; or |
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30.10 | Exclusion of liability | ||
30.10.1 | Without limiting clause 30.10.2 (and without prejudice to any other provision of the Finance Documents excluding or limiting the liability of the Agent) the Agent will not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for: | ||
(a) | any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document or the Charged Property, unless directly caused by its gross negligence or wilful default. For the avoidance of doubt and notwithstanding anything contained in the Finance Documents, the Agent shall not in any event be liable for any indirect or consequential loss (including, without limitation, loss of profit, business or goodwill) regardless of whether it was informed of the likelihood of such loss and irrespective of whether any such claim is made for breach of contract, in tort or otherwise; | ||
(b) | exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document, the Charged Property or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with, any Finance Document or the Charged Property, unless directly caused by the gross negligence or wilful default of the Agent and in the course of the exercise or non exercise by it of any right, power, authority or discretion given to it expressly under a Finance Document; or | ||
(c) | without prejudice to the generality of paragraphs (a) and (b) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of: | ||
(d) | any act, event or circumstance not reasonably within its control; or | ||
(e) | the general risks of investment in, or the holding of assets in, any jurisdiction, | ||
including (in each case and without limitation) such damages, costs, losses, diminution in value or liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action. | |||
30.10.2 | No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this clause 30.10 subject to clause 1.3 (Third party rights) and the provisions of the Third Parties Act. | ||
30.10.3 | The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose. | ||
30.10.4 | Nothing in this Agreement shall oblige the Agent or the Arranger to carry out: | ||
(a) | any “know your customer” or other checks in relation to any person; or | ||
(b) | any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender, |
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on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arranger. | |||
30.10.5 | Without prejudice to any provision of any Finance Document excluding or limiting the Agent’s liability, any liability of the Agent arising under or in connection with any Finance Document or the Charged Property shall be limited to the amount of actual loss which has been finally judicially determined to have been suffered (as determined by reference to the date of default of the Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Agent at any time which increase the amount of that loss. In no event shall the Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Agent has been advised of the possibility of such loss or damages. | ||
30.11 | Lenders’ indemnity to the Agent | ||
30.11.1 | Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three Business Days of demand, against: | ||
(a) | any Losses for negligence or any other category of liability whatsoever incurred by the Agent in the circumstances contemplated pursuant to clause 33.11 ( Disruption to payment systems etc ) notwithstanding the Agent’s negligence, gross negligence, or any other category of liability whatsoever but not including any claim based on the fraud of the Agent); and | ||
(b) | any other Losses (otherwise than by reason of the Agent’s gross negligence or wilful default) including the costs of any person engaged in accordance with clause 30.7 ( Rights and discretions of the Agent ) and any Receiver in acting as its agent under the Finance Documents, | ||
in each case incurred by the Agent in acting as such under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document or out of the Trust Property) and this clause 30.11 as applied in favour of the Security Agent pursuant to clause 30.22 ( Application of certain clauses to Security Agent ) shall be without prejudice to any right to indemnity by law given to trustees generally and any other indemnity in the Security Agent’s favour in any other Finance Document. | |||
The indemnities contained in this clause 30.11 shall survive the termination or discharge of this Agreement. | |||
30.11.2 | Subject to clause 30.11.3, the Borrowers shall immediately on demand reimburse any Lender for any payment that Lender makes to the Agent pursuant to clause 30.11.1. | ||
30.11.3 | Clause 30.11.2 shall not apply to the extent that the indemnity payment in respect of which the Lender claims reimbursement relates to a liability of the Agent to an Obligor. | ||
30.12 | Resignation of the Agent | ||
30.12.1 | The Agent may resign without giving any reason therefor and appoint one of its Affiliates as successor by giving notice to the Lenders, the Security Agent and the Borrowers. | ||
30.12.2 | Alternatively the Agent may resign without giving any reason therefor by giving 30 day’s notice to the other Finance Parties and the Borrowers, in which case the Majority Lenders (after consultation with the Borrowers) may appoint a successor Agent acting through an office in the United Kingdom. |
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30.12.3 | If the Majority Lenders have not appointed a successor Agent in accordance with clause 30.12.2 above within 20 days after notice of resignation was given, the retiring Agent (after consultation with the Borrowers) may appoint a successor Agent. |
30.12.4 | If the Agent wishes to resign because (acting reasonably) it has concluded that it is no longer appropriate for it to remain as agent and the Agent is entitled to appoint a successor Agent under clause 30.12.3, the Agent may (if it concludes (acting reasonably) that it is necessary to do so in order to persuade the proposed successor Agent to become a party to this Agreement as Agent) agree with the proposed successor Agent amendments to this clause 30 and any other term of this Agreement dealing with the rights or obligations of the Agent consistent with then current market practice for the appointment and protection of corporate trustees together with any reasonable amendments to the agency fee payable under this Agreement which are consistent with the successor Agent’s normal fee rates and those amendments will (subject to approval by the Majority Lenders, which approval shall not be unreasonably withheld or delayed) bind the Parties. |
30.12.5 | The retiring Agent shall, either at the Lenders’ expense if it has been required to resign pursuant to clause 30.13 ( Replacement of the Agent ) or otherwise at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents. The Borrowers shall, within three Business Days of demand, reimburse the retiring Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance. |
30.12.6 | The Agent’s resignation notice shall only take effect upon the appointment of a successor. |
30.12.7 | The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under clause 30.12.5) but shall remain entitled to the benefit of clause 14.3 ( Indemnity to the Agent and the Security Agent ) and this clause 30 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party. |
30.13 | Replacement of the Agent |
30.13.1 | After consultation with the Borrowers, the Majority Lenders may, by giving 30 days’ notice to the Agent (or, at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Agent by appointing a successor Agent. |
30.13.2 | The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents. |
30.13.3 | The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under clause 30.13.2) but shall remain entitled to the benefit of clause 14.3 ( Indemnity to the Agent and the Security Agent ) and this clause 30 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). |
30.13.4 | Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party. |
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30.14 | Confidentiality |
30.14.1 | In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its department, division or team directly responsible for the management of the Finance Documents which shall be treated as a separate entity from any other of its divisions, departments or teams. |
30.14.2 | If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it. |
30.14.3 | Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arranger is obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty. |
30.15 | Relationship with the Lenders |
30.15.1 | Subject to clause 28.8 ( Pro rata interest settlement) the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent’s principal office as notified to the Finance Parties from time to time) as a Lender acting through its Facility Office: |
(a) | entitled to or liable for any payment due under any Finance Document on that day; and |
(b) | entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day, |
unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
30.15.2 | Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under clause 35.5 ( Electronic communication )) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of clause 35.2 ( Addresses ) and clause 35.5 ( Electronic communication ) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender. |
30.15.3 | Each Lender shall supply the Agent with any information that the Agent may reasonably specify as being necessary or desirable to enable the Agent or the Security Agent to perform its functions as Agent or Security Agent. |
30.15.4 | Each Lender shall deal with the Security Agent exclusively through the Agent and shall not deal directly with the Security Agent. |
30.16 | Credit appraisal by the Lenders |
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to each other Finance Party that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:
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(a) | the financial condition, status and nature of each Obligor and other Group Member; |
(b) | the legality, validity, effectiveness, adequacy or enforceability of any Finance Document , any Charter Document or any Contract and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document, any Charter Document or any Contract; |
(c) | the application of any Basel II Regulation or Basel III Regulation to the transactions contemplated by the Finance Documents; |
(d) | whether any Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Charged Property; |
(e) | the adequacy, accuracy and/or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, any Charter Document or any Contract, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document, any Charter Document or any Contract; and |
(f) | the right or title of any person in or to, or the value or sufficiency of, any part of the Charged Property, the priority of the Security Documents or the existence of any Security Interest affecting the Charged Property. |
30.17 | Reference Banks |
If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in consultation with the Borrowers) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.
30.18 | Agent’s management time and additional remuneration |
Any amount payable to the Agent under clause 14.3 ( Indemnity to the Agent and the Security Agent ), clause 16 ( Costs and expenses ) and clause 30.11 ( Lenders’ indemnity to the Agent ) (and in the case of the Security Agent, as extended to it by virtue of clause 30.22 ( Application of certain clauses to Security Agent )) shall include the cost of utilising the Agent’s management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Agent may notify to the Borrowers and the Lenders, and is in addition to any fee paid or payable to the Agent under clause 11 ( Fees ).
30.19 | Deduction from amounts payable by the Agent |
If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
30.20 | Common parties |
Although the Agent and the Security Agent may from time to time be the same entity, that entity will have entered into the Finance Documents (to which it is party) in its separate capacities as agent for the Finance Parties and (as appropriate) security agent and trustee for the Finance Parties. Where any Finance Document provides for the Agent or Security Agent
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to communicate with or provide instructions to the other, while they are the same entity, such communication or instructions will not be necessary.
30.21 | Security Agent |
30.21.1 | Each other Finance Party appoints the Security Agent to act as its agent and (to the extent permitted under any applicable law) trustee under and in connection with the Security Documents and confirms that the Security Agent shall have a lien on the Security Documents and the proceeds of the enforcement of those Security Documents for all moneys payable to the beneficiaries of those Security Documents. |
30.21.2 | Each other Finance Party authorises the Security Agent: |
(a) | to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Security Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions; and |
(b) | to execute each of the Security Documents and all other documents that may be approved by the Agent for execution by it. |
30.21.3 | The Security Agent accepts its appointment under clause 30.21 ( Security Agent ) as trustee of the Trust Property with effect from the date of this Agreement and declares that it holds the Trust Property on trust for itself and the other Finance Parties (for so long as they are Finance Parties) on and subject to the terms set out in clauses 30.21 ( Security Agent ) - 30.28 ( Indemnity from Trust Property ) (inclusive) and the Security Documents to which it is a party. |
30.22 | Application of certain clauses to Security Agent |
30.22.1 | Clauses 30.7 ( Rights and discretions of the Agent ), 30.8 ( Responsibility for documentation and other matters ), clause 30.9 ( No duty to monitor ), 30.10 ( Exclusion of liability ), 30.11 ( Lenders’ indemnity to the Agent ), 30.12 ( Resignation of the Agent ), 30.13 ( Replacement of the Agent ) 30.14 ( Confidentiality ), 30.15 ( Relationship with the Lenders ), 30.16 ( Credit appraisal by the Lenders ), 30.18 ( Agent’s management time and additional remuneration ) and 30.19 ( Deduction from amounts payable by the Agent ) shall each extend so as to apply to the Security Agent in its capacity as such and for that purpose each reference to the “Agent” in these clauses shall extend to include in addition a reference to the “Security Agent” in its capacity as such and, in clause 30.7 ( Rights and discretions of the Agent ), references to the Lenders and a group of Lenders shall refer to the Agent. |
30.22.2 | In addition, clause 30.12 ( Resignation of the Agent ) and clause 30.13 ( Replacement of Agent ) shall, for the purposes of their application to the Security Agent pursuant to clause 30.22.1, have the following additional sub-clause inserted after them: |
At any time after the appointment of a successor, the retiring Security Agent shall do and execute all acts, deeds and documents reasonably required by its successor to transfer to it (or its nominee, as it may direct) any property, assets and rights previously vested in the retiring Security Agent pursuant to the Security Documents and which shall not have vested in its successor by operation of law. All such acts, deeds and documents shall be done or, as the case may be, executed at the cost of the Borrowers (except where the Security Agent is retiring under clause 30.12.1 as extended to it by clause 30.22.1, in which case such costs shall be borne by the Lenders (in proportion (if no part of the Loan is then outstanding) to their shares of the Total Commitments or (at any other time) to their participation in the Loan).
30.22.3 | Clause 30.7 ( Rights and discretions of the Agent ) shall, for the purposes of its application to the Security Agent pursuant to clause 30.22.1, read as follows: |
“The Security Agent may, at the cost of the Borrowers, rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Security Agent or by any other Party), whether or not liability
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thereunder is limited by reference to monetary cap or otherwise, and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.”.
30.22.4 | Clause 30.10 ( Exclusion of liability ) shall, for the purposes of its application to the Security Agent pursuant to clause 30.22.1, include the following after sub clause 30.10.1(b): |
“(c) | any shortfall which arises on the enforcement or realisation of the Security Interests created by the Finance Documents.”. |
30.22.5 | Clause 30.14 ( Confidentiality ) shall, for the purposes of its application to the Security Agent pursuant to clause 30.22.1, be read and construed as to refer to “its agency and trust department” instead of “its department, division or team directly responsible for the management of the Finance Documents”. |
30.22.6 | Without prejudice to the generality of any other provision of this Agreement or any other Security Document, the entry into possession of the Charged Property shall not render the Security Agent or any Receiver liable to account as mortgagee in possession thereunder (or its equivalent in any other applicable jurisdiction) or take any action which would expose it to any liability in respect of Environmental Claims in respect of which it has not been indemnified and/or secured and/or pre-funded to its satisfaction or to be liable for any loss on realisation or for any default or omission on realisation or for any default or omission for which a mortgagee in possession might be liable unless such loss, default or omission is caused by its own gross negligence or wilful default. |
30.22.7 | The Security Agent shall not be bound to take any steps to ascertain whether any event, condition or act, the happening of which would cause a right or remedy to become exercisable by the Security Agent or any agent under this Agreement or the other Security Documents has happened or to monitor or supervise the observance and performance by the Borrowers, any agent or any of the other parties thereto of their respective obligations thereunder and, until it shall have actual knowledge or express notice to the contrary, the Security Agent shall be entitled to assume that no such event, condition or act has happened and that the Borrowers, the agents and the other parties thereto are observing and performing all their respective obligations thereunder. |
30.23 | Instructions to Security Agent |
30.23.1 | The Security Agent shall: |
(a) | unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Security Agent in accordance with any instructions given to it by the Agent; and |
(b) | not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (a) above even though it may subsequently be found that there was a defect on the giving of such instruction. |
30.23.2 | The Security Agent shall be entitled to (but not obliged to) request instructions, or clarification of any instruction, from the Agent as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion and the Security Agent may refrain from acting unless and until it receives those instructions or that clarification. |
30.23.3 | Unless a contrary indication appears in a Finance Document, any instructions given to the Security Agent by the Agent shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties. |
30.23.4 | The Security Agent may refrain from acting in accordance with any instructions of the Agent until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may |
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include payment in advance) for any cost, loss or liability (together with any associated VAT or other applicable tax) which it may incur in complying with those instructions.
30.23.5 | For the avoidance of doubt, no provision of this Agreement shall require the Security Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity and/or security and/or prefunding against such risk or liability is not assured to it. |
30.23.6 | In the absence of instructions, the Security Agent may act (or refrain from acting) as it considers to be in the best interest of the Finance Parties. |
30.23.7 | The Security Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document. This clause 30.23.7 shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or enforcement of the Security Documents. |
30.23.8 | The Security Agent shall have no responsibility whatsoever to the Borrowers, the Agent, or any Finance Party as regards any deficiency which might arise because the Security Agent is subject to any Tax in respect of all or any of the Charged Property, the income therefrom or the proceeds thereof. |
30.23.9 | Until the delivery of an enforcement notice pursuant to clause 27.23 ( Acceleration ), the moneys standing to the credit of any accounts comprised in the Security Documents shall be dealt with in accordance with the provisions of this Agreement and the Security Documents and the Security Agent shall not be responsible in such circumstances or at any other time for any liabilities (howsoever described) suffered by any person, whether by reason of depreciation in value or by fluctuation in exchange rates or otherwise. |
30.24 | Order of application |
30.24.1 | The Security Agent agrees to apply the Trust Property and each other beneficiary of the Security Documents agrees to apply all moneys received by it in the exercise of its rights under the Security Documents in accordance with the following respective claims: |
(a) | first , as to a sum equivalent to the amounts payable to the Security Agent under the Finance Documents (excluding any amounts received by the Security Agent pursuant to clause 30.11 ( Lenders’ indemnity to the Agent ) as extended to the Security Agent pursuant to clause 30.22 ( Application of certain clauses to Security Agent )), for the Security Agent absolutely; |
(b) | secondly , as to a sum equivalent to the amounts payable to the Agent under the Finance Documents (excluding any amounts received by the Agent pursuant to clause 30.11 ( Lenders’ indemnity to the Agent )), for the Agent absolutely; |
(c) | thirdly , as to a sum equivalent to the aggregate amount then due and owing to the other Finance Parties under the Finance Documents, for those Finance Parties absolutely for application between them in accordance with clause 33.5 (Partial payments) ; |
(d) | fourthly , until such time as the Security Agent is satisfied that all obligations owed to the Finance Parties have been irrevocably and unconditionally discharged in full, held by the Security Agent on a suspense account for payment of any further amounts owing to the Finance Parties under the Finance Documents and further application in accordance with this clause 30.24.1 as and when any such amounts later fall due; |
(e) | fifthly , to such other persons (if any) as are legally entitled thereto in priority to the Obligors; and |
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(f) | sixthly , as to the balance (if any), for the Obligors by or from whom or from whose assets the relevant amounts were paid, received or recovered or other person entitled to them. |
30.24.2 | The Security Agent and each other beneficiary of the Security Documents shall make each application as soon as is practicable after the relevant moneys are received by, or otherwise become available to, it save that (without prejudice to any other provision contained in any of the Security Documents) the Security Agent (acting on the instructions of the Agent), any other beneficiary of the Security Documents or any receiver or administrator may credit any moneys received by it to a suspense account for so long and in such manner as the Security Agent, any other beneficiary of the Security Documents or such receiver or administrator may from time to time determine with a view to preserving the rights of the Finance Parties or any of them to prove for the whole of their respective claims against the Borrowers or any other person liable. |
30.24.3 | The Security Agent and/or any other beneficiary of the Security Documents shall obtain a good discharge in respect of the amounts expressed to be due to the other Finance Parties as referred to in this clause 30.24 by paying such amounts to the Agent for distribution in accordance with clause 33 ( Payment mechanics ). |
30.25 | Powers and duties of the Security Agent as trustee of the security |
In its capacity as trustee in relation to the Trust Property, the Security Agent:
(a) | shall, without prejudice to any of the powers, discretions and immunities conferred upon trustees by law (and to the extent not inconsistent with the provisions of this Agreement or any of the Security Documents), have all the same powers and discretions as a natural person acting as the beneficial owner of such property and/or as are conferred upon the Security Agent by this Agreement and/or any Security Document but so that the Security Agent may only exercise such powers and discretions to the extent that it is authorised to do so by the provisions of this Agreement; |
(b) | shall (subject to clause 30.24 ( Order of application )) be entitled (in its own name or in the names of nominees) to invest moneys from time to time forming part of the Trust Property or otherwise held by it as a consequence of any enforcement of the security constituted by any Finance Document which, in the reasonable opinion of the Security Agent, it would not be practicable to distribute immediately, by placing the same on deposit in the name or under the control of the Security Agent as the Security Agent may think fit without being under any duty to diversify the same and the Security Agent shall not be responsible for any loss due to interest rate or exchange rate fluctuations except for any loss arising from the Security Agent’s gross negligence or wilful default and shall not be liable to account for an amount of interest greater than the standard amount that would be payable to an independent customer; |
(c) | may, in the conduct of its obligations under and in respect of the Security Documents instead of acting personally, employ and pay any agent (whether being a lawyer or any other person) to transact or concur in transacting any business and to do or concur in doing any acts required to be done by the Security Agent (including the receipt and payment of money) or may delegate to any person on any terms (including the power to sub-delegate) and on the basis that (i) any such agent or delegate engaged in any profession or business shall be entitled to be paid all usual professional and other charges for business transacted and acts done by him or any partner or employee of his or her in connection with such employment and (ii) the Security Agent shall not be bound to supervise, or be responsible for any loss incurred by reason of any act or omission of, any such agent or delegate if the Security Agent shall have exercised reasonable care in the selection of such agent; and |
(d) | may place all deeds and other documents relating to the Trust Property which are from time to time deposited with it pursuant to the Security Documents in any safe |
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deposit, safe or receptacle selected by the Security Agent or with any firm of solicitors or company whose business includes undertaking the safe custody of documents selected by the Security Agent and may make any such arrangements as it thinks fit for allowing Obligors access to, or its solicitors or auditors possession of, such documents when necessary or convenient and the Security Agent shall not be responsible for any loss incurred in connection with any such deposit, access or possession if it has exercised reasonable care in the selection of a safe deposit, safe, receptacle or firm of solicitors or company;
(e) | may, unless and to the extent the express provisions of any Security Document provide otherwise, do any act or thing in the exercise of any of its duties under the Finance Documents which in its absolute discretion (in the absence of any instructions of the Agent as to the doing of such act or thing) it deems advisable for the protection and benefit of all the Finance Parties; |
(f) | may, unless the express provisions of any such Security Document provide otherwise, if authorised by the Agent, amend or vary the terms of or waive breaches of or defaults under, or otherwise excuse performance of any provision of, or grant consents under any of the Security Documents to which it is a party, any such amendment, variation, waiver or consent so authorised to be binding on all the parties hereto and that Security Agent to be under no liability whatsoever in respect thereof; |
(g) | shall not be bound to disclose to any other person (including but not limited to any other Finance Party) (i) any confidential information or (ii) any other information, if disclosure would, or might in its reasonable opinion, constitute a breach of any law or be a breach of fiduciary duty; |
(h) | shall have no responsibility to make any payment, deduction or withholding of any Tax or governmental charge as a result of the Security Agent (i) holding the Security Interests created by the Finance Documents or (ii) enforcing such Security Interests created by the Finance Documents; |
(i) | shall not have, or be deemed to have, any relationship of trust or agency with any Obligor; and |
(j) | shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied) and the role and functions of the Security Agent under this Agreement shall be purely mechanical and administrative in nature and, subject to the terms of this Agreement, acting on the instructions of the Agent. |
30.25.2 | The rights, powers and discretions conferred upon the Security Agent by this Agreement shall be supplemental to the Trustee Act 1925 and the Trustee Act 2000 and in addition to any which may be vested in the Security Agent by general law or otherwise. Section 1 of the Trustee Act 2000 shall not apply to the duties of the Security Agent in relation to the trusts constituted by this Agreement. Where there are any inconsistencies between the Trustee Act 1925 or the Trustee Act 2000 and the provisions of this Agreement, the provisions of this Agreement shall, to the extent allowed by law, prevail and, in the case of any inconsistency with the Trustee Act 2000, the provisions of this Agreement shall constitute a restriction or exclusion for the purposes of that Act. |
30.26 | All enforcement action through the Security Agent |
30.26.1 | None of the other Finance Parties shall have any independent power to enforce any of those Security Documents which are executed in favour of the Security Agent only, or to exercise any rights, discretions or powers or to grant any consents or releases under or pursuant to such Security Documents or otherwise have direct recourse to the security and/or guarantees constituted by such Security Documents except through the Security Agent. |
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30.26.2 | None of the other Finance Parties shall have any independent power to enforce any of those Security Documents which are executed in their favour or to exercise any rights, discretions or powers or to grant any consents or releases under or pursuant to such Security Documents or otherwise have direct recourse to the security and/or guarantees constituted by such Security Documents except with the prior written consent of the Agent (acting through the Security Agent and on the instructions of the Majority Lenders). If any Finance Party (other than the Security Agent) is a party to any Security Document it shall promptly upon being requested by the Agent to do so grant a power of attorney or other sufficient authority to the Security Agent to enable the Security Agent to exercise any rights, discretions or powers or to grant any consents or releases under such Security Document. |
30.27 | Co-operation to achieve agreed priorities of application |
The other Finance Parties shall co-operate with each other and with the Security Agent and any receiver or administrator under the Security Documents in realising the property and assets subject to the Security Documents and in ensuring that the net proceeds realised under the Security Documents after deduction of the expenses of realisation are applied in accordance with clause 30.24 ( Order of application ).
30.28 | Indemnity from Trust Property |
30.28.1 | In respect of all liabilities, costs or expenses for which the Obligors are liable under this Agreement, the Security Agent and each Affiliate of the Security Agent and each officer or employee of the Security Agent or its Affiliate (each a Relevant Person ) shall be entitled to be indemnified out of the Trust Property in respect of all liabilities, damages, costs, claims, charges or expenses whatsoever properly incurred or suffered by such Relevant Person: |
(a) | in the execution or exercise or bona fide purported execution or exercise of the trusts, rights, powers, authorities, discretions and duties created or conferred by or pursuant to the Finance Documents; |
(b) | as a result of any breach by an Obligor of any of its obligations under any Finance Document; |
(c) | in respect of any Environmental Claim made or asserted against a Relevant Person which would not have arisen if the Finance Documents had not been executed; and |
(d) | in respect of any matter or thing done or omitted in any way in accordance with the terms of the Finance Documents relating to the Trust Property or the provisions of any of the Finance Documents. |
30.28.2 | The rights conferred by this clause 30.28 are without prejudice to any right to indemnity by law given to trustees generally and to any provision of the Finance Documents entitling the Security Agent or any other person to an indemnity in respect of, and/or reimbursement of, any liabilities, costs or expenses incurred or suffered by it in connection with any of the Finance Documents or the performance of any duties under any of the Finance Documents. Nothing contained in this clause 30.28 shall entitle the Security Agent or any other person to be indemnified in respect of any liabilities, damages, costs, claims, charges or expenses to the extent that the same arise from such person’s own gross negligence or wilful default. |
30.29 | Finance Parties to provide information |
The other Finance Parties shall provide the Security Agent with such written information as it may reasonably require for the purposes of carrying out its duties and obligations under the Security Documents and, in particular, with such necessary directions in writing so as to enable the Security Agent to make the calculations and applications contemplated by clause 30.24 ( Order of application ) above and to apply amounts received under, and the proceeds of realisation of, the Security Documents as contemplated by the Security Documents, clause 33.5 ( Partial payments ) and clause 30.24 ( Order of application ).
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30.30 | No Reliance on Security Agent |
It is understood and agreed by each Finance Party (other than the Security Agent) that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of each Obligor and, accordingly, each other Finance Party warrants to the Security Agent that it has not relied and will not hereafter rely on the Security Agent:
(a) | to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided to it by the Obligors or any other person in connection with any of the Finance Documents, the Charged Property or the transactions therein contemplated (whether or not such information has been or is hereafter circulated to such Finance Party by the Security Agent); |
(b) | to check or enquire on its behalf into the adequacy, accuracy or completeness of any communication delivered to it under any of the Finance Documents, the Charged Property, any legal or other opinions, reports, valuations, certificates, appraisals or other documents delivered or made or required to be delivered or made at any time in connection with any of the Finance Documents, the Charged Property, any security to be constituted thereby or any other report or other document, statement or information circulated, delivered or made, whether orally or otherwise and whether before, on or after the date of this Agreement; |
(c) | to check or enquire on its behalf into the due execution, delivery, validity, legality, adequacy, suitability, performance, enforceability or admissibility in evidence of any of the Finance Documents, the Charged Property or any other document referred to in paragraph (b) above or of any guarantee, indemnity or security given or created thereby or any obligations imposed thereby or assumed thereunder; |
(d) | to check or enquire on its behalf into the ownership, value, existence or sufficiency of any Charged Property, the priority of any of the Security Interests, the right or title of any person in or to any property comprised therein or the existence of any encumbrance affecting the same; or |
(e) | to assess or keep under review on its behalf the identity, financial condition, creditworthiness, condition, affairs, status or nature of any Obligor or other Group Member. |
30.31 | Release to facilitate enforcement and realisation |
Each Finance Party acknowledges that pursuant to any enforcement action by the Security Agent (or a Receiver) carried out on the instructions of the Agent it may be desirable for the purpose of such enforcement and/or maximising the realisation of the Charged Property being enforced against, that any rights or claims of or by the Security Agent (for the benefit of the Finance Parties) and/or any Finance Parties against any Obligor and/or any Security Interest over any assets of any Obligor (in each case) as contained in or created by any Finance Document, other than such rights or claims or security being enforced, be released in order to facilitate such enforcement action and/or realisation and, notwithstanding any other provision of the Finance Documents, each Finance Party hereby irrevocably authorises the Security Agent (acting on the instructions of the Agent) to grant any such releases to the extent necessary to fully effect such enforcement action and realisation including, without limitation, to the extent necessary for such purposes to execute release documents in the name of and on behalf of the Finance Parties. Where the relevant enforcement is by way of disposal of shares in a Borrower, the requisite release shall include releases of all claims (including under guarantees) of the Finance Parties and/or the Security Agent against that Borrower and of all Security Interests over the assets of that Borrower.
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30.32 | Undertaking to pay |
Each Obligor which is a Party undertakes with the Security Agent on behalf of the Finance Parties that it will, on demand by the Security Agent, pay to the Security Agent all money from time to time owing, and discharge all other obligations from time to time incurred, by it under or in connection with the Finance Documents.
30.33 | Additional trustees |
The Security Agent shall have power by notice in writing to the other Finance Parties and the Borrowers to appoint any person either to act as separate trustee or as co-trustee jointly with the Security Agent:
(a) | if the Security Agent reasonably considers such appointment to be in the best interests of the Finance Parties; |
(b) | for the purpose of conforming with any legal requirement, restriction or condition in any jurisdiction in which any particular act is to be performed; or |
(c) | for the purpose of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction against any person of a judgment already obtained, |
and any person so appointed shall (subject to the provisions of this Agreement) have such rights (including as to reasonable remuneration), powers, duties and obligations as shall be conferred or imposed by the instrument of appointment. The Security Agent shall have power to remove any person so appointed. At the request of the Security Agent, the other parties to this Agreement shall forthwith execute all such documents and do all such things as may be required to perfect such appointment or removal and each such party irrevocably authorises the Security Agent in its name and on its behalf to do the same. Such a person shall accede to this Agreement as a Security Agent to the extent necessary to carry out their role on terms satisfactory to the Security Agent and (subject always to the provisions of this Agreement) have such trusts, powers, authorities, liabilities and discretions (not exceeding those conferred on the Security Agent by this Agreement and the other Finance Documents) and such duties and obligations as shall be conferred or imposed by the instrument of appointment (being no less onerous than would have applied to the Security Agent but for the appointment). The Security Agent shall not be bound to supervise, or be responsible for any loss incurred by reason of any act or omission of, any such person if the Security Agent shall have exercised reasonable care in the selection of such person.
30.34 | Non-recognition of trust |
It is agreed by all the parties to this Agreement that:
(a) | in relation to any jurisdiction the courts of which would not recognise or give effect to the trusts expressed to be constituted by this clause 30, the relationship of the Security Agent and the other Finance Parties shall be construed as one of principal and agent, but to the extent permissible under the laws of such jurisdiction, all the other provisions of this Agreement shall have full force and effect between the parties to this Agreement; and |
(b) | the provisions of this clause 30 insofar as they relate to the Security Agent in its capacity as trustee for the Finance Parties and the relationship between themselves and the Security Agent as their trustee may be amended by agreement between the other Finance Parties and the Security Agent. The Security Agent may amend all documents necessary to effect the alteration of the relationship between the Security Agent and the other Finance Parties and each such other party irrevocably authorises the Security Agent in its name and on its behalf to execute all documents necessary to effect such amendments. |
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30.35 | Security Agent’s Ongoing Fees |
30.35.1 | Th e Borrowers shall pay to the Agent and the Security Agent certain fees in accordance with clause 11 ( Fees ). |
30.35.2 | If: |
(a) | a Default has occurred; or |
(b) | the Security Agent considers it expedient and/or necessary or is requested by the Borrowers or any Finance Party or group of Finance Parties to undertake duties which the Security Agent considers to be of an exceptional nature and/or outside the scope of the normal duties of the Security Agent under the Finance Documents (which for the avoidance of doubt shall include any amendments to the Finance Documents and the time incurred in relation thereto), |
the Borrowers shall pay to the Security Agent any additional remuneration (together with any applicable taxes thereon) which shall be calculated by reference to its hourly rates in force from time to time.
30.36 | Insurance by Security Agent |
Where the Security Agent is named on any insurance policy (including the Insurances) as an insured party and/or loss payee, the Security Agent shall not be responsible for any loss which may be suffered by reason of, directly or indirectly, its failure to notify the insurers of any material fact relating to the risk assumed by such insurers or any other information of any kind, unless the Agent shall have requested it to do so in writing and the Security Agent shall have failed to do so within 14 days after receipt of that request. The Security Agent shall have no obligation to, nor any liability for any failure to, insure any of the Charged Property.
30.37 | Custodians and nominees |
The Security Agent may (to the extent legally permitted) appoint and pay any person to act as a custodian or nominee on any terms in relation to any assets of the trust as the Security Agent may determine, including for the purpose of depositing with a custodian this Agreement or any document relating to the trust created under this Agreement and the Security Agent shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it under this Agreement or be bound to supervise the proceedings or acts of any person.
30.38 | Acceptance of title |
The Security Agent shall be entitled to accept without enquiry, and shall not be obliged to investigate, any right and title that any of the Obligors have to any of the Charged Property and shall not be liable for or bound to require any Debtor to remedy any defect in its right or title.
30.39 | Refrain from illegality |
Notwithstanding anything to the contrary expressed or implied in the Finance Documents, the Security Agent may refrain from doing anything which in its opinion will or may be contrary to any relevant law, directive or regulation of any applicable jurisdiction and the Security Agent may do anything which is, in its opinion, necessary to comply with any such law, directive or regulation.
30.40 | Interest on Demand |
If the Borrowers fail to pay any amount payable by them to the Security Agent under this Agreement on its due date, interest shall accrue on the overdue amount (and be compounded with it) from the due date up to the date of actual payment (both before and after judgment and
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to the extent interest at a default rate is not otherwise being paid on such sum) at the rate which is two per cent. (2%) per annum over the rate at which the Security Agent was being offered, by prime banks in the London interbank market, deposits in an amount comparable to the unpaid amounts in the currencies of those amounts for such period(s) as the Security Agent may from time to time select.
30.41 | Release of Security |
If the Agent, with the approval of all the other Finance Parties, shall determine that all of the amounts owing under the Finance Documents and all other obligations the discharge of which is secured by any of the Security Documents have been fully and finally discharged and none of the Finance Parties is under any commitment, obligation or liability (whether actual or contingent) to make advances or provide other financial accommodation to the Borrowers under or pursuant to this Agreement or any other Finance Document, the trusts herein set out shall be wound up and the Security Agent shall, at the request and cost of the Borrowers and acting on the instructions of the Agent, release, without recourse or warranty, all of the security then held by it, whereupon the Security Agent, the Agent, the Lenders and the Obligors shall be released from their obligations hereunder (save for those which arose prior to such winding up).
31 | Conduct of business by the Finance Parties |
31.1 | Finance Parties tax affairs |
No provision of this Agreement will:
(a) | interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit; |
(b) | oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or |
(c) | oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax. |
31.2 | Finance Parties acting together |
Notwithstanding clause 2.2 ( Finance Parties’ rights and obligations ), if the Agent makes a declaration under clause 27.23 ( Acceleration ) the Agent shall, in the names of all the Finance Parties, take such action on behalf of the Finance Parties and conduct such negotiations with the Borrowers, any Obligors or any Subsidiaries of an Obligor and generally administer the Facility in accordance with the wishes of the Majority Lenders. All the Finance Parties shall be bound by the provisions of this clause and no Finance Party shall be entitled to take action independently against any Obligor or any of its assets without the prior consent of the Majority Lenders.
This clause shall not override clause 30 ( Roles of Agent , Security Agent and Arranger ) as it applies to the Security Agent.
31.3 | Majority Lenders |
31.3.1 | Where any Finance Document provides for any matter to be determined by reference to the opinion of, or to be subject to the consent, approval or request of, the Majority Lenders or for any action to be taken on the instructions of the Majority Lenders (a majority decision ), such majority decision shall (as between the Lenders) only be regarded as having been validly given or issued by the Majority Lenders if all the Lenders shall have received prior notice of the matter on which such majority decision is required and the relevant majority of Lenders shall have given or issued such majority decision. However (as between any Obligor and the Finance Parties) the relevant Obligor shall be entitled (and bound) to assume that such notice shall have been duly received by each Lender and that the relevant majority shall have been |
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obtained to constitute Majority Lenders when notified to this effect by the Agent whether or not this is the case.
31.3.2 | If, within ten Business Days of the Agent despatching to each Lender a notice requesting instructions (or confirmation of instructions) from the Lenders or the agreement of the Lenders to any amendment, modification, waiver, variation or excuse of performance for the purposes of, or in relation to, any of the Finance Documents, the Agent has not received a reply specifically giving or confirming or refusing to give or confirm the relevant instructions or, as the case may be, approving or refusing to approve the proposed amendment, modification, waiver, variation or excuse of performance, then (irrespective of whether such Lender responds at a later date) the Agent shall treat any Lender which has not so responded as having indicated a desire to be bound by the wishes of 66 ⅔ per cent. of those Lenders (measured in terms of the total Commitments of those Lenders) which have so responded. |
31.3.3 | For the purposes of clause 31.3.2, any Lender which notifies the Agent of a wish or intention to abstain on any particular issue shall be treated as if it had not responded. |
31.3.4 | Clauses 31.3.2 and 31.3.3 shall not apply in relation to those matters referred to in, or the subject of, clause 39.2 ( Exceptions ). |
31.4 | Conflicts |
31.4.1 | Each Borrower acknowledges that the Arranger and its parent undertaking, subsidiary undertakings and fellow subsidiary undertakings (together an Arranger Group ) may be providing debt finance, equity capital or other services (including financial advisory services) to other persons with which the Borrowers may have conflicting interests in respect of the Facility or otherwise. |
31.4.2 | No member of an Arranger Group shall use confidential information gained from any Obligor by virtue of the Facility or its relationships with any Obligor in connection with their performance of services for other persons. This shall not, however, affect any obligations that any member of the Arranger Group has as Agent in respect of the Finance Documents. The Borrowers also acknowledge that no member of an Arranger Group has any obligation to use or furnish to any Obligor information obtained from other persons for their benefit. |
31.4.3 | The terms parent undertaking , subsidiary undertaking and fellow subsidiary undertaking when used in this clause have the meaning given to them in sections 1161 and 1162 of the Companies Act 2006. |
32 | Sharing among the Finance Parties |
32.1 | Payments to Finance Parties |
If a Finance Party (a Recovering Finance Party ) receives or recovers any amount from an Obligor other than in accordance with clause 33 ( Payment mechanics ) (a Recovered Amount ) and applies that amount to a payment due under the Finance Documents then:
(a) | the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery, to the Agent; |
(b) | the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with clause 33 ( Payment mechanics ), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and |
(c) | the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the Sharing Payment ) equal to such receipt or recovery less any amount which the Agent determines may be retained by the |
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Recovering Finance Party as its share of any payment to be made, in accordance with clause 33.5 ( Partial payments ).
32.2 | Redistribution of payments |
The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the Sharing Finance Parties ) in accordance with clause 33.5 ( Partial payments ) towards the obligations of that Obligor to the Sharing Finance Parties.
32.3 | Recovering Finance Party’s rights |
On a distribution by the Agent under clause 32.2 ( Redistribution of payments ) of a payment received by a Recovering Finance Party from an Obligor, as between the relevant Obligor and the Recovering Finance Party, an amount of the Recovered Amount equal to the Sharing Payment will be treated as not having been paid by that Obligor.
32.4 | Reversal of redistribution |
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a) | each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the Redistributed Amount ); and |
(b) | as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor. |
32.5 | Exceptions |
32.5.1 | This clause 32 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this clause, have a valid and enforceable claim against the relevant Obligor. |
32.5.2 | A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings in accordance with the terms of this Agreement, if: |
(a) | it notified that other Finance Party of the legal or arbitration proceedings; and |
(b) | the taking legal or arbitration proceedings was in accordance with the terms of this Agreement; and |
that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
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SECTION 10 - ADMINISTRATION
33 | Payment mechanics |
33.1 | Payments to the Agent |
33.1.1 | On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment. |
33.1.2 | Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in a Participating Member State or London as specified by the Agent) with such bank as the Agent, in each case specifies. |
33.2 | Distributions by the Agent |
Each payment received by the Agent under the Finance Documents for another Party shall, subject to clause 33.3 ( Distributions to an Obligor ) and clause 33.4 ( Clawback ) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days’ notice with a bank specified by that Party in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London as specified by that Party).
33.3 | Distributions to an Obligor |
The Agent may (with the consent of the Obligor or in accordance with clause 34 ( Set-off )) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
33.4 | Clawback |
33.4.1 | Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum. |
33.4.2 | If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds. |
33.5 | Partial payments |
33.5.1 | If the Agent receives a payment for application against amounts due under the Finance Documents that is insufficient to discharge all the amounts then due and payable by an Obligor under those Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under those Finance Documents in the following order: |
(a) | first , in or towards payment pro rata of any unpaid amount owing to the Agent, the Security Agent or the Arranger under those Finance Documents; |
(b) | secondly , in or towards payment to the Lenders pro rata of any amount owing to the Lenders under clause 30.11 ( Lenders’ indemnity to the Agent ) including any amount |
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resulting from the indemnity to the Security Agent under clause 30.22.1 ( Application of certain clauses to Security Agent );
(c) | thirdly , in or towards payment to the Lenders pro rata of any accrued interest, fee or commission due but unpaid under those Finance Documents; |
(d) | fourthly , in or towards payment to the Lenders pro rata of any principal which is due but unpaid under those Finance Documents; and |
(e) | fifthly , in or towards payment pro rata of any other sum due but unpaid under the Finance Documents. |
33.5.2 | The Agent shall, if so directed by all the Lenders, vary the order set out in paragraphs (b) to (d) of clause 33.5.1. |
33.5.3 | Clauses 33.5.1 and 33.5.2 above will override any appropriation made by an Obligor. |
33.6 | No set-off by Obligors |
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
33.7 | Business Days |
33.7.1 | Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). |
33.7.2 | During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date. |
33.8 | Payments on demand |
For the purposes of clause 27.1 ( Non-payment ) and subject to the Agent’s right to demand interest under clause 8.3 ( Default interest ), payments on demand shall be treated as paid when due if paid within three Business Days of demand.
33.9 | Currency of account |
33.9.1 | Subject to clauses 33.9.2 to 33.9.3, dollars is the currency of account and payment for any sum due from an Obligor under any Finance Document. |
33.9.2 | A repayment of all or part of the Loan or an Unpaid Sum and each payment of interest shall be made in dollars on its due date. |
33.9.3 | Each payment in respect of the amount of any costs, expenses or Taxes or other losses shall be made in dollars and, if they were incurred in a currency other than dollars, the amount payable under the Finance Documents shall be the equivalent in dollars of the relevant amount in such other currency on the date on which it was incurred. |
33.9.4 | All moneys received or held by the Security Agent or by a Receiver under a Security Document in a currency other than dollars may be sold for dollars and the Obligor which executed that Security Document shall indemnify the Security Agent against the full cost in relation to the sale. Neither the Security Agent nor such Receiver will have any liability to that Obligor in respect of any loss resulting from any fluctuation in exchange rates after the sale. |
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33.10 | Change of currency |
33.10.1 | Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then: |
(a) | any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrowers); and |
(b) | any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably). |
33.10.2 | If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the London interbank market and otherwise to reflect the change in currency. |
33.11 | Disruption to Payment Systems etc. |
If either the Agent determines (in its discretion) that a Payment Disruption Event has occurred or the Agent is notified by the Borrowers that a Payment Disruption Event has occurred:
(a) | the Agent may, and shall if requested to do so by the Borrowers, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Facility as the Agent may deem necessary in the circumstances; |
(b) | the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in paragraph (a) above if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes; |
(c) | the Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) above but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances; |
(d) | any such changes agreed upon by the Agent and the Borrowers shall (whether or not it is finally determined that a Payment Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of clause 39 ( Amendments and grant of waivers ); |
(e) | the Agent shall not be liable for any damages, costs or losses to any person, or for any diminution in value or any liability whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this clause 33.11; and |
(f) | the Agent shall notify the Finance Parties of all changes agreed pursuant to paragraph (d) above. |
33.12 | Impaired Agent |
33.12.1 | If, at any time, the Agent becomes an Impaired Agent, an Obligor or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with clause 33.1 ( Payments to the Agent ) may instead either pay that amount direct to the required recipient or pay that amount to an interest-bearing account held with an Acceptable Bank within the meaning of paragraph (a) of the definition of Acceptable Bank and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Lender making the payment and designated as a trust account for the benefit of the Party or Parties |
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beneficially entitled to that payment under the Finance Documents. In each case such payments must be made on the due date for payment under the Finance Documents.
33.12.2 | All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the beneficiaries of that trust account pro rata to their respective entitlements. |
33.12.3 | A Party which has made a payment in accordance with clause 33.1 ( Payments to the Agent ) shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account. |
33.12.4 | Promptly upon the appointment of a successor Agent in accordance with clause 30.13 ( Replacement of the Agent ), each Party which has made a payment to a trust account in accordance with clause 33.1 ( Payments to the Agent ) shall give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution in accordance with clause 33.2 ( Distributions by the Agent ). |
34 | Set-off |
A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. For the purpose of this clause the term “Finance Party” includes each of the relevant Finance Party’s holding companies and its subsidiaries and each subsidiary of the relevant Finance Party’s holding companies (as defined in the Companies Act 2006).
35 | Notices |
35.1 | Communications in writing |
Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
35.2 | Addresses |
The address, and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Obligor or Finance Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
(a) | in the case of any Obligor which is a Party, that identified with its name in Schedule 1 ( The original parties ); |
(b) | in the case of any Obligor which is not a Party, that identified in any Finance Document to which it is a party; |
(c) | in the case of any Original Lender, the Security Agent, the Agent and any other original Finance Party that identified with its name in Schedule 1 ( The original parties ); and |
(d) | in the case of each other Lender or Finance Party, that notified in writing to the Agent on or prior to the date on which it becomes a Party in the relevant capacity, |
or, in each case, any substitute address, fax number, or department or officer as an Obligor or Finance Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days’ notice.
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35.3 | Delivery |
35.3.1 | Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective: |
(a) | if by way of fax, when received in legible form; or |
(b) | if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; |
and, if a particular department or officer is specified as part of its address details provided under clause 35.2 ( Addresses ), if addressed to that department or officer.
35.3.2 | Any communication or document to be made or delivered to the Agent or the Security Agent will be effective only when actually received by the Agent or the Security Agent and then only if it is expressly marked for the attention of the department or officer identified in Schedule 1 ( The original parties ) (or any substitute department or officer as the Agent or the Security Agent shall specify for this purpose). |
35.3.3 | All notices from or to an Obligor shall be sent through the Agent. |
35.3.4 | Any communication or document made or delivered to the Borrowers in accordance with this clause will be deemed to have been made or delivered to each of the Obligors. |
35.3.5 | Any communication or document which becomes effective, in accordance with clauses 35.3.1 to 35.3.4 above, after 5:00 pm in the place of receipt shall be deemed only to become effective on the following day. |
35.4 | Notification of address and fax number |
Promptly upon receipt of notification of an address or fax number or change of address or fax number pursuant to clause 35.2 ( Addresses ) or changing its own address or fax number, the Agent shall notify the other Parties.
35.5 | Electronic communication |
35.5.1 | Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means to the extent that those two Parties: |
(a) | agree that, unless and until notified to the contrary, this is to be an accepted form of communication; |
(b) | notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and |
(c) | notify each other of any change to their address or any other such information supplied by them by not less than five Business Days notice. |
35.5.2 | Any electronic communication made between those two Parties will be effective only when actually received in readable form and in the case of any electronic communication made by a Party to the Agent or the Security Agent only if it is addressed in such a manner as the Agent or the Security Agent shall specify for this purpose. |
35.5.3 | Any electronic communication which becomes effective, in accordance with clause 35.5.2 above, after 5:00 p.m. in the place of receipt shall be deemed only to become effective on the following day. |
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35.5.4 | In particular, the Obligors are aware and acknowledge that: |
(a) | the unencrypted information is transported over an open, publicly accessible network and can, in principle, be viewed by others, thereby allowing conclusions to be drawn about a banking relationship; |
(b) | the information can be changed and manipulated by a third party; |
(c) | the sender’s identity (sender of any electronic communication) can be assumed or otherwise manipulated; |
(d) | the exchange of information can be delayed or disrupted due to transmission errors, technical faults, disruptions, malfunctions, illegal interventions, network overload, the malicious blocking of electronic access by third parties, or other shortcomings on the part of the network provider. In certain situations, time-critical orders and instructions might not be processed on time; and |
(e) | the Finance Parties assume no liability for any loss incurred as a result of manipulation of the electronic address or content nor is it liable for any loss incurred by the Borrowers or any other Obligor due to interruptions and delays in transmission caused by technical problems. |
35.5.5 | The Finance Parties are entitled to assume that all the orders and instructions, and communications in general, received from the Borrowers or any other Obligor or a third party are from an authorised individual, irrespective of the existing signatory rights in accordance with the commercial register (or any other applicable equivalent document) or the specimen signature provided to any Finance Party. The Obligors shall further procure that all third parties referred to herein agree with the use of electronic communication and are aware of the above terms and conditions related to the use of electronic communication. |
35.6 | English language |
35.6.1 | Any notice given under or in connection with any Finance Document shall be in English. |
35.6.2 | All other documents provided under or in connection with any Finance Document shall be: |
(a) | in English; or |
(b) | if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document. |
35.7 | Communication with Agent when Agent is Impaired Agent |
If the Agent is an Impaired Agent the Parties may, instead of communicating with each other through the Agent, communicate with each other directly and (while the Agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Agent shall be varied so that communications may be made and notices given to or by the relevant parties directly. This provision shall not operate after a replacement Agent has been appointed.
36 | Calculations and certificates |
36.1 | Accounts |
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
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36.2 | Certificates and determinations |
Any certification or determination by the Agent of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
36.3 | Day count convention |
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Interbank Market differs, in accordance with that market practice.
37 | Partial invalidity |
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
38 | Remedies and waivers |
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in the Finance Documents are cumulative and not exclusive of any rights or remedies provided by law.
39 | Amendments and grant of waivers |
39.1 | Required consents |
39.1.1 | Subject to clause 39.2 ( Exceptions ) and 39.3 ( All Lenders matters ), any term of the Finance Documents may be amended or waived with the consent of the Agent (acting on the instructions of the Majority Lenders and, if it affects the rights and obligations of the Agent or the Security Agent, the consent of the Agent or the Security Agent) and any such amendment or waiver agreed or given by the Agent will be binding on all the Finance Parties. |
39.1.2 | The Agent may (or, in the case of the Security Documents, instruct the Security Agent to) effect, on behalf of any Finance Party, any amendment or waiver permitted by this clause. |
39.2 | Exceptions |
39.2.1 | No amendment or waiver may be made before the date falling ten (10) Business Days after the terms of that amendment or waiver have been notified by the Agent to the Lenders, unless each Lender is a FATCA Protected Lender. The Agent shall notify the Lenders reasonably promptly of any amendments or waivers proposed by the Borrowers. |
39.2.2 | Without prejudice to the generality of sub-clauses 30.7.2(d), 30.7.4 and 30.7.5 of clause 30.7 (Rights and discretions of Agent) , the Agent may engage, pay for and rely on the services of lawyers in determining the consent level required for and effecting any amendment, waiver or consent under this Agreement. |
39.2.3 | Each Obligor agrees to any such amendment or waiver permitted by this clause 39 which is agreed to by the Borrowers. This includes any amendment or waiver which would, but for this clause 39.2.3, require the consent of the Guarantors. |
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39.3 | All Lenders matters |
39.3.1 | An amendment, waiver or discharge or release or a consent of, or in relation to, the terms of any Finance Document that has the effect of changing or which relates to: |
(a) | the definition of “Majority Lenders” in clause 1.1 ( Definitions ); |
(b) | the definition of “Last Availability Date” in clause 1.1 ( Definitions ); |
(c) | an extension to the date of payment of any amount under the Finance Documents or an extension of any period within which the Facility is available; |
(d) | a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable or the rate at which they are calculated; |
(e) | an increase in, or an extension of, any Commitment or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders pro rata under the Facility; |
(f) | a change to the Borrowers or any other Obligor; |
(g) | any provision which expressly requires the consent or approval of all the Lenders; |
(h) | clause 2.2 ( Finance Parties’ rights and obligations ), clause 28 ( Changes to the Lenders ), clause 32.1 ( Payments to Finance Parties ), this clause 39, clause 42 ( Governing Law ) or clause 43 ( Enforcement ); |
(i) | the order of distribution under clause 33.5.1 ( Partial payments ); |
(j) | the order of distribution under clause 30.24.1 ( Order of application ); |
(k) | the currency in which any amount is payable under any Finance Document; |
(l) | the nature or scope of the Charged Property or any Guarantee or the manner in which the proceeds of enforcement of the Security Documents are distributed; or |
(m) | the circumstances in which the security constituted by the Security Documents (including the Guarantees) are permitted or required to be released or reassigned under any of the Finance Documents, |
shall not be made, or given, without the prior consent of all the Lenders.
39.4 | Other exceptions |
39.4.1 | If the Agent or a Lender reasonably believes that an amendment or waiver to any term of this Agreement, may constitute a “material modification” for the purposes of FATCA that may result (directly or indirectly) in a Party being required to make a FATCA Deduction and the Agent or that Lender (as the case may be) notifies the Borrowers and the Agent accordingly, that amendment or waiver may not be effected without the consent of the Agent or that Lender (as the case may be). The consent of a Lender shall not be required pursuant to this clause if that Lender is a FATCA Protected Lender. |
39.4.2 | An amendment or waiver which relates to the rights or obligations of the Agent, the Security Agent or the Arranger in their respective capacities as such (and not just as a Lender) may not be effected without the consent of the Agent, the Security Agent or the Arranger (as the case may be). |
39.4.3 | Notwithstanding clauses 39.1 ( Required consents ), 39.3 ( All Lenders matters ) and 39.4 ( Other exceptions ) (inclusive), the Agent may make technical amendments to the Finance Documents arising out of manifest errors on the face of the Finance Documents, where such amendments |
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would not prejudice or otherwise be adverse to the interests of any Finance Party without any reference or consent of the Finance Parties.
39.5 | Disenfranchisement of Defaulting Lenders |
39.5.1 | For so long as a Defaulting Lender has any Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitment has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lender’s Commitment will be reduced by the amount of its Commitment. |
39.5.2 | For the purposes of this clause 39.5, the Agent may assume that the following Lenders are Defaulting Lenders: |
(a) | any Lender which has notified the Agent that it has become a Defaulting Lender; and |
(b) | any Lender in relation to which it is aware that any of the events or circumstances referred to in paragraphs (a), (b) or (c) of the definition of Defaulting Lender has occurred, unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender. |
39.6 | Replacement of a Defaulting Lender |
39.6.1 | The Borrowers may, at any time a Lender has become and continues to be a Defaulting Lender, by giving 10 Business Days’ prior written notice to the Agent and such Lender replace such Lender by requiring such Lender to (and, to the extent permitted by law such Lender shall) transfer pursuant to clause 28 ( Changes to the Lenders ) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a Replacement Lender ) selected by the Borrowers, and which (unless the Agent is an Impaired Agent) is acceptable to the Agent (acting reasonably) and which confirms its willingness to assume and does assume all the obligations or all the relevant obligations of the transferring Lender (including the assumption of the transferring Lender’s participations or unfunded participations (as the case may be) on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender’s participation in the outstanding Utilisations and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents (or at any other purchase price approved by all of the other Lenders who are not Defaulting Lenders at the time). |
39.6.2 | Any transfer of rights and obligations of a Defaulting Lender pursuant to this clause shall be subject to the following conditions: |
(a) | the Borrowers shall have no right to replace the Agent or Security Agent; |
(b) | neither the Agent nor the Defaulting Lender shall have any obligation to the Borrowers to find a Replacement Lender; |
(c) | the transfer must take place no later than 14 days after the notice referred to in clause 39.6.1 above; and |
(d) | in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents. |
39.7 | Releases |
Except with the approval of all the Lenders or for a release which is expressly permitted or required by the Finance Documents, the Agent shall not have authority to authorise the Security Agent to release:
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(a) | any Charged Property from the security constituted by any Security Document; or |
(b) | any Obligor from any of its guarantee or other obligations under any Finance Document. |
40 | Counterparts |
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
41 | Confidentiality |
41.1 | Confidential Information |
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by clause 41.2 ( Disclosure of Confidential Information ), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
41.2 | Disclosure of Confidential Information |
Any Finance Party may disclose (without the consent of the Obligors) to any of its Affiliates, employees (including service and settlement employees), or any of its employees, officers, directors, representatives or advisers, and to any other person:
(a) | in the case of a Lender, to (or through) whom that Lender assigns (or may potentially assign) all or any of its rights and obligations under the Finance Documents; |
(b) | in the case of a Lender, to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to clause 28.7 ( Security over Lenders’ rights ); |
(c) | in the case of a Lender, with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, the Finance Documents or any Obligor; |
(d) | to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation; |
(e) | in order to preserve or enforce any rights any Finance Party may have under the Security Documents; |
(f) | which is a rating agency (including its professional advisers) or such Finance Party’s professional advisers (including auditors, lawyers, accountants, surveyors, valuers, insurers, insurance advisors and brokers); or |
(g) | in the case of the Security Agent, in the course of the performance of its functions under the Finance Documents, |
any information about any Obligor, the Group and the Finance Documents as that Finance Party shall consider appropriate; and any Finance Party may disclose (with the consent of the Borrowers) to any other person not included in paragraphs (a) - (g) above, any information about any Obligor, the Group and the Finance Documents as that Finance Party shall consider appropriate.
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41.3 | Disclosure to numbering service providers |
41.3.1 | Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Obligors the following information: |
(a) | names of Obligors; |
(b) | country of domicile of Obligors; |
(c) | place of incorporation of Obligors; |
(d) | date of this Agreement; |
(e) | clause 42 (Governing law) ; |
(f) | the names of the Agent and the Arranger; |
(g) | date of each amendment and restatement of this Agreement; |
(h) | amount of Total Commitments; |
(i) | currency of the Facility; |
(j) | type of the Facility; |
(k) | ranking of the Facility; |
(l) | the term of the Facility; |
(m) | changes to any of the information previously supplied pursuant to paragraphs (a) to (l) above; and |
(n) | such other information agreed between such Finance Party and the Borrowers, |
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
41.3.2 | The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider. |
41.3.3 | The Borrowers represent that none of the information set out in clauses 41.3.1(a) to (m) above is, nor will at any time be, unpublished price-sensitive information. |
41.3.4 | The Agent shall notify the Borrowers and the other Finance Parties of: |
(a) | the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facility and/or one or more Obligors; and |
(b) | the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more Obligors by such numbering service provider. |
41.4 | Entire agreement |
This clause 41 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential
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Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
41.5 | Inside information |
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
41.6 | Continuing obligations |
The obligations in this clause 41 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twelve months from the earlier of:
(a) | the date on which all amounts payable by the Obligors under or in connection with the Finance Documents have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and |
(b) | the date on which such Finance Party otherwise ceases to be a Finance Party. |
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SECTION 11 - GOVERNING LAW AND ENFORCEMENT
42 | Governing law |
This Agreement and any non-contractual obligations connected with it are governed by English law.
43 | Enforcement |
43.1 | Jurisdiction of English courts |
43.1.1 | The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Agreement) (a Dispute ). |
43.1.2 | The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary. |
43.1.3 | This clause 43.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions. |
43.2 | Service of process |
Without prejudice to any other mode of service allowed under any relevant law, each Obligor which is a Party:
(a) | irrevocably appoints the person named in Schedule 1 ( The original parties ) as that Obligor’s English process agent as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; |
(b) | agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned; and |
(c) | if any person appointed as process agent for an Obligor is unable for any reason to act as agent for service of process, that Obligor must immediately (and in any event within ten days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose. |
This Agreement has been entered into on the date stated at the beginning of this Agreement.
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Schedule 1
The original parties
Borrowers
Name : | GAS-sixteen Ltd. |
Jurisdiction of incorporation | Bermuda |
Registration number ( or equivalent, if any ) | 48624 |
English process agent ( if not incorporated in England ) | Unisea Maritime Ltd. |
Registered office | Clarendon House, 2 Church Street, Hamilton HM11, Bermuda |
Address for service of notices | Simon Crowe, c/o GasLog Monaco SAM, Gildo Pastor Center, 7, rue du Gabian, MC98000, Monaco |
Name : | GAS-seventeen Ltd. |
Jurisdiction of incorporation | Bermuda |
Registration number ( or equivalent, if any ) | 48625 |
English process agent ( if not incorporated in England ) | Unisea Maritime Ltd. |
Registered office | Clarendon House, 2 Church Street, Hamilton HM11, Bermuda |
Address for service of notices | Simon Crowe, c/o GasLog Monaco SAM, Gildo Pastor Center, 7, rue du Gabian, MC98000, Monaco |
Name : | GAS-eighteen Ltd. |
Jurisdiction of incorporation | Bermuda |
Registration number ( or equivalent, if any ) | 48623 |
English process agent ( if not incorporated in England ) | Unisea Maritime Ltd. |
Registered office | Clarendon House, 2 Church Street, Hamilton HM11, Bermuda |
Address for service of notices | Simon Crowe, c/o GasLog Monaco SAM, Gildo Pastor Center, 7, rue du Gabian, MC98000, Monaco |
GasLog
Name of GasLog | GasLog Ltd. |
Jurisdiction of incorporation | Bermuda |
Registration number ( or equivalent, if any ) | 33928 |
English process agent ( if not incorporated in England ) | Unisea Maritime Ltd. |
Registered office | Clarendon House, 2 Church Street, Hamilton HM11, Bermuda |
Address for service of notices | Simon Crowe, c/o GasLog Monaco SAM, Gildo Pastor Center, 7, rue du Gabian, MC98000, Monaco |
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GasLog Carriers
Name of GasLog Carriers | GasLog Carriers Ltd. |
Jurisdiction of incorporation | Bermuda |
Registration number ( or equivalent, if any ) | 41493 |
English process agent ( if not incorporated in England ) | Unisea Maritime Ltd. |
Registered office | Clarendon House, 2 Church Street, Hamilton HM11, Bermuda |
Address for service of notices | Simon Crowe, c/o Gaslog Monaco SAM, Gildo Pastor Center, 7, rue du Gabian, MC98000, Monaco |
The Agent
Name | Citibank International Plc | |
Facility Office, address, fax number and attention details for notices and account details for payments |
Address:
Fax: Attention: |
Loans Agency (AO), 5
th
Floor, Citigroup Centre, 25
Canada Square, Canary Wharf, London E14 5LB, United Kingdom +44 20 7492 3980 Loans Agency, Agent Office |
The Security Agent
Name | Citibank, N.A., London Branch | |
Facility Office, address, fax number and attention details for notices and account details for payments |
Address:
Fax: Attention: |
Citigroup Centre, 33 Canada Square, Canary Wharf,
London E14 5LB, United Kingdom +44(0) 207 500 5877 Agency & Trust |
The Original Lenders
Name | Citibank International Plc., London Branch |
Commitment ($) | $65,200,000 |
Name | Nordea Bank Finland Plc, London Branch |
Commitment ($) | $65,100,000 |
Name | DVB Bank America N.V. |
Commitment ($) | $65,100,000 |
Name | ABN AMRO Bank N.V. |
Commitment ($) | $65,100,000 |
Name | Commonwealth Bank of Australia |
Commitment ($) | $65,000,000 |
TOTAL | $325,500,000 |
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Schedule 2
Ship information
Owner: | GAS-sixteen Ltd. |
Name: | m.v. “ Methane Rita Andrea ” |
Size, type and builder: | 145,000m3, Gas Carrier, Samsung Heavy Industries Co. Ltd |
Official Number: | 737895 |
IMO Number: | 9307188 |
Seller: | Brazil Shipping II Limited, 100 Thames Valley Park Drive, Reading, RG6 1PT, Company No. 07519965 |
Date and description of Contract: | |
Contract Price: | $155,000,000 |
Ship Commitment: | $108,500,000 |
Flag State | Bermuda |
Charter description: | time charter dated |
Charterer: | Methane Services Limited, a UK company |
Classification: |
†A1, Liquefied Gas Carrier, E
FL 40, SH, SH-DLA, SHCM Additional Notations: RRDA, PMP+, CRC, SFA 40 |
Classification Society: | ABS |
Major Casualty Amount: | $2,000,000 |
Owner: | GAS-seventeen Ltd. |
Name: | m.v. “ Methane Jane Elizabeth ” |
Size, type and builder: | 145,000m3, Gas Carrier, Samsung Heavy Industries Co. Ltd |
Official Number: | 737897 |
IMO Number: | 9307190 |
Seller: | Brazil Shipping II Limited, 100 Thames Valley Park Drive, Reading, RG6 1PT, Company No. 07519965 |
Date and description of Contract: | |
Contract Price: | $155,000,000 |
Ship Commitment: | $108,500,000 |
Flag State | Bermuda |
Charter description: | time charter dated |
Charterer: | Methane Services Limited, a UK company |
Classification: |
†A1, Liquefied Gas Carrier, E
FL 40, SH, SH-DLA, SHCM Additional Notations: RRDA, PMP, CRC, SFA 40 |
Classification Society: | ABS |
Major Casualty Amount: | $2,000,000 |
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Owner: | GAS-eighteen Ltd. |
Name: | m.v. “ Methane Lydon Volney ” |
Size, type and builder: | 145,000m3, Gas Carrier, Samsung Heavy Industries Co. Ltd |
Official Number: | 737898 |
IMO Number: | 9307205 |
Seller: | Brazil Shipping II Limited, 100 Thames Valley Park Drive, Reading, RG6 1PT, Company No. 07519965 |
Date and description of Contract: | |
Contract Price: | $155,000,000 |
Ship Commitment: | $108,500,000 |
Flag State | Bermuda |
Charter description: | time charter dated |
Charterer: | Methane Services Limited, a UK company |
Classification: |
†A1, Liquefied Gas Carrier, E
FL 40, SH, SH-DLA, SHCM Additional Notations: PMP, CRC, SFA 40 |
Classification Society: | ABS |
Major Casualty Amount: | $2,000,000 |
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Schedule 3
Conditions precedent
Part 1
Initial conditions precedent
1 | Original Obligors’ corporate documents |
(a) | A copy of the Constitutional Documents of each Original Obligor. |
(b) | A copy of a resolution of the board of directors of each Original Obligor (or any committee of such board empowered to approve and authorise the following matters): |
(i) | approving the terms of, and the transactions contemplated by, the Finance Documents and the Charter Document for each Ship ( Relevant Documents ) to which it is a party and resolving that it execute the Relevant Documents; |
(ii) | authorising a specified person or persons to execute the Relevant Documents on its behalf; and |
(iii) | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Relevant Documents to which it is a party. |
(c) | If applicable, a copy of a resolution of the board of directors of the relevant company, establishing any committee referred to in paragraph (b) above and conferring authority on that committee. |
(d) | (If a requirement under the Constitutional Documents of each Original Obligor or under Bermudian law) a copy of a resolution signed by all the holders of the issued shares in each Original Obligor, approving the terms of, and the transactions contemplated by, the Relevant Documents to which such Obligor is a party. |
(e) | (If a requirement under the Constitutional Documents of each Original Obligor or under Bermudian law) A copy of a resolution of the board of directors of each corporate shareholder of each Original Obligor approving the terms of the resolution referred to in paragraph (e) above. |
(f) | A copy of any power of attorney under which any person is to execute any of the Relevant Documents on behalf of any Original Obligor. |
2 | Charters |
(a) | The Charters for each of the Ships duly executed, on such terms, including as to: |
(i) | the identity of the Charterers; |
(ii) | the charter rates (which shall be a net daily charter hire of no less than ***** under each such Charter and of no less than ***** for any extension period); |
(iii) | the charter tenors (which in any event will be no less than 78 months under the Charter in relation to m.v. Methane Rita Andrea , 72 months under the Charter in relation to m.v. Methane Jane Elizabeth and 66 months under the Charter in relation to m.v. Methane Lydon Volney and, in respect of at least two of the Charters, will include a Charterer’s option to extend for at least 36 months); |
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and otherwise in form and substance satisfactory to the Majority Lenders in their absolute discretion.
(b) | The Quiet Enjoyment Agreements for each such Ship duly executed by the relevant Owners, the Security Agent and the relevant Charterers. |
(c) | Such evidence as the Agent may require (to be arranged by Norton Rose Fulbright) as to the due execution of each of the Charter Documents and the Quiet Enjoyment Agreements for each such Ship, as to the due incorporation of the relevant Charterer and any other party to the Charter Documents (other than an Obligor) and the Quiet Enjoyment Agreements in relation to each such Ship, their power and authority to enter into and perform those documents and the authorisation of their entry into them. |
3 | Legal opinions |
(a) | A legal opinion of Norton Rose Fulbright Greece addressed to the Arranger, the Security Agent and the Agent on matters of English law, substantially in the form approved by the Agent and the Security Agent prior to signing this Agreement. |
(b) | A legal opinion of the legal advisers to the Arranger, the Security Agent and the Agent in England and also each jurisdiction in which an Obligor is incorporated and/or which is or is to be the Flag State of a Ship, or in which an Account opened at Utilisation is established or which governs any assets which are to be the subject of a Security Interest substantially in the form approved by the Agent and the Security Agent prior to signing this Agreement. |
4 | Legal and beneficial ownership |
The Agent shall have received from the Obligors in writing details of the name, company number and current legal and ultimate beneficial owners of Relevant Company A and Relevant Company B in form and substance acceptable to the Agent.
5 | Miscellaneous documents and evidence |
(a) | Evidence that any process agent referred to in clause 43.2 ( Service of process ) or any equivalent provision of any other Finance Document entered into on or before the first Utilisation Date, if not an Original Obligor, has accepted its appointment. |
(b) | A certificate of GasLog (signed by an officer) confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on any other Original Obligor to be exceeded. |
(c) | A certificate of an authorised signatory of the relevant Original Obligor certifying that each copy document relating to it specified in Part 1 of this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and that any such resolutions or power of attorney have not been revoked. |
(d) | A specimen of the signature of each person authorised by the resolution referred to in paragraph 1(b) of Part 1 of this Schedule. |
(e) | A copy of any other authorisation or other document, opinion or assurance which the Agent (acting on the instructions of the Majority Lenders) considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document. |
(f) | The Original Financial Statements. |
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(g) | Any Fee Letters duly executed and evidence that the fees, commissions, costs and expenses then due from the Borrowers pursuant to clause 11 ( Fees ) and clause 16 ( Costs and expenses ) have been paid or will be paid by the first Utilisation Date. |
(h) | A copy, certified by an approved person to be a true and complete copy, of the Contract, any Charter Documents and of any management agreements entered into between each Borrower and a Manager (or another approved manager), each to be in an approved form. |
6 | Bank Accounts |
Evidence that any Account required to be established under clause 25 ( Bank accounts ) has been opened and established, that any Account Security in respect of each such Account has been executed and delivered by the relevant Account Holder(s) in favour of the Security Agent and/or any other Finance Party and that any notice required to be given to an Account Bank under that Account Security has been given to it and acknowledged by it in the manner required by that Account Security and that an amount has been credited to it.
7 | “Know your customer” information |
Such documentation and information as any Finance Party may reasonably request through the Agent or as the Security Agent may reasonably require (including specimen signatures) to comply with “know your customer” or similar identification procedures under all laws and regulations applicable to that Finance Party.
8 | Finance Documents |
(a) | The Guarantees duly executed by the Obligors. |
(b) | Duly executed notices of assignment and acknowledgements of those notices as required by any of the above Security Documents. |
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Part 2
Ship and security conditions precedent
1 | Security |
(a) | The Mortgage, the Deed of Covenant and the Charter Assignment in respect of the relevant Ship, each duly executed by the relevant Owner. |
(b) | The Quiet Enjoyment Agreement in respect of the relevant Ship, each duly executed by the relevant Charterer, the Security Agent and the relevant Owner. |
(c) | Any Manager’s Undertaking required pursuant to the Finance Documents duly executed by each Manager of the relevant Ship. |
(d) | Duly executed notices of assignment and acknowledgements of those notices as required by any of the above Security Documents or this Agreement. |
2 | Delivery and registration of Ship |
Evidence that the relevant Ship:
(a) | is legally and beneficially owned by the relevant Owner and registered provisionally in the name of the relevant Owner through the relevant Registry as a Bermudian flagged ship under the laws and flag of the relevant Flag State; |
(b) | is operationally seaworthy and in every way fit for service; |
(c) | is classed with the relevant Classification free of all overdue requirements and recommendations of the relevant Classification Society; |
(d) | is insured in the manner required by the Finance Documents; and |
(e) | is free of any other charter commitment which would require approval under the Finance Documents, |
and there is no Event of Default under clause 27.22 ( Charters ) nor would result from, or occur immediately after, the relevant Utilisation.
3 | Mortgage registration |
Evidence in respect of the relevant Ship that the Mortgage has been registered against the relevant Ship as a first priority mortgage through the relevant Registry under the laws and flag of the relevant Flag State.
4 | Legal opinions |
The following further legal opinions, each addressed to the Arranger and the Security Agent:
(a) | a legal opinion of Norton Rose Fulbright Greece on matters of English law, substantially in the form approved by the Agent and the Security Agent prior to signing this Agreement in relation to Security Documents. |
(b) | a legal opinion of the legal advisers to the Security Agent and the Agent in each jurisdiction in which an Obligor is incorporated and/or which is or is to be the Flag State of the Ship, approved by the Agent and the Security Agent prior to signing this Agreement. |
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5 | Insurance |
In relation to the relevant Ship’s Insurances:
(a) | an opinion from insurance consultants appointed by the Agent on such Insurances; |
(b) | evidence that such Insurances have been placed in accordance with clause 23 ( Insurance ); and |
(c) | evidence that approved brokers, insurers and/or associations have issued or will issue letters of undertaking in favour of the Security Agent in an approved form in relation to the Insurances. |
6 | ISM and ISPS Code |
Copies of:
(a) | the document of compliance issued in accordance with the ISM Code to the person who is the operator of the relevant Ship for the purposes of that code; |
(b) | the safety management certificate in respect of the relevant Ship issued in accordance with the ISM Code; |
(c) | the international ship security certificate in respect of the relevant Ship issued under the ISPS Code; |
(d) | If so requested by the Agent, any other certificates issued under any applicable code required to be observed by the relevant Ship or in relation to its operation under any applicable law. |
7 | Fees and expenses |
Evidence that the fees, commissions, costs and expenses that are due from the Borrowers pursuant to clause 11 ( Fees ) and clause 16 ( Costs and expenses ) have been paid or will be paid by the relevant Utilisation Date.
8 | Survey report |
(If required by the Agent) A survey report from approved surveyors obtained not more than 10 days before the relevant Utilisation Date evidencing that the relevant Ship is seaworthy and capable of safe operation.
9 | Environmental matters |
Copies of the relevant Ship’s certificate of financial responsibility and vessel response plan required under United States law and evidence of their approval by the appropriate United States government entity and (if requested by the Agent) an environmental report in respect of the relevant Ship from an approved person.
10 | Withholding Tax |
If relevant, assurance that any withholding tax will be paid or application to the tax authorities in any Relevant Jurisdiction is or will be sent.
11 | Delivery |
Evidence that the relevant Ship has been delivered to, and accepted by, the relevant Owner under the Contract, that the Contract Price has been paid in full (or will be paid forthwith upon release of the Loan proceeds), that the title of the relevant Seller to the Ship has been deleted from the current registry of ships (or will be deleted within 2 days from Delivery) and that the bill
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of sale, the protocol of delivery and acceptance and any other documents to be delivered and exchanged between the parties under the Contract of the relevant Ship upon its Delivery, have been duly executed and delivered and exchanged between them in form and substance satisfactory the Agent.
12 | Value of Security |
Valuations of the relevant Ship obtained (not more than six (6) weeks before the relevant Utilisation Date) in accordance with clause 24 ( Minimum security value ) evidencing compliance with clause 5.3 ( Currency and amount ) and clause 24 ( Minimum security value ) (including immediately after the relevant Utilisation).
13 | Additional opinions |
Any other document, authorisation, opinion or assurance required by the Agent.
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Schedule 4
Utilisation Request
From: | GAS- sixteen Ltd. |
GAS- seventeen Ltd. | |
GAS- eighteen Ltd. | |
To: | Citibank International plc |
(as Agent) | |
Dated: | [ l ] 2014 |
Dear Sirs
$325,500,000
Facility Agreement dated [ · ] 2014 (the Agreement)
1 | We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request. |
2 | We wish to borrow an Advance on the following terms: |
Proposed Utilisation Date: | [ · ] (or, if that is not a Business Day, the next Business Day) | |
Amount: | $[ · ] | |
Interest Period: | [ · ] months | |
Payment instructions | [ · ] | |
3 | We confirm that each condition specified in clause 4.4 ( Further conditions precedent ) is satisfied on the date of this Utilisation Request. |
4 | This Advance is part of the Ship Commitment for m.v. [Methane Rita Andrea][Methane Jane Elisabeth][Methane Lydon Volney] and the purpose of this Advance is [ specify purpose complying with clause 3 of the Agreement ] and its proceeds should be credited to [ · ] [ specify account ]. |
5 | This Utilisation Request is irrevocable. |
Yours faithfully
authorised signatory for
GAS- sixteen Ltd.
GAS- seventeen Ltd.
GAS- eighteen Ltd.
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Schedule 5
Selection Notice
From: | GAS- sixteen Ltd. |
GAS- seventeen Ltd. | |
GAS- eighteen Ltd. | |
To: | Citibank International plc |
(as Agent) | |
Dated: | [ l ] 2014 |
Dear Sirs
$325,500,000
Facility Agreement dated [ · ] 2014 (the Agreement)
1 | We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice. |
2 | We request that the next Interest Period for the Advance in relation to m.v. [Methane Rita Andrea][Methane Jane Elisabeth][Methane Lydon Volney] be [ l ] months. |
3 | This Selection Notice is irrevocable. |
Yours faithfully
authorised signatory for
GAS- sixteen Ltd.
GAS- seventeen Ltd.
GAS- eighteen Ltd.
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Schedule 6
Form of Transfer Certificate
To: | [ Citibank International plc] as Agent |
From: | [ The Existing Lender ] (the Existing Lender ) and [ The New Lender ] (the New Lender ) |
Dated:
$325,500,000 Facility Agreement dated [ · ] 2014 as amended, supplemented and restated to date ( the “Agreement” )
1 | We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate. |
2 | We refer to clause 28.5 ( Procedure for transfer ): |
(a) | The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Agreement and the other Finance Documents which relate to that portion of the Existing Lender’s Commitment(s) and participations in the Loan under the Agreement as specified in the Schedule. | |
(b) | The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender’s Commitment(s) and participations in the Loan under the Agreement specified in the Schedule. | |
(c) | The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b) above. | |
(d) | The proposed Transfer Date is [ · ]. | |
(e) | The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of clause 35.2 (Addresses) are set out in the Schedule. | |
3 | The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in clause 28.4 ( Limitation of responsibility of Existing Lenders ). |
4 | The New Lender confirms that it is [not] a Borrower’s Affiliate. |
5 | This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate. |
6 | [ Consider including reference to accession to an intercreditor agreement, mortgage or other Finance Documents to which Lenders may need to be party and checklist of steps necessary for the New Lender to obtain the benefit of the Security Documents .] |
7 | This Transfer Certificate and any non-contractual obligations connected with it are governed by English law. |
8 | This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate. |
Note: The execution of this Transfer Certificate alone may not assign a proportionate share of the Existing Lender’s interest in the Security Interests constituted by the Security Documents in all jurisdictions. It is the responsibility of the New Lender to ascertain whether any other
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documents or other formalities are required to perfect an assignment of such a share in the Existing Lender’s interest in the Security Interests constituted by the Security Documents in any jurisdiction and, if so, to arrange for execution of those documents and completion of those formalities.
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The Schedule
Commitment/rights to be assigned and obligations to be assumed
[ insert relevant details ]
Facility Office address, fax number
and attention details for notices and account details for payments
[ insert relevant details ]
[ Existing Lender ] | [ New Lender ] |
By: | By: |
This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed to be as stated above.
[ Agent ]
By:
135 |
|
Schedule 7
Forms of Notifiable Debt Purchase Transaction Notice
Part 1
Form of Notice on Entering into Notifiable Debt Purchase Transaction
To: | Citibank International plc as Agent |
From: | [The Lender] |
Dated:
$325,500,000 Facility Agreement dated [ · ] 2014 as amended, supplemented and restated to date (the “Facility Agreement”)
1 | We refer to clause 29.2.3 ( Prohibition on Debt Purchase Transactions by the Group ) of the Facility Agreement. Terms defined in the Facility Agreement have the same meaning in this notice unless given a different meaning in this notice. |
2 | We have entered into a Notifiable Debt Purchase Transaction. |
3 | The Notifiable Debt Purchase Transaction referred to in paragraph 2 above relates to the amount of our Commitment(s) as set out below. |
Commitment | Amount of our Commitment to which Notifiable Debt Purchase Transaction relates | |
[ · ] | [insert amount (of Commitment) to which the relevant Debt Purchase Transaction applies] |
[Lender]
By:
136 |
|
Part 2
Form of Notice on Termination of Notifiable Debt Purchase Transaction / Notifiable Debt Purchase Transaction ceasing to be with Borrower Affiliate
To: | Citibank International plc as Agent |
From: | [The Lender] |
Dated:
$325,500,000 Facility Agreement dated [ · ] 2014 as amended, supplemented and restated to date (the “Facility Agreement”)
1 | We refer to clause 29.2.4 ( Prohibition on Debt Purchase Transactions by the Group ) of the Facility Agreement. Terms defined in the Facility Agreement have the same meaning in this notice unless given a different meaning in this notice. |
2 | A Notifiable Debt Purchase Transaction which we entered into and which we notified you of in a notice dated [ ] has [terminated]/[ceased to be with a Borrower Affiliate]. |
3 | The Notifiable Debt Purchase Transaction referred to in paragraph 2 above relates to the amount of our Commitment(s) as set out below. |
Commitment | Amount of our Commitment to which Notifiable Debt Purchase Transaction relates (Base Currency) | |
[ · ] | [insert amount (of Commitment) to which the relevant Debt Purchase Transaction applies] |
[Lender]
By
137 |
|
SIGNATURES
THE BORROWERS | ||
GAS-sixteen Ltd. | ) | /s/ Paul Antony Wogan |
By: Paul Antony Wogan | ) | |
GAS-seventeen Ltd. | ) | /s/ Paul Antony Wogan |
By: Paul Antony Wogan | ) | |
GAS-eighteen Ltd. | ) | /s/ Paul Antony Wogan |
By: Paul Antony Wogan | ) | |
THE ARRANGER | ||
CITIBANK, N.A., LONDON BRANCH | ) | /s/ Vassilios N. Maroulis |
By: Vassilios N. Maroulis | ) | |
THE BOOKRUNNER | ||
CITIBANK, N.A., LONDON BRANCH | ) | /s/ Vassilios N. Maroulis |
By: Vassilios N. Maroulis | ) | |
THE AGENT | ||
CITIBANK INTERNATIONAL PLC | ) | /s/ Steve Wright |
By: Steve Wright | ) | |
THE SECURITY AGENT | ||
CITIBANK, N.A., LONDON BRANCH | ) | /s/ John Kane |
By: John Kane | ) | |
THE LENDERS | ||
CITIBANK INTERNATIONAL PLC, LONDON BRANCH | ) | /s/ Vassilios N. Maroulis |
By: Vassilios N. Maroulis | ) | |
NORDEA BANK FINLAND PLC, LONDON BRANCH | ) | /s/ Niki Alexandrou |
By: Niki Alexandrou | ) | |
DVB BANK AMERICA N.V. | ) | /s/ Niki Alexandrou |
By: Niki Alexandrou | ) | |
ABN AMRO Bank N.V. | ) | /s/ Niki Alexandrou |
By: Niki Alexandrou | ) | |
COMMONWEALTH BANK OF AUSTRALIA | ) | /s/ Will Barrand |
By: Will Barrand | ) |
138 |
Exhibit 10.26
Private & Confidential
DATED , 2014
SUPPLEMENTAL DEED
relating to a
US$325,500,000 Loan
to
GAS-SIXTEEN LTD.
GAS-SEVENTEEN LTD.
and
GAS-EIGHTEEN LTD.
arranged by
CITIBANK, N.A., LONDON BRANCH
with
CITIBANK INTERNATIONAL PLC
as Agent
CITIBANK, N.A., LONDON BRANCH
as Security Agent
|
Contents
Clause | Page | |
1 | Definitions | 1 |
2 | Agreement of the Lenders and Agent | 2 |
3 | Amendments to Principal Agreement | 3 |
4 | Representations and warranties | 4 |
5 | Conditions | 5 |
6 | Finance Documents | 5 |
7 | Costs and expenses | 6 |
8 | Miscellaneous and notices | 6 |
9 | Applicable law | 6 |
Schedule 1 Documents and evidence required as conditions precedent | 7 | |
Schedule 2 Form of Effective Date Notice | 9 |
|
THIS SUPPLEMENTAL DEED is dated 2014 and made BETWEEN :
(1) | GAS-SIXTEEN LTD. (the Gas-sixteen Borrower ), GAS-SEVENTEEN LTD. (the Gas-seventeen Borrower ) and GAS-EIGHTEEN LTD. (the Gas-eighteen Borrower and, together with the Gas-sixteen Borrower and the Gas-seventeen Borrower, the Borrowers ) each of the address set out in Schedule 1 to the Facility Agreement as Borrowers; |
(2) | GASLOG LTD. of the address set out in Schedule 1 to the Facility Agreement as GasLog and Commercial Manager; |
(3) | GASLOG CARRIERS LTD. of the address set out in Schedule 1 to the Facility Agreement as GasLog Carriers (and together with GasLog, the Principal Guarantors ); |
(4) | GASLOG LNG SERVICES LTD. of the address set out in Schedule 1 to the Facility Agreement as Technical Manager; |
(5) | CITIBANK, N.A., LONDON BRANCH of the address set out in Schedule 1 to the Facility Agreement as Arranger; |
(6) | THE FINANCIAL INSTITUTIONS set out in Schedule 1 to the Facility Agreement as the Original Lenders; |
(7) | CITIBANK, N.A., LONDON BRANCH of the address set out in Schedule 1 to the Facility Agreement as Bookrunner; |
(8) | CITIBANK INTERNATIONAL PLC of the address set out in Schedule 1 to the Facility Agreement as Agent; and |
(9) | CITIBANK, N.A., LONDON BRANCH of the address set out in Schedule 1 to the Facility Agreement as Security Agent. |
WHEREAS :
(A) | This Deed is supplemental to an agreement dated 1 April 2014 (the Principal Agreement ) and made between, inter alios, (1) the Borrowers, (2) the Lenders, (3) the Bookrunner, (4) the Agent and (5) the Security Agent, whereby the Lenders agreed to make available to the Borrowers, as joint and several borrowers, a loan facility of up to $325,500,000 upon the terms and subject to the conditions therein contained. |
(B) | By a waiver and consent request dated 1 April 2014 (the Waiver and Consent Request ) and a further waiver and consent request supplemental thereto dated 16 July 2014, the Borrowers have requested the Lenders to (inter alia) (1) permit the disposal by GasLog Carriers, and the acquisition, directly or indirectly, by GPHL of the shares in the Gas-sixteen Borrower and the Gas-seventeen Borrower (the Sale ) and (2) amend the Principal Agreement on the terms set out in this Deed. |
NOW IT IS HEREBY AGREED as follows:
1 | Definitions |
1.1 | Defined expressions |
Words and expressions defined in the Principal Agreement shall unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this Deed. |
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1.2 | Definitions | |
In this Deed, unless the context otherwise requires: | ||
Effective Date means the date specified in the Effective Date Notice. | ||
Effective Date Notice means the notice to be signed and delivered to the Borrowers by the Agent in accordance with Clause 5 in the form set out in Schedule 2. | ||
Facility Agreement means the Principal Agreement as amended, supplemented and waived by this Deed. | ||
GPHL means GasLog Partners Holdings LLC of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. | ||
GPHL Guarantee means the guarantee executed or (as the context may require) to be executed by GPHL in favour of the Security Agent in the agreed form. | ||
MLP means GasLog Partners LP of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. | ||
Relevant Parties means each Borrower, the Principal Guarantors, the Managers, MLP and GPHL or, where the context so requires or permits, means any or all of them. | ||
1.3 | Principal Agreement | |
References in the Principal Agreement to “this Agreement” shall, with effect from the Effective Date and unless the context otherwise requires, be references to the Principal Agreement as amended, waived and/or supplemented by this Deed and words such as “herein”, “hereof”, “hereunder”, “hereafter”, “hereby” and “hereto”, where they appear in the Principal Agreement, shall be construed accordingly. | ||
1.4 | Construction | |
Clauses 1.2 ( Construction ), 1.3 ( Third party rights ) and 1.4 ( Finance Documents ) of the Facility Agreement and any other provision of the Facility Agreement which, by its terms, purports to apply to all of the Finance Documents and/or any Obligor shall apply to this Deed as if set out in it but with all necessary changes and as if references in the provision to Finance Documents referred to this Deed. This Deed is a Finance Document. | ||
2 | Agreement of the Lenders and Agent | |
The Lenders and the Agent, relying upon the representations and warranties on the part of each of the Borrowers, the Principal Guarantors and the Managers contained in clause 4, agree with the Borrowers that, subject to the terms and conditions of this Deed and in particular, but without prejudice to the generality of the foregoing, fulfillment on or before 2014 (or such later date as the Agent, acting on the instructions of the Majority Lenders, may agree) of the conditions contained in clause 5 and Schedule 1, the Agent and the Lenders: | ||
(a) | agree to the Sale; and |
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(b) | agree to the amendment of the Principal Agreement on the terms set out in clause 3 ( Amendments to Principal Agreement ). | |
3 | Amendments to Principal Agreement | |
3.1 | Amendments | |
The Principal Agreement shall, with effect on and from the Effective Date, be (and is hereby) amended in accordance with the following provisions (and the Principal Agreement (as so amended) will continue to be binding upon each of the parties hereto upon such terms as so amended): | ||
(a) | the definition of “ Finance Documents ” in clause 1.1 ( Definitions ) of the Principal Agreement shall be amended by inserting the words “, the Supplemental Deed” after the words “the Security Documents”; | |
(b) | new definitions of “ GPHL ” and “ GPHL Guarantee ” shall be inserted in clause 1.1 ( Definitions ) of the Principal Agreement reading as follows: | |
“ GPHL means GasLog Partners Holdings LLC of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. | ||
GPHL Guarantee means the guarantee to be executed by GPHL in favour of the Security Agent in the agreed form.”; | ||
(c) | the definitions of “ Guarantees ” and “ Guarantors ” in clause 1.1 ( Definitions ) of the Principal Agreement shall be deleted and replaced as follows: | |
“ Guarantees means the GasLog Guarantee, the GasLog Carriers Guarantee, the GPHL Guarantee and the MLP Guarantee and Guarantee means any of them. | ||
Guarantors means each of GasLog, GasLog Carriers, GPHL and MLP.”; | ||
(d) | the definition of “ MLP ” in clause 1.1 ( Definitions ) of the Principal Agreement shall be deleted and replaced as follows: | |
“ MLP means GasLog Partners LP of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960.”; | ||
(e) | the definition of “ MLP Guarantee ” in clause 1.1 ( Definitions ) of the Principal Agreement shall be amended by deleting the rest of the words after the words “in the agreed form”; | |
(f) | a new definition of “Supplemental Deed” shall be inserted in clause 1.1 ( Definitions ) of the Principal Agreement reading as follows: | |
“ Supplemental Deed means the deed dated 2014 between (inter alios) the Borrowers, the Lenders, the Bookrunner, the Agent and the Security Agent supplemental to this Agreement.”; | ||
(g) | clause 17.21.2 of the Principal Agreement shall be amended by inserting the words “As at the date of this Agreement” at the beginning of the paragraph and continuing with “all” in lower case; |
3 |
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4 |
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ownership ) of the Principal Agreement and on the Effective Date, in respect of clause 17.21 ( Legal and beneficial ownership ) of the Facility Agreement); | ||
(b) | it is duly incorporated as a limited liability company and has power to carry on its business as it is now being conducted and to own its property and other assets; and | |
(c) | it has power to execute, deliver and perform its obligations under this Deed and all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same. | |
5 | Conditions | |
5.1 | Documents, evidence and Effective Date Notice | |
(a) | The agreement of the Lenders and the Agent referred to in clause 2 shall be subject to the receipt by the Agent or its duly authorised representative of the documents and evidence specified in Schedule 1 in form and substance satisfactory to the Agent. | |
(b) | The Agent shall sign the Effective Date Notice on the date that the Agent has received the documents and evidence specified in Clause 5 and Schedule 1 in a form and substance satisfactory to it and specify that date to be the Effective Date, provided that date falls not later than 2014 (or such later date as the Agent acting on the instructions of the Majority Lenders may agree). | |
5.2 | General conditions precedent | |
The agreement of the Lenders and the Agent referred to in clause 2 shall be further subject to: | ||
(a) | the representations and warranties in clause 4 being true and correct on the Effective Date as if each was made with respect to the facts and circumstances existing at such time; and | |
(b) | no Default having occurred and continuing at the time of the Effective Date. | |
5.3 | Waiver of conditions precedent | |
The conditions specified in this clause 5 are inserted solely for the benefit of the Finance Parties and may be waived by the Agent (acting on the instructions of the Lenders) in whole or in part with or without conditions. | ||
6 | Finance Documents | |
Each of the Borrowers, the Principal Guarantors and the Managers confirms its consent to the amendments to the Principal Agreement and the other arrangements contained in this Deed and each of the Borrowers, the Principal Guarantors and each Manager further acknowledges and agrees, for the avoidance of doubt, that: | ||
(a) | each of the other Finance Documents to which it is a party, and its obligations thereunder, shall remain in full force and effect notwithstanding the amendments made to the Principal Agreement by this Deed; and |
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(b) | with effect from the Effective Date, references to the “Facility Agreement” in any of the other Finance Documents to which it is a party shall henceforth be reference to the Principal Agreement as amended by this Deed and as from time to time hereafter amended. | |
7 | Costs and expenses | |
For the avoidance of doubt, clause 16 ( Costs and expenses ) of the Facility Agreement shall apply in respect of all reasonably incurred costs and expenses of the Finance Parties in connection with this Deed. | ||
8 | Miscellaneous and notices | |
8.1 | Notices | |
The provisions of clause 35 ( Notices ) of the Principal Agreement shall apply to this Deed if set out herein. | ||
8.2 | Counterparts | |
This Deed may be executed in any number of counterparts and by the different parties on separate counterparts, each of which when so executed and delivered shall be an original but all counterparts shall together constitute one and the same instrument. | ||
9 | Applicable law | |
9.1 | Governing law | |
This Deed and any non-contractual obligations connected with it are governed by English law. | ||
9.2 | Jurisdiction of English courts | |
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed or any non-contractual obligations connected with it (including a dispute regarding the existence, validity or termination of this Deed) (a Dispute ). | ||
The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary. | ||
This clause 9.2 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions. | ||
This Deed has been duly executed and delivered as a deed on the date stated at the beginning of this Deed. |
6 |
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Schedule 1
Documents and evidence required as conditions precedent
(referred to in clause 5.1)
1 | Relevant Parties’ corporate documents | ||
(a) | A copy of the Constitutional Documents of MLP and GPHL (and confirmation from an officer of each other Relevant Party that no changes have been made to the Constitutional Documents of each other Relevant Party from the copies previously provided to the Agent under the Facility Agreement). | ||
(b) | A copy of a resolution of the board of directors of each Relevant Party (or any committee of such board empowered to approve and authorise the following matters): | ||
(i) | approving and/or ratifying the terms of, and the transactions contemplated by, this Deed, the MLP Guarantee and the GPHL Guarantee ( Relevant Documents ) to which it is a party and resolving that it execute the Relevant Documents to which it is a party; | ||
(ii) | authorising a specified person or persons to execute the Relevant Documents on its behalf and/or ratifying the execution of the Relevant Documents; and | ||
(iii) | authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Relevant Documents to which it is a party and/or ratifying the signing and/or despatch of all such documents and notices. | ||
(c) | If applicable, a copy of a resolution of the board of directors of the relevant company, establishing any committee referred to in paragraph (b) above and conferring authority on that committee. | ||
(d) | (If required under the Constitutional Documents of the Relevant Parties or Marshall Islands or Bermudian law), a copy of a resolution signed by all the holders of the issued shares in each Relevant Party, approving the terms of, and the transactions contemplated by, the Relevant Documents to which such Relevant Party is a party. | ||
(e) | A copy of any power of attorney under which any person is to execute any of the Relevant Documents on behalf of any Relevant Party. | ||
(f) | A certificate of an authorised signatory of each Relevant Party certifying that each copy document relating to it specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Deed and that any such resolutions or power of attorney have not been revoked. |
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2 | Legal opinions | |
(a) | A legal opinion of Norton Rose Fulbright Greece addressed to the Arranger, the Security Agent and the Agent and for the benefit of all the Finance Parties on matters of English law, substantially in the form approved by the Agent prior to signing this Deed. | |
(b) | A legal opinion of the legal advisers to the Arranger, the Security Agent and the Agent in each jurisdiction in which each Relevant Party is incorporated or which is required by the Lenders in substantially in the form approved by the Agent prior to signing this Deed. | |
3 | Other documents and evidence | |
(a) | Evidence that any process agent referred to in the Relevant Documents has accepted its appointment. | |
(b) | A copy of any other authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by any Relevant Document or for the validity and enforceability of any Relevant Document. | |
4 | “Know your customer” information | |
Such documentation and information in respect of the Relevant Parties as any Finance Party may reasonably request through the Agent to comply with “know your customer” or similar identification procedures under all laws and regulations applicable to that Finance Party. | ||
5 | Sale | |
(a) | Approval of the arrangements for completion of the Sale and that all the shares in GPHL are owned by MLP. | |
(b) | Evidence satisfactory to the Agent that all of the shares in the Gas-sixteen Borrower and the Gas-seventeen Borrower are legally and beneficially owned by GPHL. | |
6 | Guarantees | |
(a) | The GPHL Guarantee duly executed by GPHL. | |
(b) | The MLP Guarantee duly executed by MLP. |
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Schedule 2
Form of Effective Date Notice
To: | Gas-sixteen Ltd. |
Gas-seventeen Ltd. | |
Gas-eighteen Ltd. |
Supplemental Deed dated ____, 2014 (the “Deed”) relating to a US$325,500,000 loan to GAS-sixteen Ltd., GAS-seventeen Ltd. and Gas-eighteen Ltd.
In accordance with clause 5.1 of the Deed, we confirm that the Effective Date is [•] 2014.
This is the Effective Date Notice under (and as defined in) the Deed.
for and on behalf of | |
CITIBANK INTERNATIONAL PLC | |
as Agent |
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BORROWERS | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GAS-SIXTEEN LTD. | ) | Authorised Signatory | ||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GAS-SEVENTEEN LTD. | ) | Authorised Signatory | ||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GAS-EIGHTEEN LTD. | ) | Authorised Signatory | ||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
PRINCIPAL GUARANTORS | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GASLOG LTD. | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: |
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EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GASLOG CARRIERS LTD. | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
MANAGERS | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GASLOG LNG SERVICES LTD. | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
GASLOG LTD | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
FINANCE PARTIES | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
CITIBANK, N.A., LONDON BRANCH | ) | Authorised Signatory | ||
(as Arranger and Bookrunner) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: |
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EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
CITIBANK INTERNATIONAL PLC, LONDON BRANCH | ) | Authorised Signatory | ||
(as Lender) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
CITIBANK INTERNATIONAL PLC | ) | Authorised Signatory | ||
(as Agent) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
CITIBANK, N.A., LONDON BRANCH | ) | Authorised Signatory | ||
(as Security Agent) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
NORDEA BANK FINLAND PLC, LONDON BRANCH | ) | Authorised Signatory | ||
(as Lender) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: |
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EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
DVB BANK AMERICA N.V. | ) | Authorised Signatory | ||
(as Lender) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
ABN AMRO BANK N.V. | ) | Authorised Signatory | ||
(as Lender) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: | ||||
EXECUTED as a DEED by | ) | |||
for and on behalf of | ) | |||
COMMONWEALTH BANK OF AUSTRALIA | ) | Authorised Signatory | ||
(as Lender) | ) | |||
in the presence of | ||||
Witness | ||||
Name: | ||||
Address: | ||||
Occupation: |
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Exhibit 10.27
This Indemnification Agreement (this “ Agreement ”) is made as of [date of agreement] by and between GasLog Partners LP, a Marshall Islands limited partnership (the “ Partnership ”), and [name of indemnitee] (the “ Indemnitee ”).
WHEREAS it is essential to the Partnership to retain and attract as Directors and Officers the most capable persons available,
WHEREAS on [date of appointment or election], the Indemnitee was [appointed] [elected] as [the] [a] [position of Indemnitee] of the Partnership,
WHEREAS the Amended and Restated Partnership Agreement of the Partnership (the “ Partnership Agreement ”) requires indemnification of the directors and officers of the Partnership to the fullest extent permitted under the Limited Partnership Act of The Republic of the Marshall Islands, as amended, supplemented or restated from time to time, and any successor to such statute, except in matters involving fraud or dishonesty on the part of such persons,
WHEREAS it is the express policy of the Partnership to indemnify their Directors and Officers so as to provide them with the maximum possible protection permitted by law, and
WHEREAS the Partnership does not regard the protection available to the Indemnitee as adequate in the present circumstances, and realizes that the Indemnitee may not be willing to serve as a Director and/or Officer without adequate protection, and the Partnership desires the Indemnitee to serve in such capacity;
NOW, THEREFORE , in consideration of the Indemnitee’s agreement to serve as a [position of Indemnitee], the parties agree as follows:
1. Definitions
1.1 As used in this Agreement:
(a) The term “ Proceeding ” shall include any threatened, pending or completed action, suit or proceeding, whether brought by or in the right of the GasLog Ltd., a Bermuda exempted company and parent of the Partnership (the “ Company ”), the Partnership or otherwise and whether of a civil, criminal, administrative or investigative nature;
(b) The term “ Expenses ” shall include, but is not limited to, (i) expenses of investigations, judicial or administrative proceedings or appeals, (ii) damages, judgments, fines, amounts paid in settlement by or on behalf of the Indemnitee,
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(iii) attorneys’ fees and disbursements and (iv) any expenses of establishing a right to indemnification under this Agreement; and
(c) The terms “ Director ” and “ Officer ” shall include the Indemnitee’s service at the request and for the benefit of the Partnership as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise as well as a Director and/or Officer of the Partnership.
2. Indemnity of Director and/or Officer
Subject only to the limitations set forth in Section 3, the Partnership will pay on behalf of the Indemnitee all Expenses actually and reasonably incurred by the Indemnitee because of any claim or claims made against him in a Proceeding by reason of the fact that he will be, or is or was a Director and/or Officer for or on behalf of the Partnership. The Partnership will also pay all such Expenses relating to the Indemnitee’s acting as a witness in a Proceeding and in respect of any Proceeding relating to this Agreement or with respect to the Indemnitee’s entitlement to indemnification by the Company or by the Partnership pursuant to the Partnership Agreement or any statute, rule or otherwise.
3. Limitations on Indemnity
3.1 The Partnership shall not be obligated under this Agreement to make any payment of Expenses to the Indemnitee:
(a) if such payment is prohibited by applicable law;
(b) for which payment is actually made to the Indemnitee under an insurance policy, except in respect of any excess beyond the amount of payment under such insurance;
(c) for which payment the Indemnitee is indemnified by the Company or by the Partnership otherwise than pursuant to this Agreement;
(d) resulting from a claim decided in a Proceeding adversely to the Indemnitee based upon or attributable to the Indemnitee gaining in fact any personal profit or advantage to which he was not legally entitled;
(e) brought about or contributed to by the fraud or dishonesty of the Indemnitee seeking payment hereunder; provided , however , that the Indemnitee shall be indemnified under this Agreement as to any claims upon which suit may be brought against him by reason of any alleged dishonesty on his part, unless it shall be decided in a Proceeding that he committed (i) acts of active and deliberate dishonesty, (ii) with actual dishonest purpose and intent, and (iii) which acts were material to the cause of action so adjudicated.
3.2 For purposes of Sections 3 and 4, the phrase “decided in a Proceeding” shall mean a decision by a court, arbitrator(s), hearing officer or other judicial agent
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having the requisite legal authority to make such a decision, which decision has become final and from which no appeal or other review proceeding is permissible.
4. Advance Payment of Costs
4.1 Expenses incurred by the Indemnitee in defending a claim against him in a Proceeding shall be paid promptly by the Partnership as incurred and in advance of the final disposition of such Proceeding; provided , however , that Expenses of defence need not be paid as incurred and in advance where it is decided in a Proceeding that the Indemnitee is not entitled to be indemnified pursuant to this Agreement.
4.2 The Indemnitee hereby agrees and undertakes to repay such amounts advanced if it shall be decided in a Proceeding that he is not entitled to be indemnified by the Partnership pursuant to this Agreement or otherwise. The Indemnitee shall not be required to post bond or other security to support this undertaking.
5. Enforcement
If a claim under this Agreement is not paid by the Partnership, or on its behalf, within 10 business days after a written claim has been received by the Partnership, the Indemnitee may at any time thereafter bring suit against the Partnership to recover the unpaid amount of the claim and if successful in whole or in part, the Indemnitee shall also be entitled to be paid the Expenses of prosecuting such claim.
6. Subrogation
In the event of payment under this Agreement, the Partnership shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Partnership effectively to bring suit to enforce such rights.
7. Insurance
The Partnership shall maintain an insurance policy providing directors’ and officers’ liability insurance in such amounts as the Partnership shall reasonably determine to be prudent for similarly situated companies whose securities are listed on the New York Stock Exchange, and the Indemnnitee shall be entitled to coverage under the insurance policy up to the maximum coverage made available for any director or officer of the Partnership.
8. Partnership Assumption of Defence
The Partnership shall be entitled to participate in the defence of any Proceeding or to assume the defence thereof, with counsel approved by the Indemnitee, which approval shall not be unreasonably withheld, conditioned or delayed, upon the delivery to the Indemnitee of written notice of its election to do so; provided , however , that in the event that (i) the use of counsel chosen by the Partnership to represent the Indemnitee would
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present such counsel with an actual or potential conflict, (ii) the named parties in any such Proceeding (including any impleaded parties) include both the Partnership and the Indemnitee and the Indemnitee shall conclude that there may be one or more legal defences available to him that are different from or in addition to those available to the Partnership or (iii) any such representation by the Partnership would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee will be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Proceeding) at the Partnership’s expense subject to the other terms and conditions of this Agreement.
9. Notice
9.1 The Indemnitee, as a condition precedent to his right to be indemnified under this Agreement, shall give to the Partnership notice in writing as soon as practicable of any claim made against him for which indemnity will or could be sought under this Agreement, together with such information and cooperation as it may reasonably require.
9.2 Notice to the Partnership shall be given at its principal office and shall be directed to the Partnership’s Secretary (or such other address as the Partnership shall designate in writing to the Indemnitee).
9.3 Notice shall be deemed received if sent by prepaid mail properly addressed, the date of such notice being the date postmarked.
9. Saving Clause
If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the Partnership shall nevertheless indemnify the Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated or by any other applicable law.
10. Indemnification Hereunder Not Exclusive
Nothing herein shall be deemed to diminish or otherwise restrict the Indemnitee’s right to indemnification under any provision of the constitutional documents of the Company or the Partnership, under Bermuda or Marshall Islands law or under any contract or agreement or otherwise.
11. Applicable Law
The terms and conditions of this Agreement and the rights of the parties hereunder shall be governed by and construed in all respects in accordance with the laws of the Republic of the Marshall Islands. The parties to this Agreement hereby irrevocably agree that the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction), unless otherwise provided for by Marshall Islands law, shall have exclusive jurisdiction in respect of any dispute, suit, action, arbitration or
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proceedings which may arise out of or in connection with this Agreement and waive any objection to such proceedings in the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction), unless otherwise provided for by Marshall Islands law, on the grounds of venue or on the basis that they have been brought in an inconvenient forum.
12. Changes in Law
In the event that a change in applicable law after the date of this Agreement, whether by statute, rule or judicial decision, expands or otherwise increases the right or ability of a Marshall Islands limited partnership to indemnify (or to otherwise pay or advance Expenses as to any Proceeding for the benefit of) a member of its board of directors or an officer of the Partnership, the Indemnitee shall, by this Agreement, enjoy the greater benefits so afforded by such change. In the event that a change in applicable law after the date of this Agreement, whether by statute, rule or judicial decision, narrows or otherwise reduces the right or ability of a Marshall Islands limited partnership to indemnify (or to otherwise pay or advance Expenses as to any Proceeding for the benefit of) a member of its board of directors or an officer of the Partnership, such change shall have no effect on this Agreement or any of the Indemnitee’s rights hereunder, except and only to the extent required by law.
13. Counterparts
This Agreement may be executed in any number of counterparts, each of which shall constitute the original.
14. Successors and Assigns
This Agreement shall be binding upon the Partnership and its successors and assigns.
15. Continuation of Indemnification
The indemnification under this Agreement shall continue as to the Indemnitee even though he may have ceased to be a Director and/or Officer and shall inure to the benefit of the heirs and personal representatives of the Indemnitee.
16. Coverage of Indemnification
The indemnification under this Agreement shall cover the Indemnitee’s service as a Director and/or Officer prior to or after the date of the Agreement.
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AGREED by the Parties through their authorised signatories on the date first written above:
For, and on behalf of
GasLog Partners LP
By | ||||
[name] | [name] | |||
[position] |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 of our report dated August 11, 2014, relating to the combined and consolidated financial statements of GasLog Partners LP, appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading “Experts” in such Prospectus.
/s/ Deloitte Hadjipavlou, Sofianos& Cambanis S.A.
August 13, 2014
Athens, Greece
Exhibit 23.4
GasLog Partners LP
c/o GasLog Monaco S.A.M.
Gildo Pastor Center
7 Rue du Gabian
MC 98000, Monaco
August 13, 2014
Ladies and Gentlemen:
Reference is made to the Form F-1 registration statement, as the same may be amended from time to time (collectively, the “Registration Statement”), of Partners LP (the “Partnership”), to be filed with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), relating to the public offering of the Partnership’s common units.
We have reviewed the section in the Registration Statement entitled “The LNG Shipping Industry” and confirm that it accurately describes the international LNG shipping market. We further advise the Partnership that our role has been limited to the review of the section referenced above and the provision of the information set forth in the section of the Registration Statement entitled “The LNG Shipping Industry,” including, but not limited to, the statistical data, graphs and tables that appear in that section (collectively, the “Shipping Information”). With respect to the Shipping Information supplied by us, we advise you that:
• | some industry data included in this discussion is derived from estimates or subjective judgments; | |
• | the published information of other maritime data collection agencies may differ from this data; and | |
• | while we have taken reasonable care in the compilation of the Shipping Information and believe it to be accurate and correct, data compilation is subject to limited audit and validation procedures. |
We hereby consent to (i) the use of the graphical and statistical information supplied by us as set forth in the Registration Statement, including, without limitation, such information contained under the section of the Registration Statement entitled “The LNG Shipping Industry”, (ii) the references to our Company in the Registration Statement, (iii) the naming of our company as an expert in the Registration Statement, and (iv) the filing of this letter as an exhibit to the Registration Statement to be filed with the United States Securities and Exchange Commission pursuant to the Securities Act.
/s/ Stephen Willcox | /s/ William Holmes | |
For and on behalf of | For and on behalf of | |
Clarkson Research Services Limited | Clarkson Research Services Limited | |
Name: Stephen Willcox | Name: William Holmes | |
Designation: Director | Designation: Director |