Performance Shipping Inc. has secured a $37.8 million sale‑and‑leaseback for its new LR1 tanker, M/T P. San Francisco, which is currently under construction at Jiangsu New Yangzi Shipbuilding and is slated for delivery in early 2027. The company sold the vessel to an unaffiliated third party and will lease it back on a bare‑boat basis for ten years, providing immediate cash while retaining operational control.
The financing structure includes 120 monthly payments of $5,451 per day, a $18.1 million balloon payment at the end of the lease, and an interest rate of Term SOFR plus 2.00% annually. The deal also grants Performance Shipping options to repurchase the vessel after the second year, giving the company flexibility to adjust its fleet mix as market conditions evolve.
M/T P. San Francisco is already chartered to Mercuria Energy Trading S.A. for a firm four‑year period at a daily gross charter rate of $23,750, which exceeds the vessel’s daily cash‑flow breakeven of $22,200. This charter arrangement ensures that the vessel will generate positive cash flow from day one, providing a strong return on the financing and mitigating risk for the company.
Performance Shipping’s recent financial results underscore the strategic importance of this transaction. In Q4 2025 the company posted a net income of $7.6 million, and for the full year 2025 it earned $50.0 million on revenue of $84.2 million. Net and operating margins stood at 59.37% and 38.71% respectively, while the debt‑to‑equity ratio was 0.69 and the Altman Z‑Score was 0.66, indicating potential distress. The sale‑and‑leaseback, covering 70% of the vessel’s $54.1 million contract price, provides a lower leverage level than alternative funding options and supports the company’s fleet renewal strategy.
Management emphasized the strategic fit of the deal: "We are pleased to announce the new financing arrangement for our LR1 newbuilding, secured almost one year ahead of the vessel's expected delivery date. The financing represents 70% of the vessel's contract price and an even lower leverage level when considering current market values for modern LR1 newbuilding tankers, while maintaining a conservative cashflow breakeven level of US$22,200 per day." "As previously announced, the vessel has been chartered to Mercuria Energy Trading S.A. for a firm period of four years upon delivery, at a daily gross charter rate of US$23,750, providing coverage above the vessel's daily cashflow breakeven, with options to extend the charter for up to three additional one-year periods. This financing is consistent with our strategy of fleet renewal, fleet deployment and balanced financial management."
The transaction aligns with Performance Shipping’s broader fleet renewal plan, which includes new Suezmax contracts and the delivery of the M/T P. Marseille. By securing financing well before delivery, the company positions itself to capitalize on favorable charter rates and maintain a balanced capital structure, while the pre‑arranged charter guarantees revenue that exceeds the vessel’s breakeven, reinforcing the financial soundness of the deal.
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