Teekay and all associated companies released earnings today and generally they were very good for shipping companies. Teekay LNG Partners is a master limited partnership with a large fleet of ships (although many of the ships are owned in partnership with others) which are typically leased for long periods of time–up to about 30 years. LNG shipping has been a real growth business in the last 10 years as the supply of natural gas in the United States has expanded thanks to fracking.
The biggest problem we have with TGP is that there are a lot of new builds on order and historically ocean shippers get into financial trouble when they over commit to purchase of new ships. This is not a problem now as the global economies have been strengthening, but in a recessionary time too many new builds on order can cause severe financial stress for a company.
Note that this is the 2nd LNG shipper in the portfolio as the GasLog Partners 8.20% fixed-to-floating perpetual preferred (GLOP-B) is in the portfolio as well. Presently we have no real problem with this over exposure, but it is a situation that needs to be monitored.
Readers should be aware that personally we are much more conservative than this portfolio represents, although we do own the Spark Energy fixed-to-floating issue contained in this model.
With this purchase the model is 53% invested. We will continue to search for a higher yield baby bond to add to the portfolio.