Teekay LNG Partners to increase 2019 distributions by 36%
Teekay GP, the general partner of Teekay LNG Partners, has announced the following actions affecting its unitholders: Common unit distributions expected to increase by 36% in 2019 as part of a balanced capital allocation strategy; and a recommendation that unitholders vote in favor of amending Teekay LNG's tax status to be treated as a corporation, instead of a partnership, for U.S. federal income tax purposes, which would result in common and preferred unitholders receiving Form 1099s, instead of K-1s, in the future."With roughly half of our newbuilding program delivered and the remaining vessels set to deliver throughout 2019, the Partnership's cash flows and net income are expected to grow significantly while our balance sheet is anticipated to naturally delever over time," commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd. "Our Board has carefully assessed our future capital allocation strategy and has concluded that a balanced approach that, in the near-term, focuses on both delevering the balance sheet, which creates significant equity value and builds financial strength, and returning more capital to unitholders from its free cash flow after debt amortization payments, is prudent and will create the most long-term value for our unitholders. As a result, with the recent completion of our 2018 refinancings and nearly all of our newbuild program financings, our Board has decided to increase Teekay LNG's quarterly common unit cash distribution in 2019 by 36 percent to $0.19 per unit, commencing with the first quarter of 2019 distribution to be paid in May 2019." Mr. Kremin added, "With almost $11 billion of forward fixed-rate revenues, we believe that our capital allocation strategy provides a clear path to delever our balance sheet towards our target of 5.5 times on a net debt to cash flow from vessel operations basis over the next few years, while also providing an enhanced ability for the Partnership to fund future growth at a lower cost of capital. As we approach our targeted leverage level, we believe a stronger balance sheet will enable us to consider returning additional capital to unitholders through distribution increases and/or common unit repurchases, which we intend to evaluate at least annually." Mr. Kremin continued, "In addition, Teekay LNG intends to change its tax status to be treated as a corporation for US tax purposes, which we anticipate will broaden our investor base by making Teekay LNG a more attractive investment for new investors."