Shipping companies transforming to tax-exempt firms

[NEW YORK] Master limited partnerships, tax-exempt companies that pay investors most of their income at the cost of added risk, are spreading in the shipping industry.

Scorpio Tankers, the largest owner of vessels hauling refined fuels, is "seriously" considering starting an MLP, president Robert Bugbee said in an Aug 26 interview. The Monaco-based company would join GasLog Partners and Dynagas LNG Partners among shipping companies that recently reorganised as publicly-traded partnerships that pay no corporate income tax.

MLPs trade at a higher multiple of their assets than do corporations, and are popular with investors hunting for better returns in the sixth year of near-zero interest rates, leading them to riskier businesses. The cash streams from some MLPs may not be reliable because shipping rates, for instance, are volatile. Scorpio is considering the structure a month after the man who popularised it, Houston billionaire Richard Kinder, said he was dissolving his company's MLPs.