HispanicBusiness

On January 7, 2013, the Partnership also announced that the M/T 'Arionas' (36,725dwt, Ice 1A IMO II/III, built 2006 Hyundai Mipo Dockyard Co Ltd) has extended its employment with CMTC for an additional 12 months (+/- 30 days) at an increased gross rate of $13,800 per day with earliest expected redelivery in September 2013.

As of December 31, 2012 the Partnership had three IMO II/III Chemical/Product tankers (M/T Alexandros II, M/T Aristotelis II and M/T Aris II, all built in 2008 by STX Offshore & Shipbuilding Co. Ltd.) on long term bareboat charters to subsidiaries of Overseas Shipholding Group Inc. ("OSG"). These charters were scheduled to terminate, approximately, in February, July and September of 2018, respectively, and are at rates that are substantially above current market rates. On November 14, 2012, OSG made a voluntary filing for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. OSG has requested that the Partnership reduce the charter rates for their remaining terms to substantially lower rates. The Partnership has been in discussions with OSG regarding this matter. No assurance can be given that we will reach an agreement with OSG regarding the remaining duration, rate and terms of the charters, or our rights in the bankruptcy proceeding, or, if any such agreement is reached, that it will be approved by the bankruptcy court.

Market Commentary

Overall, product tanker spot earnings in the fourth quarter of 2012 improved considerably with average earnings for the quarter reaching the highest level since the first quarter of 2009. Demand for product tankers was quite robust in all main product tanker markets, as increased arbitrage opportunities in the Atlantic basin and increased demand for Medium Range tankers ("MRs") in the East led spot rates to increase.

Product tanker period market activity improved during the course of the fourth quarter of 2012, as more charterers sought to take period coverage and at slightly higher time charter rates compared to the third quarter of 2012.

On the supply side, the product tanker order book experienced substantial slippage during 2012, as approximately 55% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts expect that net fleet growth for MR and handy size product tankers for 2013 will be in the region of 3.6%, while overall demand for product tankers for the year has been revised up to 4.2%. We believe the improving demand and supply balance of the product tanker market should continue to positively affect spot and period charter rates going forward.

The Suezmax spot market improved towards the end of the fourth quarter, as increased demand out of West Africa to the US and delays in the Turkish Straits pushed rates considerably higher from the low levels experienced during most of the fourth quarter of 2012. Overall, average spot earnings for crude vessels in 2012 improved slightly when compared to 2011, due to a strong first half of 2012, when a spike in OPEC production, together with aggressive stock building and longer trading distances in response to the Iranian supply issues, exerted upward pressure on rates.

Slippage for the Suezmax tanker order book as of the end of December 2012 continued to affect tonnage supply as approximately 34% of the expected Suezmax newbuildings were not delivered on schedule. Industry analysts expect the Suezmax tanker order book slippage and cancellations to increase going forward due to the historically weak spot market, the soft shipping finance environment and downward pressure on asset values. Suezmax tanker demand is expected to grow by 5.2% in the full year 2013 with net fleet growth projected at 5.6%.