SFL - Adjusted agreement with a recapitalized Frontline Ltd.
(Thomson Reuters ONE) -
Press release from Ship Finance International Limited, December 6, 2011
Ship Finance International Limited (NYSE:SFL) ("Ship Finance" or the "Company"),
today announced that it has agreed, subject to final board and bank financing
approvals, to amend the terms of the long-term chartering agreements with
Frontline Ltd. ("Frontline").
This will happen concurrently with a proposed recapitalization of Frontline,
where some of their assets will be sold and a significant capital commitment
relating to newbuildings will be transferred to a new company to be established,
Frontline 2012 ("Frontline 2012"). Frontline's balance sheet will be
strengthened and the current uncertainty relating to its liquidity position and
bank covenant compliance will be removed.
At the same time, all of Frontline's tonnage providers, including Ship Finance,
have been requested to reduce the base charter rates in order for the
restructured Frontline to manage through a potentially very weak spot tanker
market in the short to medium term. For Ship Finance, the preliminary agreement
is to reduce the base charter rates by $6,500 per day per vessel from 2012
through 2015, and thereafter revert to previous charter rate levels.
Ship Finance will receive a restructuring compensation of $106 million in cash
from Frontline, including the release of $56 million restricted cash currently
serving as security for their charter payments to us. The remaining $50 million
will be an early payment of profit split, and will effectively be used to offset
future profit split revenues over and above the old base rate.
There will also be an adjustment to the profit split calculation whereby Ship
Finance will get 100% up to the old base rate levels, and 25% profit split above
that. The profit split will be payable on an annual basis as before.
In addition to the $106 million cash payment from Frontline, we plan to use an
additional $50 million to prepay on bank financing, with corresponding reduced
interest and loan amortization. The net effect of this significant debt
reduction and new charter arrangement is that the cashflow from these vessels
will at a minimum cover the debt service, even at the reduced base rate, for the
next four years.
At year-end 2011, the bank financing relating to the 28 Frontline vessels will
then be reduced from approximately $740 million to approximately $584 million.
This is just a marginal level above current scrap values for the vessels, and we
will continue to amortize down the debt further according to schedule.
Currently, the net contribution from the Frontline vessels, after debt service,
is approximately $8 million per quarter, or approximately $0.10 per share. It is
expected that the near-term dividends will be adjusted to reflect a reduced net
cash-flow, potentially reducing the base dividend to approximately $0.25 per
share for the next quarter. If the market is higher than the new reduced base
charter rates, significant additional cash will be generated with the potential
to increase SFL's dividend in the future. Any final decision to pay dividends,
and the amount of such dividends, is made by the Board of Directors on a quarter
by quarter basis.
CEO of Ship Finance Management AS, Ole B. Hjertaker said in a comment: "The
uncertainty relating to Frontline has been negative for our Company and a
potential default on their chartering obligations could be dramatic for us. It
has been a difficult process for all involved parties, but we feel that the
outlined solution will, if accepted, give our Company a solid footing under our
large tanker exposure in what is a very difficult time for the tanker industry.
We will receive base charter rates which are clearly in excess of what can be
achieved in the market today and we will have a solid counterpart with a good
liquidity position and low cash break-even rates.
In a positive market scenario, we will have the potential to recover more than
the original agreed charter payments through an improved profit share agreement.
Since the establishment of Ship Finance in 2004, we have received more than $500
million in profit sharing from Frontline. It has enabled the Company to grow and
diversify the asset base much faster than originally anticipated with
corresponding higher dividend capacity. This clearly illustrates the value of
optionality in the tanker market.
The uncertainty regarding our tanker exposure should then be dramatically
reduced, and the foundation for a long term dividend capacity with additional
upside potential should be established."
The outlined structure is subject to final board approval, and also approval by
the financing banks in Ship Finance and Frontline, respectively, with a deadline
of December 31, 2011.
December 6, 2011
The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda
Questions should be directed to:
Investor and Analyst Contacts:
Eirik Eide, Chief Financial Officer, Ship Finance Management AS
+47 23114006 / +47 95008921
Magnus T. Valeberg, Vice President, Ship Finance Management AS
+47 23114012 / +47 93440960
Media Contact:
Ole B. Hjertaker, Chief Executive Officer, Ship Finance Management AS
+47 23114011 / +47 90141243
About Ship Finance
Ship Finance is a major ship owning company listed on the New York Stock
Exchange (NYSE: SFL). Including newbuildings, the Company has a fleet of 69
vessels, including 25 crude oil tankers (VLCC and Suezmax), two chemical
tankers, five oil/bulk/ore vessels, 11 drybulk carriers including six
newbuildings, 15 container vessels including four newbuildings, six offshore
supply vessels, one jack-up drilling rigs, one ultra-deepwater drillship and two
ultra-deepwater semi-submersible drilling rigs. The fleet is one of the largest
in the world and most of the vessels are employed on long-term charters.
More information can be found on the Company's website: www.shipfinance.org
Cautionary Statement Regarding Forward Looking Statements
This press release may contain forward looking statements. These statements are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including Ship Finance management's examination of historical
operating trends. Although Ship Finance believes that these assumptions were
reasonable when made, because assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond its control, Ship Finance cannot give assurance that it will achieve
or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to
differ materially from those discussed in this presentation include the strength
of world economies and currencies, general market conditions including
fluctuations in charter hire rates and vessel values, changes in demand in the
tanker market as a result of changes in OPEC's petroleum production levels and
worldwide oil consumption and storage, changes in the Company's operating
expenses including bunker prices, dry-docking and insurance costs, changes in
governmental rules and regulations or actions taken by regulatory authorities,
potential liability from pending or future litigation, general domestic and
international political conditions, potential disruption of shipping routes due
to accidents or political events, and other important factors described from
time to time in the reports filed by the Company with the United States
Securities and Exchange Commission.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Ship Finance International Limited via Thomson Reuters ONE
[HUG#1569394]
Unternehmensinformation / Kurzprofil:
Datum: 06.12.2011 - 09:56 Uhr
Sprache: Deutsch
News-ID 94585
Anzahl Zeichen: 9007
contact information:
Town:
Hamilton
Kategorie:
Business News
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"SFL - Adjusted agreement with a recapitalized Frontline Ltd."
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