The restructuring of Frontline has been approved by the Board of the Company and will in the next few days be put forward to our creditors and counterparties for approval. The proposed solution has been made possible through a massive commitment from Frontline’s major shareholder; Hemen Holding Ltd.
The major part of the restructuring consists of the following elements:
A new company, Frontline 2012, will be established and registered on the NOTC list in Oslo. Frontline 2012 will acquire five VLCC newbuilding contracts, six modern VLCCs and four modern Suezmax tankers from Frontline at fair market value. The value of these vessels, including the value of one time charter agreement, is based on independent appraisals, set at $1,121 million. In addition, Frontline 2012 will assume a total of $666 million in bank debt attached to the newbuilding contracts and vessels and a further $325.5 million in remaining newbuilding commitments. Further Frontline will be paid for working capital related to the assets acquired. The transaction will be supported by a fairness opinion.
Frontline 2012 plans to raise new equity in the amount of $250 million, of which Frontline will subscribe for 10 percent. A commitment for the underwriting of the remaining equity issuance has been received from Hemen. This commitment is subject only to final agreement with the banks and major counterparts. The purchase of the assets from Frontline is based on fair market value supported by independent appraisals. However the Board of Frontline 2012 and the guarantor of the Frontline 2012 equity will to the extent permissible by securities law, seek to give preference to Frontline equity holders to subscribe to the new capital in Frontline 2012. In view of the fact that the transaction is based on current market values there will not be given any tradable rights for subscription.
The Chief Executive of Frontline Management AS, Jens Martin Jensen, says in a comment: “In this very difficult situation we are extremely pleased with the understanding and flexibility shown by our leading banks and the major counterparts. We feel that significant upside will be kept for Frontline’s existing equity holders through the massive reduction in debt and newbuilding obligations that the proposed solution will bring. With the restructured cash break even rates Frontline will be extremely well positioned to meet the challenges the current oversupply of tankers has created and also benefit from a recovery in the tanker market going forward. We want to thank all the parties who have contributed to this solution, which ultimately, if implemented, will give significant extra value to our creditors, counterparties and equity holders.”
Frontline 2012’s ambition is to grow and become the consolidator in the tanker market when timing is right.
Shipbuilding Tribune Staff, December 6, 2011; Image: frontline