Ship Finance International Limited, today announced that it has agreed to sell the 1998 and 1999 built VLCCs Front Champion and Golden Victory to unrelated third parties. The Company has simultaneously agreed to terminate the corresponding charter parties with a subsidiary of Frontline Ltd.
The vessels are expected to be delivered to the new owners in November 2013 and Ship Finance expects to receive cash proceeds of approximately $43 million, including approximately $11 million upfront payment from Frontline. In addition, we will receive approximately $79 million in 7.5% amortizing notes from Frontline.
The amortization profile and maturity of the notes will match the current charters for the two vessels, with reduced rates until 2015 and full rates from 2016. Front Champion and Golden Victory were acquired in 2005 with the highest charter rates across the vessels on charter to Frontline, and the level of compensation payments for early termination is a reflection of this.
While the spot VLCC market has currently shown some signs of recovery, there is still a fundamental oversupply in the market, and the retirement of older vessels will contribute to a balancing of the market going forward. The decision to phase out Front Champion and Golden Victory has been made on the basis of individual assessments of the vessels and the costs of taking them through expensive drydockings later this year.
Divesting of older vessels is a part of the Company’s strategy to renew and diversify the fleet. The majority of our charter revenues are currently sourced from the offshore segment, and in the second quarter of 2013, the adjusted EBITDA from the vessels on charter to Frontline was limited to only 18% of the total. Following this sale, the number of vessels on charter to Frontline will be reduced to 20 vessels, including 15 VLCCs and five Suezmax crude oil carriers.
SFL, November 7, 2013