Ship Finance in Fleet Renewal Mode

Bermuda-based shipowner Ship Finance International (SFL) continues with diversification and renewal of its fleet as it recently took delivery of the second 19,200 TEU boxship and sold two older oil tankers.

In March, MSC Viviana was handed over to SFL and immediately commenced a 15-year bareboat charter to Mediterranean Shipping Company (MSC). The first 19,200 TEU vessel was delivered in December 2016 and is also chartered to MSC for a period of 15 years.

In addition, the company agreed to sell the 2000-built VLCC Front Scilla and the 1998-built Suezmax vessel Front Brabant to unnamed buyers during the first quarter of 2017. The agreed net sales prices are USD 27 million and USD 12 million respectively, including compensation for the early termination of the charters from Frontline. The vessels are expected to be delivered to their new owners in the second quarter of 2017.

Also in March, Ship Finance delivered the 1998-built VLCC Front Century to its new owner, an undisclosed party. The sale was agreed in November 2016 and the net proceeds from the sale amounted to USD 24 million, including compensation from Frontline for the early termination of the charter.

SFL expects to take delivery of the two 114,000 dwt LR2 newbuilding product tankers in 3Q 2017. Both ships have been chartered out on long-term charters to Phillips 66, with a minimum period of seven years and options for the charter to extend the period to up to 12 years.

In April, the 1,700 TEU containership MSC Alice started a hire-purchase lease with MSC for a period of five years at a net bareboat hire rate of USD 1,600 per day.

Furthermore, SFL secured a charter for the 2007-built drilling rig Soehanah with a national company in Asia for a minimum period of 12 months.

The information on fleet modernization comes on the back of SFL’s financial results for the first quarter of this year which show that the company delivered a net income of USD 32 million, up from a net income of USD 29 million posted in the previous quarter.

The company earned USD 152 million of total charter revenues in 1Q, compared to USD 154 million posted in 4Q 2016.

“Ship Finance continues to take steps to strengthen its balance sheet and diversify its contracted backlog. In the first quarter, we took delivery of our second 19,200 TEU container vessel, and we expect to take delivery of two product tankers in the third quarter this year. These three vessels, backed by long-term charters, will add approximately USD 26 million in annual EBITDA following their deliveries. We are also pleased to have secured employment for our sole uncontracted drilling rig,” Ole B. Hjertaker, CEO of Ship Finance Management AS, commented.

“We are of course focused on the restructuring of Seadrill, one of our large counterparties, which we hope will be finalized in the coming months. At the same time, we have significant capital available for investments, and our objectives remain to find accretive investment opportunities across our core markets and to maximize returns from our existing portfolio of assets,” Hjertaker added.

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