Tanker owner and operator Frontline signed two senior secured term loan facilities of USD 110.5 million each to partially finance four recent vessel deals.
Under the deals, up to USD 110.5 million would be provided by ING Bank and the other USD 110.5 million would be provided by Credit Suisse, for the financing of the company’s recent very large crude carrier (VLCC) resales and newbuilding contracts.
Signed in June 2017, both facilities mature in 2023, carry an interest rate of LIBOR plus a margin of 190 basis points and have an amortization profile of 18 years.
Frontline has committed bank financing in place to partially finance all of its 10 resales and newbuilding contracts.
“The financing of our current newbuilding program is complete, following the signing of our senior secured loan facilities with ING and Credit Suisse. The terms of the financing support Frontline’s low cash break-even levels,” Inger M. Klemp, Chief Financial Officer of Frontline Management AS, said.
The agreements were unveiled as part of Frontline’s second quarter and first half of 2017 financial report in which the company said that it ended the three-month period in the red, mainly due to a weak tanker market witnessed during the quarter.
The company’s net loss for the period reached USD 19.4 million, compared with net income of USD 27 million seen in the first quarter of the year. The loss was primarily due to USD 7.8 million in dry docking expenses during the quarter and a USD 12.2 million loss on termination of two charters.
The two long-term charters which were ended were for the 1998-built Suezmax tanker Front Brabant and the 2000-built VLCC Front Scilla, ahead of the vessels’ scheduled drydockings.
“The market has been decidedly weak since the start of the second quarter of 2017, which is primarily the result of the increase in the size of the global crude oil tanker fleet. While the weak market naturally affects our earnings in the short term, the company’s strategy is not altered,” Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS, said.
For the six month period ended June 30, Frontline delivered a net income of USD 7.6 million, compared with a net income of USD 93.2 million seen in the first six months of 2016.
As of August 2017, the company estimates that the average daily cash breakeven rates for the remainder of 2017 will be approximately USD 21,600, USD 17,500 and USD 15,700 for its owned and leased VLCCs, Suezmax tankers and LR2 tankers, respectively.