Bermuda-based shipowner Ship Finance International Limited has inked a deal to sell three 2002-built VLCCs to ADS Crude Carriers Ltd.
ADS is a newly established company in which Ship Finance has acquired a 17 pct interest.
The new market entrant has raised USD 58 million in equity capital from a wide group of investors and USD 30 million in the form of a non-amortizing secured debt facility. ADS intends to list its shares on the Oslo Mercur Market, and targets a 100% payout of net cash flow.
“For Ship Finance, the participation in the new venture is an opportunistic financial investment where a portion of the sales proceeds from the vessels has been reinvested in ADS. We believe we are close to a low point in the tanker cycle, with limited downside to current recycling values, and our investment as a minority shareholder in ADS could therefore give us significant upside potential with very low risk exposure at the tail end of these vessels’ commercial life,” the company said.
The three VLCCs, Front Page, Front Stratus and Front Serenade, are among the few vessels remaining from the company’s inception in 2004, and delivery to ADS is expected to occur in the third quarter.
Net proceeds from the sale will be approximately USD 77.6 million, including USD 10.1 million in the form of an interest-bearing loan note from Frontline Limited.
ADS plans to fit the vessels with scrubbers prior to 2020 to meet the sulphur cap and benefit from the anticipated spread between various fuel types after the implementation of new emissions controls regulations.
“Divesting of older vessels is a part of the company’s strategy to renew and diversify the fleet. Over the last three months, Ship Finance has taken delivery of 19 vessels with long-term charters, increasing our fixed charter backlog by nearly USD 600 million. We see further growth opportunities across our target market segments, and we expect to reinvest the proceeds from these vessel sales in new assets,” Ole B. Hjertaker, CEO of Ship Finance Management AS, said.
The trio was previously on charter with Frontline Shipping Limited, which agreed with SFL to terminate the long term charters upon the sale and delivery of the vessels.
Frontline has agreed to compensate USD 10.12 million for the termination of the charters.
The company has also sold the 2007-built jack-up drilling rig Soehanah to an unnamed third party. The sales price remained undisclosed. Nevertheless, the company said that the sale would result in book profit as the rig is debt-free. The rig is scheduled for delivery to its news owner in the second half of 2018, and the company will continue to receive a bareboat charter rate of approximately USD 10,000 per day from the current charter to an affiliate of Indonesia-based Apexindo in the meantime.