Press release from Ship Finance International
Limited, May 29, 2015.
Ship Finance International Limited (NYSE:SFL)
("Ship Finance" or the "Company"), today announced that it has
entered into a heads of agreement to amend the long-term chartering
agreements with Frontline Ltd. ("Frontline").
The Company currently has 17 vessels on charter to
subsidiaries of Frontline, with an average remaining charter term
of nearly 8 years. The new agreement will take effect from July 1,
2015 and will be a combination of reduced long-term base rates,
increased profit split and an ownership share in Frontline. The
operating expenses, including dry-docking, payable to a subsidiary
of Frontline will also be adjusted to current market level.
-
New time charter rate for VLCCs: $20
000/day
-
New time charter rate for Suezmaxes:
$15 000/day
-
New opex for all vessels: $9,000/day
-
New profit split: 50% above new time charter
rates
-
55 million Frontline shares will be issued to Ship
Finance
Ship Finance will continue chartering the vessels
to a subsidiary of Frontline, and in exchange for releasing
Frontline from their current guarantee obligation on the charters,
a cash buffer of $34 million ($2 million per vessel) will be built
up in the chartering company.
Accrued cash sweep from January through June 2015
based on the existing agreement, estimated to approximately $20
million, will be paid in cash to Ship Finance.
Under the current agreement, Ship Finance is
entitled to a 25% profit split above approximately $26,700/day for
the VLCCs and $21,100/day for the Suezmaxes, calculated and payable
on an annual basis. Frontline prepaid $50 million of this profit
split in December 2011, and no additional profit split has so far
accumulated in excess of this amount.
The new profit split agreement will start accruing
from July 1, 2015 and will now be calculated and paid on a
quarterly basis. Going forward, profit split payments will not be
subject to the previous $50 million threshold.
Based on closing shareprice on May 28, 2015, of
$3.06 per share, the market value of the Frontline shares to be
issued to the Company is approximately $168 million, and based on
the volume-weighted shareprice last 3 months of $2.64 per share,
the value is approximately $145 million.
When issued, the shares will represent
approximately 27.7% of the total shares in Frontline on a diluted
basis. Following customary filing requirements, the shares received
may be distributed to our shareholders as a special dividend or
sold at a later stage. In addition, Ship Finance owns approximately
$117 million of senior unsecured amortizing notes in Frontline,
which will remain unchanged and serviced by Frontline like
before.
The release of the charter guarantee relating to
our charters is seen as an important feature to facilitate
strategic transactions in Frontline, including potential mergers
and/or acquisitions going forward.
CEO of Ship Finance Management AS, Ole B.
Hjertaker said in a comment: "We are currently enjoying a very
strong tanker market, and the new and higher profit share
arrangement is likely to generate higher net cash flows from the
vessels in the near term. Lower base rates will also ensure a more
sustainable long term structure, with a cash buffer to mitigate
potential fluctuations in the charter market.
Since the establishment of Ship Finance in 2004,
we have received more than $600 million in cash sweep and profit
sharing from Frontline. It has enabled the Company to grow and
diversify the asset base much faster than originally anticipated
with corresponding higher dividend capacity. Changing the
calculation of the profit split to quarterly basis and starting
from a lower level adds interesting optionality for us going
forward, with the potential for increased long term quarterly
distribution capacity."
May 29, 2015
The Board of Directors
Ship Finance International Limited
Hamilton, Bermuda
Questions can be directed to Ship Finance
Management AS:
Harald Gurvin, Chief Financial Officer: +47
23114009
Andre Reppen, Senior Vice President: +47
23114055
Media Contact:
Ole B. Hjertaker, Chief Executive Officer: +47
23114011
About Ship Finance
Ship Finance is a major ship owning company listed
on the New York Stock Exchange (NYSE: SFL). Including recent
acquisitions, the Company will have a fleet of 72 vessels,
including 19 crude oil tankers (VLCC and Suezmax), two chemical
tankers, 22 dry bulk carriers (including 8 acquisitions), 17
container vessels, two car carriers, six offshore supply vessels,
two jack-up drilling rigs and two ultra-deepwater semi-submersible
drilling rigs. The fleet is one of the largest in the world and
most of the vessels are employed on long-term charters.
More information can be found on the Company's
website: www.shipfinance.org
Cautionary Statement Regarding
Forward Looking Statements
This press release may contain forward looking
statements. These statements are based upon various assumptions,
many of which are based, in turn, upon further assumptions,
including Ship Finance management's examination of historical
operating trends. Although Ship Finance believes that these
assumptions were reasonable when made, because assumptions are
inherently subject to significant uncertainties and contingencies
which are difficult or impossible to predict and are beyond its
control, Ship Finance cannot give assurance that it will achieve or
accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual
results to differ materially from those discussed in this
presentation include the strength of world economies and
currencies, general market conditions including fluctuations in
charter hire rates and vessel values, changes in demand in the
tanker market as a result of changes in OPEC's petroleum production
levels and worldwide oil consumption and storage, changes in the
Company's operating expenses including bunker prices, dry-docking
and insurance costs, changes in governmental rules and regulations
or actions taken by regulatory authorities, potential liability
from pending or future litigation, general domestic and
international political conditions, potential disruption of
shipping routes due to accidents or political events, and other
important factors described from time to time in the reports filed
by the Company with the United States Securities and Exchange
Commission.
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Ship Finance International Limited via
Globenewswire
HUG#1924748