John Fredriksen’s shipping company Frontline has secured funds from China’s ICBC Financial Leasing (ICBCL) in order to finance the acquisition of ten Trafigura ships.
In August this year, Frontline entered into an agreement with Singaporean commodity trader Trafigura to acquire ten Suezmax tanker newbuilds. Until the transaction’s closing, Frontline has agreed to time charter-in all the ten vessels at a daily rate of about USD 23,000.
Frontline has now secured a commitment from ICBCL for a sale-and-leaseback agreement in an amount of up to USD 544 million, which is subject to final documentation.
The lease financing has a tenor of seven years. It will finance the cash amount payable upon closing of the acquisition and includes purchase options for Frontline throughout the period with a purchase obligation at the end.
“We are very pleased to have secured the financing commitment from ICBCL on highly attractive terms, which marks an important transaction between ICBCL and Frontline. Through this transaction we extend our capital sources at a very attractive capital cost, maintain our … cash break-even rates and maximise potential cash flow per share after debt service,” Inger M. Klemp, Chief Financial Officer of Frontline Management AS, commented.
What is more, Frontline signed a senior secured term loan facility in an amount of up to USD 42.9 million with Credit Suisse. The facility will be used to partially finance the Suezmax tanker resale under construction at HSHI.
The financings were unveiled in Frontline’s financial results for the third quarter of this year which show that the company delivered a net loss of USD 10 million, compared to a net income of USD 1.1 million in the previous quarter.
In the third quarter, Frontline reported spot average daily time charter equivalent (TCE) for VLCCs, Suezmax tankers and LR2 tankers were USD 22,900, USD 16,200 and USD 15,900, respectively.
“We believe that tanker market fundamentals look encouraging and we have entered a period of substantially stronger vessel earnings. Our strategy has focused on increasing our spot exposure throughout the year and we believe this will be reflected in our results for the fourth quarter,” Robert Hvide Macleod, Chief Executive Officer of Frontline Management AS said.
“We expect to see a dynamic and volatile market environment in the coming quarters and we will seek to opportunistically secure charter coverage if market strength persists,” he concluded.