SFL - Closing of charter amendments with Frontline Ltd.
Press release from Ship Finance International Limited - 03.01.2012
Press release from Ship Finance International Limited, January 3, 2012
Ship Finance International Limited (NYSE:SFL) ("Ship Finance" or the "Company"), today announced that it has successfully completed the previously announced amendments to the chartering agreements with Frontline Ltd. ("Frontline").
Ship Finance has agreed to temporarily reduce the charter rates by $6,500 per day per vessel from 2012 through 2015, and thereafter revert to previous charter rate levels.
Frontline has paid a cash compensation of $106 million to Ship Finance. In addition there will be a cash sweep feature, whereby Ship Finance will receive 100% of vessel earning up to the old base rates. The old profit share arrangement has been improved from 20% to 25%, and will be calculated from the old threshold levels. Of the $106 million upfront payment, $50 million is a non-refundable, early payment of profit split for revenues above the old threshold levels. The cash sweep and the profit split will be payable on an annual basis, as before.
Following the agreement with Frontline, Ship Finance has prepaid $156 million of related bank financing, of which $106 million represents the cash compensation from Frontline. Consequently, the bank financing relating to the vessels has been reduced from approximately $740 million to approximately $584 million at year-end 2011.The net effect of this significant debt reduction is considerably lower debt service payments for Ship Finance going forward, and for 2012 alone we estimate debt service to be reduced by approximately $40 million. If Frontline generates market revenues in line with the previous base rates, the cash sweep payments alone may give a positive net effect of approximately $0.20 per share per quarter, or double the previous net contribution from Frontline.
January 3, 2011
The Board of Directors Ship Finance International Limited Hamilton, Bermuda
Questions should be directed to: Investor and Analyst Contacts: Eirik Eide, Chief Financial Officer, Ship Finance Management AS +47 23114006 / +47 95008921
Magnus T. Valeberg, Vice President, Ship Finance Management AS +47 23114012 / +47 93440960
Media Contact: Ole B. Hjertaker, Chief Executive Officer, Ship Finance Management AS +47 23114011 / +47 90141243
About Ship Finance
Ship Finance is a major ship owning company listed on the New York Stock Exchange (NYSE: SFL). Including newbuildings, the Company has a fleet of 69 vessels, including 25 crude oil tankers (VLCC and Suezmax), two chemical tankers, five oil/bulk/ore vessels, 11 drybulk carriers including six newbuildings, 15 container vessels including four newbuildings, six offshore supply vessels, one jack-up drilling rig, one ultra-deepwater drillship 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
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.