FRO - Frontline Ltd. and Ship Finance International Limited agree on amended charter structure
May 29 2015 - 02:03AM
Frontline Ltd. (NYSE/OSE: FRO)
(the "Company" or "Frontline") today announced that the Company has
entered into a heads of agreement to amend the terms of the long
term charter agreements with Ship Finance International Limited
("Ship Finance") for the remainder of the charter period.
A subsidiary of Frontline has 17 vessels on charter from Ship
Finance with an average remaining charter period of 7.7 years. The
new agreement will take effect from July 1, 2015 and will reflect a
combination of reduced long-term base rates, increased profit split
to Ship Finance, increased operating expenses payable by Ship
Finance, release of Frontline's guarantee for the charters and an
ownership interest in Frontline for Ship Finance.
-
New time charter rates for VLCCs:
$20,000/day
-
New time charter rates for Suezmax tankers:
$15,000/day
-
New opex for all vessels: $9,000/day payable by
Ship Finance (previously $6,500/day)
-
New profit split: 50%/50% above new time charter
rates
-
55 million Frontline shares will be issued to
Ship Finance
The chartering counterparty will
continue to be a subsidiary of Frontline, and in exchange for
releasing Frontline from the current guarantee obligation on the
charters, a cash buffer of $34 million ($2 million per vessel) will
be built up in the chartering counterparty.
Accrued cash sweep by Ship Finance
from January through June 2015 based on the existing agreement,
estimated to be approximately $20 million, will be paid to Ship
Finance in July, 2015.
In the current charter
arrangement, Ship Finance is entitled to a 25% profit split above
an average of $26,737/day for the VLCCs and an average of
$21,100/day for the Suezmax tankers, calculated and payable on an
annual basis. Frontline prepaid $50 million in profit split in
December 2011 and no additional profit split has so far accrued in
excess of this amount.
The new profit split arrangement
will start accruing from July 1 and will be calculated and payable
on a quarterly basis. Going forward, profit split payments will not
be subject to the previous $50 million threshold.
The estimated reduction in fixed
charter payments to Ship Finance under the amendments to the
charter agreements is approximately $283 million. In addition, the
new agreement significantly strengthens Frontline's balance sheet
and reduces its financial risk.
Based on closing share price on
May 28, 2015, of $3.06 per share, the market value of the Frontline
shares to be issued to Ship Finance is approximately $168 million,
and based on the volume-weighted share price last 3 months of $2.64
per share, the value is $145 million.
The shares to Ship Finance will be
issued concurrently with completion of the new agreement,
representing approximately 27.7% per cent of the shares and votes
in Frontline following completion of the share issue. Frontline has
agreed to register those shares for resale with the US Securities
and Exchange Commission.
In addition, Ship Finance owns
approximately $116 million of senior unsecured amortizing notes in
Frontline, which will remain unchanged.
CEO of Frontline Management AS,
Robert Hvide Macleod said in a comment: "The new structure will
reduce Frontlines cash break-even rates significantly and ensure a
more sustainable long-term structure. This agreement significantly
strengthens Frontline's balance sheet and reduces its financial
risk. The board and management can now shift the focus from balance
sheet restructuring to business development and growth. This
represents a major milestone for the company."
Forward Looking
Statements
This press release contains
forward looking statements. These statements are based upon various
assumptions, many of which are based, in turn, upon further
assumptions, including Frontline management's examination of
historical operating trends. Although Frontline 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, Frontline 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 press release 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 world wide 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.
May 28, 2015
The Board of Directors
Frontline Ltd.
Hamilton, Bermuda
Questions should be directed to:
Robert Hvide Macleod: Chief Executive Officer,
Frontline Management AS
+47 23 11 40 00
Inger M. Klemp: Chief Financial Officer, Frontline Management
AS
+47 23 11 40 00
This information is subject
to the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.
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: Frontline Ltd. via Globenewswire
HUG#1924866
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