FRO - Sealift Ltd. Completes Private Placement
08:55 18.01.07
With reference to our press release dated January 14, 2007, Frontline Ltd. ("Frontline" or the "Company") is pleased to announce that Sealift Ltd. ("Sealift") has successfully completed a private placement and raised $180 million in equity. Frontline has invested $60 million in the company and will thereby end up as a 33 % shareholder. The subscription was heavily oversubscribed. The equity offering was managed by Pareto Securities ASA, Carnegie ASA and Fearnley Fonds ASA.
Sealift has agreed with Frontline to acquire four heavy lift vessels where Frontline has the total responsibility for the conversion from suezmax vessels to heavy lift vessels. The price for each heavy lift vessel is $100 million after completed conversion. The first vessel, Front Sunda, is already undergoing conversion to a heavy lift vessel and estimated delivery of all the four units will be in the period April 2007 through January 2008. Three of the vessels will be chartered back to Frontline on bareboat rate of $15.000 per day per vessel for a period until the conversion takes place.
Sealift will also acquire two further suezmax sister vessels from Frontline including option contracts with a yard to convert these to heavy lift vessels. The price for each vessel being $38 million. Conversion cost for these vessels is expected to be in the region $40 to $45 million.
Sealift's total investment before conversion of vessel five and six will be $476 million, adjusted for working capital. The company will be financed through a combination of the $180 million raised in equity, a $110 million bond facility, bank loan and a short term seller credit from Frontline which will be repaid when the vessels have been delivered converted from the yard.
In order to complete this transaction Frontline and Ship Finance International Limited ("Ship Finance") has agreed to terminate the long term lease arrangement between the parties for five of the vessels involved in this deal. Frontline will buy out the outstanding lease commitments for these five Suezmax vessels for $183.7 million and will in addition receive $62.4 million from Ship Finance as a compensation for the termination of the charters. The termination payment is based on the profit-sharing agreement between the two companies.
The net profit and liquidity effects for Frontline of the transaction and the long term earnings effect can not be estimated at this stage. This will depend upon the cost and timing of the conversions, the results from the bareboat charters and most importantly the value development of Frontline's investment in Sealift.
It is expected that the completion of the transaction and the participation in Sealift will contribute materially positive to Frontline's earnings and liquidity short term as well as strengthen the Company's balance sheet and dividend capacity long term.
Chief Executive Officer of Frontline Management AS, Mr. Bjørn Sjaastad says in a comment: We are very pleased with this transaction and the response Sealift got in the market. We have through the transaction proven the point that there is significant value enhancement in finding alternative use of single hull tonnage.
Frontline will as a major shareholder in Sealift use its influence to seek further consolidation in the heavy lift market. Frontline's core strategy will however remain to be a pure crude oil transportation company. In view of this strategy, Frontline's mission in Sealift is to help establish a good high quality and profitable company and then most likely dividend the investment directly out to the Frontline shareholders.
The heavy lift market looks promising with an interesting growth ratio and an aging fleet. We are excited to be a part of a new leading player.
January 17, 2007 The Board of Directors Frontline Ltd. Hamilton, Bermuda
Questions should be directed to:
Bjørn Sjaastad: Chief Executive Officer, Frontline Management AS +47 23 11 40 99/+47 906 901 30
Inger M. Klemp: Chief Financial Officer, Frontline management AS +47 23 11 40 76/+47 957 567 27 |