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Frontline Ltd. Message Board

  • nikkorott nikkorott Nov 7, 2013 12:27 PM Flag

    Ship sales

    8:15AM Frontline announces termination of charter-in contracts of VLCCs (FRO) 2.24 : Co has agreed with Ship Finance International (SFL) to terminate the long term charter parties for the 1998 and 1999 built VLCCs Front Champion and Golden Victory and Ship Finance has simultaneously sold the vessels to unrelated third parties. The charter parties are expected to terminate in November 2013. Frontline has agreed an aggregate compensation payment to Ship Finance of approximately $90 mln for the early termination of the charter parties, of which approximately $11 mln will be paid upon termination and the balance will be recorded as notes payable, with similar amortisation profiles to the current lease obligations, with reduced rates until 2015 and full rates from 2016. Front Champion and Golden Victory have the highest charter rates among the vessels Frontline has chartered in from Ship Finance and the level of compensation is a reflection of this.

    These transactions will reduce the Company's obligations under capital leases by ~ $105 mln and the remaining obligations under capital leases following these terminations will be ~ $735 mln related to 15 VLCCs and five Suezmax tankers.

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    • Press release in it's entirety:

      Press release from Frontline Ltd. 07.11.2013

      Frontline Ltd. ("Frontline" or the "Company") has agreed with Ship Finance International Limited ("Ship Finance") to terminate the long term charter parties for the 1998 and 1999 built VLCCs Front Champion and Golden Victory and Ship Finance has simultaneously sold the vessels to unrelated third parties. The charter parties are expected to terminate in November 2013.

      The decision to terminate the long term charter parties was taken in view of the required investment to take the vessels through the 15 year special survey and current market rates. While the VLCC spot market has recently shown some signs of recovery, there is still a fundamental oversupply in the market and the retirement of older vessels should assist in balancing the market going forward.

      Frontline has agreed an aggregate compensation payment to Ship Finance of approximately $90 million for the early termination of the charter parties, of which approximately $11 million will be paid upon termination and the balance will be recorded as notes payable, with similar amortisation profiles to the current lease obligations, with reduced rates until 2015 and full rates from 2016. Front Champion and Golden Victory have the highest charter rates among the vessels Frontline has chartered in from Ship Finance and the level of compensation is a reflection of this.

      These transactions will reduce the Company's obligations under capital leases by approximately $105 million and the remaining obligations under capital leases following these terminations will be approximately $735 million related to 15 VLCCs and five Suezmax tankers.

      November 7, 2013
      The Board of Directors
      Frontline Ltd.
      Hamilton, Bermuda

      JF taking advantage of opportunities is pretty ugly these days.

      BOL

      BS

    • What does this mean to fro shareholders

      • 2 Replies to rpbossman
      • Hi Mr. Bossman,

        near as I can tell from this article, FRO had a liability going forwards by having those ships in contract. From the termination, that liability was changed from an ongoing operational loss, to a debt.

        So, it depends on how you look at it.

        To me, it looks like the operational loss has been cut off, but now the debt of the company has increased by $79 million.

        The problem is that there is not enough income to be derived from leasing tankers to cover all the expenses including debt payments.

        The scary/sad part of this, is for JF to arrange this, it must look more advantageous to the company than to continue operating those tankers. So, it gives a further glimpse of exacly how bad it is out there.

        It may end up being a note that JF will pick up personally for pennies on the dollar when he liquidates.

        Just my take.

        Best of luck,

        Barbershores

      • I think it means less money going out and more coming or staying in the company. More money to pay down debt with I think.

 
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