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Ship Finance International Limited Message Board

  • bill3442li bill3442li Jul 22, 2013 8:50 PM Flag

    Cash Sweep

    when does cash sweep trigger? at what price. getting uptick in rates latley.

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    • bill,

      From a 2011 press release.....

      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.

    • bill...not sure what you are talking you mean profit sharing that SFL receives from the shipping companies that they lease ships to (???)...that said, because rates are so low there will probably be no profit sharing to SFL this year because the shipping rates are so low...while it true that higher shipping rates are good for profit sharing, profit sharing is always based on the amount of profit above a certain threshold level (and they are not close to that level)...SFL has already announced that there will probably be no profit sharing this year...! Lets hope that I am wrong...! $tagg...!

      • 1 Reply to staggman99
      • yes it looks like between new and old breakeven rates they get cash sweep. then 25% profit sharing after that. the suezmax ships are in the range right now but havent seen a booked charter at those levels yet. this is whats going on

        Global Hunter Securities upgrades FRO to Neutral from Sell. They believe there is a compelling trade in the near term, which could expand into a long-term story, to own crude-levered tanker stocks. The collapsed Brent / WTI price spread indicates that US oil imports should rise, as it is currently more advantageous for East Coast refineries to import crude oil rather than rely on domestic resources -- a dynamic that has been absent from the market since early 2010. We see the shares of FRO, NAT, FRNT-NO, TNK, TNP and DHT as prime beneficiaries; maintaining Buy ratings on NAT and FRNT-NO and maintaining our Neutral ratings on TNK, TNP and DHT.

        Sentiment: Buy

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