Frontline buys six ECO VLCC newbuilds for $565.8 million

Norwegian tanker owner and operator Frontline has entered into an agreement to acquire six ECO-type VLCC newbuildings through resale.

The six VLCCs are currently under construction at the Hyundai Heavy Industries shipyard in South Korea.

The VLCCs are being bought for $565.8 million, including an estimated $25.7 million in additions and upgrades to the standard specifications.

Frontline said that the vessels are designed to operate on different fuels, including biofuel, and have the potential to be converted or retrofitted to consume fuels like LNG or ammonia.

As disclosed, the newbuildings will also be fitted with scrubbers, high-end anti-fouling systems, digital energy performance solutions and would be compliant with specific Exxon Mobile lightering requirements to allow for maximum trading flexibility.

Five vessels are scheduled for delivey during 2022 starting in Q1 and the last vessel in Q1 2023. As of December 31, 2020, Frontline’s newbuilding program consisted of four LR2 tankers set for delivery in 2021.

“This transaction is consistent with our core company goals to increase exposure to the VLCC market without adding to existing vessel supply. It further cements Frontline’s position in respect of owning a modern, high quality, fuel efficient fleet. The delivery schedule for these vessels is particularly attractive, in a timing window regarded closed for new orders,” Lars H. Barstad, Interim CEO of Frontline Management AS said.

The largest portion of the instalments on each vessel will be made on delivery of each vessel, Frontline said. The Norwegian shipowner plans to finance the acquisition with existing borrowing facilities and establish long-term financing closer to the delivery of the vessels.

In the fourth quarter of 2020, Frontline refinanced two term loan facilities with total balloon payments of $324.4 million due in April 2021 and in June 2021, leaving the company with no material maturities until 2023. In addition, it has extended the terms of its senior unsecured revolving credit facility of up to $275 million to May 2022.

In 2020 Frontline recorded its strongest result since 2008, posting a net income of $412.9 million and adjusted net income of $421.6 million for the year ended December 31, 2020.