Ship Finance sheds Soehanah jack-up and three VLCCs

Ship Finance International will sell its 2007-built jack-up drilling rig Soehanah to an unrelated third party and three 2002-built VLCCs to ADS Crude Carriers Ltd.

Illustration; Photo by: Nandu Chitnis; Source: Wikimedia - under the CC BY-SA 2.0 license

Ship Finance said on Friday that the sale price for the Soehanah rig was confidential but the transaction is expected to generate a book profit and the rig is debt free.

Delivery is expected to occur in the second half of 2018, and the company will continue to receive a bareboat charter rate of approximately $10,000 per day from the current charter to an affiliate of Indonesia-based Apexindo in the meantime.

Ole B. Hjertaker, CEO of Ship Finance Management AS, said: “Divesting of older vessels is a part of the company’s strategy to renew and diversify the fleet.

“Over the last three months, Ship Finance has taken delivery of 19 vessels with long-term charters, increasing our fixed charter backlog by nearly $600 million. We see further growth opportunities across our target market segments, and we expect to reinvest the proceeds from these vessel sales in new assets.”

As for the three VLCCs, named Front Page, Front Stratus, and Front Serenade, they are among the few vessels remaining from the company’s inception in 2004, and delivery to ADS is expected to occur in the third quarter of 2018.

Net proceeds from the sale will be approximately $77.6 million, including $10.1 million in the form of an interest-bearing loan note from Frontline Limited.

The aggregate book value of the three vessels is approximately $99 million and a book impairment is therefore expected to be recorded in the second quarter. Following this transaction, only five vessels will remain on charter to a subsidiary of Frontline Limited.

It is worth mentioning that ADS is a newly established company in which Ship Finance has acquired a 17 percent interest.

ADS has raised $58 million in equity capital from a wide group of investors, including Ship Finance, and $30 million in the form of a non-amortizing secured debt facility.

ADS intends to list its shares on the Oslo Mercur Market and targets a 100% payout of net cash flow.