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
