- A 33% profit-sharing agreement applies to revenues above the base charter rate.
- The acquisition will increase Ship Finance’s charter backlog by nearly $500 million.
- Annual contribution is expected to exceed $30 million during the first seven years.
Ship Finance International Limited (NYSE: SFL) disclosed that it has entered into an agreement to purchase eight Capesize dry-bulk vessels from Golden Ocean Group Limited’s subsidiaries (Golden Ocean), reports SFL.
Terms of Vessel Acquisition
The purchased vessels are called Golden Beijing, Golden Zhoushan, Golden Magnum, Battersea, Belgravia, Golden Zhejiang, Golden Future, and KSL China. Constructed from 2009 to 2013 in Korea and China, the overall purchase price of the vessels is $272 million, an average of $34 million per ship. Delivery is scheduled for July 2015, subject to typical closing conditions.
Charter Agreement and Terms
The ships will be time-chartered to a subsidiary of Golden Ocean for 10 years. The base charter rate per day will be $17,600 for the initial seven years and $14,900 for the last three years. There is also a 33% profit-sharing arrangement for earnings over the base rate, computed and paid quarterly.
Financial Impact
The acquisition will bring in close to $500 million to Ship Finance’s charter backlog. The combined annual EBITDA contribution of the vessels is projected to be more than $30 million for the first seven years of the charter, apart from profit share. Golden Ocean will have the option to purchase after year 10. Alternatively, if that option is not taken, Ship Finance can renew the charters for three extra years.
Financing Arrangements
Ship Finance is arranging bank financing for the acquisition. The Company anticipates financing of about $22 million per ship, aggregating $176 million, with limited corporate guarantee on the financing, in line with other financing arrangements.
Golden Ocean Group Overview
Golden Ocean is an international dry-bulk shipping leader serving primarily in the Capesize and Panamax market niches. New York and Oslo-listed with the ticker “GOGL,” Golden Ocean boasts a market value of about $1 billion.
CEO Comment
Ole B. Hjertaker, CEO of Ship Finance Management AS, commented: “We are pleased to announce an acquisition of vessels in combination with long-term charters to a leading company in the dry-bulk market. We believe the entry point is attractive and there could be significant additional value in the profit sharing agreement over time. Our charter backlog and long-term distribution capacity is building in an accretive manner, and there is still good capacity for more investments without raising additional equity capital.”
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Source: SFL
