In International Shipping News 22/07/2016
Source: Ship Finance International
Ship Finance International Limited, today announced that it has agreed to amend the terms of the long-term chartering agreements with an affiliate of Deep Sea Supply PLC (“DESS”).
Our current charter guarantor, Deep Sea Supply BTG AS (“DESS BTG”), is a 50/50 owned joint venture between DESS and the Brazilian company BTG Pactual (“BTG”). DESS and BTG have now agreed that DESS will acquire the remaining shares in DESS BTG, with settlement in shares, warrants and some cash. The agreement is subject to standard closing conditions, including approval by the DESS’s shareholders of the issuance of the warrants. Following the acquisition, DESS will be our charter guarantor going forward.
Concurrently, DESS will amend its financing terms and effectively defer up to $68 million of scheduled debt amortization until March 31, 2018 and also extend maturity of three loan facilities which were originally due later this year.
As part of the overall transaction, Ship Finance has agreed to reduce the charter rates until May 2018, in exchange for extending the charter period by 3 years and introducing a 50/50 profit share on charter revenues earned by the vessels. This will be combined with a prepayment of $17 million on our bank loan facilities, equal to scheduled amortization until May 2018, and certain other adjustments. The net effect on our distributable cash flow will be neutral, with reduced charter hire balanced by reduced loan amortization and lower interest expenses.
The proposed transaction will preserve DESS’ liquidity position and better position the company through the current market downturn in the segment, while Ship Finance will effectively increase its backlog by approximately $21 million and still maintain the distributable cash flow from the vessels. In addition we will now have a 50% profit share which could be valuable in a market recovery scenario.
Ole B. Hjertaker, CEO of Ship Finance Management AS, said in a comment: “The DESS charters were agreed back in 2007, and we have now enjoyed the cash flow from these assets for nearly nine years and depreciated the vessels to a comfortably low level. The reduction in charter rates is balanced by the extended charter period, and the value of optionality relating to the new profit share could be significant, as illustrated by the arrangement we have on our tanker assets.
We will receive base charter rates which are clearly in excess of what can be achieved in the spot market today and we will have a stronger counterpart with a good liquidity position and low cash break-even rates. The uncertainty relating to our offshore asset exposure should then be reduced, without impacting our distribution capacity.”
Source: Ship Finance International
