SFL Acquires Eight Bulk Carriers from Golden Ocean

 

The vessels are named Golden Beijing, Golden Zhoushan, Golden Magnum, Battersea, Belgravia, Golden Zheijang, Golden Future and KSL China and were built in Korea and China between 2009 and 2013. The total acquisition price will be $272 million, or $34 million on average per vessel. The vessels are expected to be delivered to Ship Finance within July 2015, subject to customary closing conditions.

 

The vessels will be chartered on a time-charter basis to a subsidiary of Golden Ocean for a period of 10 years. The daily base charter rate will be $17,600 during the first seven years, and $14,900 thereafter. In addition, there will be a 33% profit share for revenues above the base rate, calculated and paid on a quarterly basis. Golden Ocean will have a purchase option after year 10 of $112 million enbloc, and if such option is not exercised, Ship Finance will have the option to extend the charters by three years at $14,900 per day.

 

SFL’s charter backlog will increase by nearly $500 million and aggregate annual EBITDA contribution from the vessels, excluding profit share, is estimated to more than $30 million on average during the first seven years of the charter.

 

SFL said it is in the process of arranging bank financing for the transaction, and it expects a financing amount of approximately $22 million per vessel, or approximately $176 million in total. Similar to most of its other financing arrangements, SFL expects to provide only a limited corporate guarantee for the financing.

 

Ole B. Hjertaker, CEO of Ship Finance Management AS, said in a comment, "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."

 

Separately, Golden Ocean has also reached agreements with several of its yards to delay the construction of the newbuilding contracts with about 75 months on aggregate basis, the company’s board of directors announced. This will postpone capital expenditure and possible cash burn on sailing vessels as the market is currently below cash break even. After this it is expected that six vessels will be delivered in 2015, 15 vessels in 2016 and four vessels in 2017.

 

Golden Ocean has also agreed to sell four of the Capesize vessels currently under construction at a Chinese yard to a third party. The company will finalize the construction of the vessels and transfer ownership to the new owner upon delivery from yard. For three of the vessels Golden Ocean will charter the vessels back on time charter for six to 12 months. The sales price is in line with the original contract price.

 

Further, Golden Ocean has sold the vessels Channel Alliance and Channel Navigator to a third party, as part of the company's fleet renewal. These vessels will be delivered to new owners within the end of June 2015. 

 

Following completion of these adjustments, Golden Ocean will have an owned and long term chartered in fleet of 40 Capesize vessels, in addition to one owned in a JV, 10 ice class Panamax vessels, one Panamax vessel, nine Kamsarmax vessels and nine Supramax vessels. Of the total fleet, 17 Capesize vessels and four Supramax vessels are newbuildings to be delivered to the company. Following these transactions Golden Ocean has secured financing for all newbuilding contracts except nine vessels with delivery in 2016 and 2017 and none of the existing loan facilities are due for refinancing before 2018.

 

“These various initiatives are taken in order to strengthen the cash position and balance sheet of the company in the current weak market,” Golden Ocean said in a press release. “Golden Ocean is not abandoning its strategy to be a much needed consolidator within the industry, but is rather positioning itself for interesting opportunities which are expected to be available over the coming months.”