Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL Corp Ltd.) covers the period ending May 31, 2018. The filing primarily serves to disclose a material corporate event: the agreement to acquire four large container vessels.
Key Financial Metrics and Transaction Details
- Asset Acquisition: Agreement to acquire four modern eco-design container vessels (built in 2014) with approximately 14,000 TEU capacity each.
- Charter Backlog: The transaction increases the fixed-rate charter backlog by nearly $450 million.
- EBITDA Impact: Estimated annual EBITDA contribution from the new vessels is approximately $60 million.
- Charter Terms: Long-term time-charters to a leading Asia-based container line run until 2024, with options to extend by 18 months.
- Financing Structure:
- Consideration includes cash and approximately 4 million newly issued shares.
- Cash portion financed via existing balance sheet cash and a $320 million unsecured loan facility from an affiliate of Hemen Holding Ltd. (largest shareholder).
- The loan is non-amortizing with a term of more than one year.
- Purchase Price: The specific purchase price is confidential and not disclosed in the filing.
Material Changes and Management Commentary
Management highlights this acquisition as a demonstration of the Company's ability to achieve sustained growth and diversification. CEO Ole B. Hjertaker noted that the Company is deploying recently raised capital while retaining capacity for further accretive opportunities. Over the two months preceding this filing, the Company added nearly $600 million to its charter backlog.
The Company is currently exploring long-term financing alternatives for these vessels in the Asian capital market to potentially replace or supplement the interim bridge financing.
Risks and Contingencies
The filing includes a standard cautionary statement regarding forward-looking statements. Key risks identified that could cause actual results to differ from expectations include:
- Strength of world economies and currency fluctuations.
- General market conditions, including fluctuations in charter hire rates and vessel values.
- Changes in demand in the tanker market due to OPEC production levels and oil consumption.
- Operating expense volatility, specifically bunker prices, dry-docking, and insurance costs.
- Regulatory changes, political conditions, and potential disruption of shipping routes.
Investor Verification Checklist
- Verify the final closing date and delivery schedule for the four container vessels.
- Confirm the final purchase price once the transaction closes, as it is currently confidential.
- Monitor the Company's progress in securing long-term financing in the Asian capital market to replace the $320 million interim loan.
- Review the impact of the 4 million newly issued shares on existing shareholder dilution.
- Track the integration of the new vessels into the fleet and the actual realization of the estimated $60 million annual EBITDA.