Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL) covers the month of June 2015. SFL is a major ship owning company listed on the NYSE with a fleet of 72 vessels, including crude oil tankers, dry bulk carriers, container vessels, and offshore drilling rigs. Most vessels are employed on long-term charters.
Key Financial Metrics
- Cash Proceeds: Approximately $72 million in net cash from the sale of notes and warrants in Horizon Lines, Inc.
- Estimated Book Gain: Approximately $45 million, to be recorded in the second quarter of 2015.
- Asset Valuation: The notes were previously conservatively recorded on the balance sheet at 40% of par value.
- Transaction Details: The sale included second-lien notes (originally $40 million received in 2012 with 15% non-cash interest) and 9.25 million warrants.
Material Changes
The primary material change is the divestiture of SFL's holding in Horizon Lines following Horizon's merger with Matson Navigation Company, Inc. The transaction was completed on May 29, 2015. Matson paid $0.72 per warrant and redeemed the second-lien notes at a premium. This event results in a significant non-operating gain and a substantial increase in liquidity for the quarter.
Guidance, Outlook, and Risks
Management Commentary: SFL intends to reinvest the cash proceeds from this transaction into new assets. The $45 million gain is expected to be recognized in the second quarter.
Risks and Contingencies: The filing includes a cautionary statement regarding forward-looking statements. Key risks include fluctuations in charter hire rates and vessel values, changes in global oil consumption and OPEC production levels, bunker prices, dry-docking costs, regulatory changes, and potential disruptions to shipping routes due to political events or accidents.
Investor Verification Checklist
- Verify the exact timing of the $45 million book gain recognition in the Q2 2015 financial statements.
- Confirm the specific allocation of the $72 million net cash proceeds toward new asset acquisitions.
- Review the updated balance sheet to ensure the removal of the Horizon Lines notes and warrants.
- Monitor the impact of the reinvestment strategy on the company's overall fleet composition and debt levels.