Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL Corp Ltd.) covers the month of November 2010. The Company is a major ship owning company listed on the NYSE, operating a diversified fleet of 71 vessels including crude oil tankers, dry bulk carriers, and offshore drilling units. The filing incorporates two press releases dated November 3, 2010, and November 9, 2010, detailing fleet expansion, asset sales, and financing activities.
Key Financial Metrics and Transactions
- Acquisitions: Agreed to acquire two new 57,000dwt Supramax bulk carriers for approximately $61 million. Delivery is scheduled for Q2 and Q3 2011.
- Asset Sale: Golden Ocean Group exercised a purchase option for the 1997-built Panamax vessel Golden Shadow. The sale price is approximately $21.5 million, with expected net cash proceeds to SFL of approximately $4.5 million after financing prepayment.
- Charter Rates:
- New Supramax vessels: 10-year charters at an average net rate of approximately $16,500 per day per vessel.
- Four Handysize vessels: 5-year charters at approximately $14,000 per day per vessel.
- Financing: Secured bank financing for two Supramax vessels totaling approximately $54 million (80% of contract price) with an 8-year tenor. Equity contribution is approximately $7 million per vessel.
- Projected Cash Flow: Net cash flow for the two financed Supramax vessels is projected to average approximately $1 million per year per vessel after operating expenses, interest, and amortization.
- Charter Backlog: Aggregate charter backlog stands at approximately $6.8 billion with a weighted average term of approximately 12 years.
Material Changes
The filing highlights a strategic shift toward modernizing the fleet and securing long-term revenue streams. Key changes include the addition of newbuilding vessels to the fleet and the divestiture of an older asset (Golden Shadow). The Company has secured medium to long-term charters for all vessels currently under construction, ensuring future revenue visibility. Financing for newbuildings has transitioned from cash-funded to bank-financed for specific vessels, though dialogue continues for remaining units.
Guidance, Outlook, and Risks
Management Commentary: CEO Ole B. Hjertaker emphasized the ambition to build and renew the fleet with modern assets and high-quality counterparts, citing the expansion of relationships with investment-grade industrial players.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Material risks include fluctuations in charter hire rates and vessel values, changes in global economic strength, 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 finalization of the 80% bank financing for the two new Supramax carriers.
- Confirm the closing date and net proceeds of the Golden Shadow sale in December 2010.
- Monitor the delivery schedule for the new Supramax and Handysize vessels (Q2/Q3 2011 and Q3 2011/Q1 2012).
- Assess the creditworthiness of the new charterers (Asia-based logistics company and Chinese industrial conglomerate).
- Review the Company's cash position to ensure it can fund remaining newbuilding payments pending long-term financing.