Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL) covers the month of November 2007. The report primarily details a press release dated November 7, 2007, announcing a significant asset acquisition and leaseback transaction. SFL is a major shipowning company listed on the NYSE with a fleet of 73 vessels, including offshore supply vessels, tankers, and container ships.
Key Financial Metrics and Transaction Details
- Acquisition Cost: Total delivered price of $126.0 million for two 15,000 BHP anchor handling tug/supply vessels (AHTS).
- Net Investment: $104.0 million, after a $22.0 million non-interest bearing seller's credit from Deep Sea Supply Plc.
- Financing Structure: Approximately $77.0 million senior loan facility and $27.0 million equity contribution from existing cash reserves.
- Charter Rates: 12-year bareboat charters with Deep Sea Supply Plc. Rates range from $41,500 per day (Years 1-2) to $27,500 per day (Years 8-12).
- Projected Cash Flow: Estimated average annual net cash contribution of approximately $4.1 million ($0.06 per share) after interest and debt repayment during the first seven years.
- Debt Repayment: Aggregate annual debt repayment estimated at $6.4 million for the first seven years.
Material Changes and Fleet Status
This transaction represents the second deal with Deep Sea Supply Plc in 2007, following a September/October acquisition of five vessels. Upon completion, SFL's operating fleet will consist of 61 vessels, with 12 additional vessels on order. The agreement includes a provision allowing Deep Sea to potentially repurchase one vessel from the prior transaction before the first agreed purchase option date.
Outlook, Risks, and Contingencies
- Purchase Options: Deep Sea holds fixed price purchase options for the vessels at $42.0 million, $34.8 million, $27.9 million, $18.7 million, and $10.85 million after 3, 5, 7, 10, and 12 years, respectively.
- Operational Responsibility: As a bareboat charter, Deep Sea is responsible for all operating and maintenance costs.
- Risk Factors: The filing includes standard forward-looking statement disclaimers citing risks such as global economic strength, currency fluctuations, charter hire rate volatility, vessel value changes, OPEC production levels, bunker prices, and regulatory changes.
Investor Verification Checklist
- Verify the closing date of the transaction (expected November/December 2007) and confirmation of the $104.0 million net investment.
- Confirm the final terms of the $77.0 million senior loan facility and interest rate assumptions used in the $4.1 million cash flow projection.
- Monitor the status of the potential repurchase of a vessel from the prior September/October transaction.
- Review Deep Sea Supply Plc's financial health and ability to meet charter obligations, given their market capitalization of approximately $600 million.
- Assess the impact of the $27.0 million equity drawdown on SFL's remaining cash reserves and liquidity position.