Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL Corp Ltd.) covers the month of September 2019, with a press release dated September 6, 2019. SFL is a Bermuda-based specialty financing company operating a fleet of over 90 vessels across tankers, bulkers, container vessels, and offshore assets. The filing announces a strategic acquisition of three Very Large Crude Carriers (VLCCs) currently under construction.
Key Financial Metrics and Transaction Details
- Acquisition Cost: Net purchase price of $180 million ($60 million per vessel) for three 300,000 dwt VLCCs.
- Charter Backlog: The transaction adds more than $100 million to SFL's fixed-rate charter backlog.
- Charter Terms: Vessels will immediately commence 5-year bareboat charters to Hunter Group ASA affiliates upon delivery.
- Financing Strategy: Initial funding from cash reserves, with plans to finance a significant portion via commercial bank loans at attractive terms.
- Valuation: The purchase price is noted as significantly below current broker estimates for VLCC resales.
The filing does not provide specific consolidated revenue, profit, cash flow, or debt figures for the reporting period, as it focuses solely on the material event of the acquisition.
Material Changes and Strategic Position
The primary material change is the expansion of the asset base through the acquisition of three newbuildings from DSME in Korea, expected within two months. This transaction leverages SFL's position as a specialty financier in an environment where traditional maritime bank financing is scarce. The deal includes purchase options for the charterer during the charter period and utilizes vessels with modern eco-design features, including exhaust gas cleaning systems.
Outlook, Risks, and Management Commentary
Management views the transaction as a value-creating opportunity that enhances return on invested equity through attractive bank financing terms. CEO Ole B. Hjertaker emphasized the company's ability to provide tailored solutions using a versatile toolbox of charter and financing structures.
Risks and Contingencies: The filing includes a standard cautionary statement regarding forward-looking statements. Key risks identified include:
- Fluctuations in charter hire rates and vessel values.
- Changes in global oil consumption, OPEC production levels, and world economies.
- Timely delivery of vessels under construction within the contracted price.
- Performance of charterers and counterparties.
- Regulatory changes, political conditions, and potential disruptions to shipping routes.
Investor Verification Checklist
- Verify the final delivery dates of the three VLCCs from DSME to ensure the "within two months" timeline is met.
- Confirm the execution of the commercial bank financing term sheet and the specific interest rates/conditions.
- Monitor the financial health and performance of Hunter Group ASA as the bareboat charterer.
- Track the impact of the $180 million outlay on SFL's immediate liquidity and leverage ratios.
- Assess the validity of the claim that the purchase price is significantly below current broker resale estimates.