Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL Corp Ltd.) covers the month of December 2018, with the report dated December 18, 2018. The company is a Bermuda-based foreign private issuer operating in the maritime industry with a fleet of over 80 vessels across tankers, bulkers, container vessels, and offshore assets.
Key Financial Metrics and Transactions
- Financing Raised: Entered into lease financing agreements totaling $270 million with an Asian-based institution.
- Asset Acquisition: Financing covers three 10,600 TEU container vessels acquired in 2018.
- Asset Sale: Delivered the VLCC Front Falcon (built 2002) to a new owner for a net sales price of approximately $30.7 million.
- Refinancing: A portion of the new financing proceeds was used to refinance a $200 million loan facility associated with the vessel acquisition.
- Liquidity Impact: The transactions freed up approximately $70 million of investment capacity.
- Recent Capital Activity: Management noted nearly $700 million raised in a matter of few weeks, including a recently announced $400 million lease financing on four 14,000 TEU vessels.
Material Changes and Operational Details
The primary material change is the restructuring of debt for three container vessels and the divestiture of an older asset. The three new vessels are employed under long-term time charters to Maersk Line A/S until 2024, with options to extend by up to four additional years. The lease financing terms exceed 10 years, with an option to purchase the vessels back after six years. Following the sale of the Front Falcon, the company retains only one vessel from its initial 2004 fleet.
Outlook, Management Commentary, and Risks
Management Commentary: CEO Ole B. Hjertaker highlighted the company's ability to source competitive capital, allowing for swift action on accretive opportunities, portfolio expansion, and increased investment capacity.
Outlook: The freed-up $70 million investment capacity is expected to be deployed in new investments.
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 economic conditions, 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 specific interest rates and covenants of the new $270 million lease financing agreements.
- Confirm the deployment timeline and target assets for the $70 million freed-up investment capacity.
- Review the remaining exposure to the initial 2004 fleet following the sale of the Front Falcon.
- Assess the creditworthiness of the Asian-based institution providing the new financing.
- Monitor the status of the charter extension options with Maersk Line A/S.