Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL) covers the month of December 2007. The report primarily disseminates a press release dated December 4, 2007, regarding a strategic asset sale. SFL is a major ship owning company listed on the NYSE with a fleet of 71 vessels, including crude oil tankers, container vessels, and offshore supply vessels.
Key Financial Metrics
- Asset Sale Proceeds: Net sales price agreed at $80.0 million for two Suezmax tankers.
- Net Cash Effect: Estimated at approximately $36.5 million after debt repayment and charter termination costs.
- Debt Repayment: Approximately $10.7 million in loans outstanding against the sold vessels.
- Charter Termination Costs: Approximately $32.8 million paid to Frontline.
- Book Profit: Aggregate estimated profit of $13.0 million ($6.6 million recognized in Q4 2007; $6.4 million in Q1 2008).
Material Changes
The Company agreed to sell its two remaining double-sided Suezmax tankers (Front Birch and Front Maple, built in 1991) to unrelated third parties. Deliveries are expected in December 2007 and January 2008. This transaction reduces the number of non-double hull crude oil tankers in the fleet to seven, a significant decrease from 18 vessels in 2006. The sale aligns with the strategy to focus on modern assets.
Outlook, Management Commentary, and Risks
Management Commentary: Proceeds from the sale are intended to be re-invested as equity contributions in new projects. The reduction of non-double hull vessels is consistent with the Company's strategy to modernize its fleet. Frontline has secured profitable sub-charters for all remaining non-double hull vessels.
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 OPEC production levels, bunker prices, dry-docking costs, regulatory changes, and potential liability from litigation.
Investor Verification Checklist
- Confirm the actual closing dates of the vessel deliveries (December 2007/January 2008) and the final net cash proceeds received.
- Verify the recognition of the $6.6 million book profit in the Q4 2007 financial statements.
- Monitor the deployment of the $36.5 million net cash proceeds into new equity projects as stated by management.
- Review the status of the remaining seven non-double hull vessels and their sub-charter profitability.