Business Context and Reporting Period
This Form 6-K filing by Ship Finance International Limited (SFL) covers the month of August 2007. The report primarily discloses a strategic acquisition announced on August 10, 2007, wherein SFL agreed to purchase five new offshore supply vessels from Deep Sea Supply Plc. This transaction aligns with SFL's strategy to diversify its asset base and customer portfolio within the offshore market sector.
Key Financial Metrics and Transaction Details
The acquisition involves a total delivered price of $198.5 million for five vessels built in 2007: two 15,000 BHP anchor handling tug/supply vessels (AHTS) and three UT 755L platform supply vessels (PSVs). The financing structure includes a senior loan facility of $148.9 million, an equity contribution of $32.1 million from existing cash reserves, and a non-interest bearing seller's credit of $17.5 million from Deep Sea. The net investment to be serviced by charter rates is $181.0 million.
Projected financial performance for the first seven years indicates an aggregate annual debt repayment of approximately $9.9 million. After estimated interest expenses and debt repayment, the average annual net cash contribution is projected at approximately $4.8 million, or $0.07 per share.
| Charter Period | 2 x AHTS (Daily Rate) | 3 x PSV (Daily Rate) | Total Daily Rate |
|---|---|---|---|
| Years 1-2 | $18,000 | $10,000 | $66,000 |
| Years 3-5 | $16,500 | $9,150 | $60,450 |
| Years 6-7 | $15,250 | $8,150 | $54,950 |
| Years 8-10 | $13,000 | $7,150 | $47,450 |
| Years 11-12 | $13,000 | $6,500 | $45,500 |
Material Changes and Fleet Status
Upon completion of the transaction, SFL's operating fleet will expand to 59 vessels, with an additional 12 vessels on order, bringing the total fleet size (including newbuildings) to 71 vessels. The filing notes that the acquired vessels are currently employed on sub-charters at rates significantly higher than their break-even levels. The AHTS vessels are sub-chartered at market rates of approximately $40,000 - $45,000 per day, while the PSVs are sub-chartered to international oil majors at rates between $22,000 and $28,500 per day.
Outlook, Risks, and Management Commentary
Management anticipates further growth opportunities in the offshore segment due to high activity levels and significant cash flows. The charter contracts are on a bareboat basis, meaning Deep Sea is responsible for all operating and maintenance costs. The agreement includes fixed-price purchase options for Deep Sea at years 3, 5, 7, 10, and 12. SFL's guarantee obligation is limited to $11.0 million per AHTS and $6.5 million per PSV during the first seven years.
The filing includes a cautionary statement regarding forward-looking statements, citing risks such as fluctuations in charter hire rates and vessel values, changes in global oil consumption, bunker prices, regulatory changes, and potential political disruptions to shipping routes.
Investor Verification Checklist
- Verify the closing date of the transaction, currently expected in September 2007.
- Confirm the actual sub-charter rates achieved versus the break-even levels cited in the press release.
- Monitor the utilization of the $32.1 million equity contribution from existing cash reserves and its impact on overall liquidity.
- Track the performance of the offshore supply vessel market to validate the "positive market outlook" cited by management.
- Review the terms of the senior loan facility to ensure interest rate assumptions align with the projected $4.8 million annual net cash contribution.