Bermuda-based shipping company Frontline has signed a sale-and-leaseback agreement in an amount up to USD 544 million with China’s ICBC Financial Leasing Co., Ltd. (ICBCL).
As informed, the proceeds of the lease financing will be used to finance the cash amount payable upon closing of the acquisition of ten Suezmax tankers built in 2019 under the sale and purchase agreement with a subsidiary of Trafigura targeted to take place on March 16, 2020.
The lease financing has a tenor of seven years and includes purchase options for Frontline throughout the term with a purchase obligation at the end of the term.
“We are very pleased to have signed the lease financing with ICBCL… This transaction extends our capital sources at a very attractive capital cost, maintains our … cash breakeven rates and maximizes potential cash flow per share after debt service,” Inger M. Klemp, Chief Financial Officer of Frontline Management AS, commented.
In August 2019, Frontline reached a sale and purchase (SPA) agreement with Trafigura Maritime Logistics to acquire the ten Suezmax newbuilds. Frontline committed to buying a special purpose company holding the ten tankers.
The acquisition consideration consists of 16,035,856 ordinary shares of Frontline at an agreed price of USD 8.00 per share issuable upon signing; and a cash amount of USD 538.2 million, payable upon the closing of the acquisition.
As previously agreed, five of the vessels would be chartered out to Trafigura for a period of three years. The remaining five ships are recorded as finance leases.
Also in August, an affiliate of Hemen provided a guarantee to finance the cash amount of up to USD 547 million, payable at closing the Trafigura acquisition. However, Frontline decided not to proceed with the Hemen favility, opting for the ICBCL financing arrangement.
As of December 31, Frontline’s fleet comprised 71 vessels with an aggregate capacity of about 13.5 million dwt, including the ten abovementioned Suezmaxes.