Bermuda-based oil shipping firm Frontline has signed a $544m sale and leaseback agreement with China’s ICBC Financial Leasing (ICBCL) for Trafigura tankers.
Frontline plans to use the proceeds to fund the acquisition of ten Suezmax newbuild ships from Singapore-based Trafigura Maritime Logistics (TML). An agreement for the ships was signed in August.
According to the stock-cash deal, the company will offer its 16.03 million ordinary shares as a consideration at an agreed price of $8 per share, which will be issued after signing.
Following the completion of the deal, Trafigura will own approximately 8.48% of the ordinary shares of Frontline.
Until the deal is completed, the shipping firm will time-charter the ten vessels from Trafigura at a daily rate of approximately $23,000.
Using the financing deal with ICBC, Frontline plans to cover the cash part of the Trafigura deal.
The lease is for a period of seven years. It also has purchase options during the charter period and includes a purchase obligation at the end.
Frontline Management chief financial officer Inger Klemp said: “We are very pleased to have secured the financing commitment from ICBCL on highly attractive terms, which marks an important transaction between ICBCL and Frontline.
“Through this transaction, we extend our capital sources at a very attractive capital cost, maintain our cash break-even rates and maximise potential cash flow per share after debt service.”
The shipping firm reported a net loss of $10m during the third quarter of this year.