Shipowner SFL Corporation has agreed to buy a newbuild 308,000 dwt Very Large Crude Carrier (VLCC), in combination with a 7-year bareboat charter with an unnamed oil major, adding nearly $60 million to SFL’s fixed-rate charter backlog.
The vessel is expected to be delivered from the shipyard in China in the second quarter and will have full cash flow effect in Q3 2020.
“The net purchase price will be $65 million, which is significantly below current broker estimates for VLCC resales, effectively providing SFL with a very attractive risk profile,” SFL said.
SFL’s chartering counterparty, an affiliate of the Landbridge Group, has secured a 3-year sub charter to an oil major, providing good cash flow visibility, SFL said.
“There will be purchase options for the charterer during the charter period, the first time after three years, and at the end of the charter, there is a purchase obligation,” SFL said, without providing details on the identity of the charterer.
TIme to invest
SFL said it would fund the acquisition with a $50 million nonrecourse bank debt facility “at very attractive terms,” and net cash flow after debt service during the first three years is estimated to more than $4 million per year on average.
Ole B. Hjertaker, CEO of SFL Management AS, said in a comment: “Amidst the recent market volatility, we see attractive investment opportunities in our core markets. Some of the best investments can be made when the general market is less competitive, and staying focused and able to execute on accretive growth opportunities through the market cycles is a key differentiating factor.
With a versatile toolbox, including time charters, bareboat charters and senior financing structures, SFL can provide prospective customers with competitive tailor-made solutions, whilst at the same time creating shareholder value on the back of our strong balance sheet and our unique access to attractively priced capital.”