John Fredriksen-backed shipowning company SFL Corp has sold its stake in a company controlling four ultra-large containerships.
The company has divested of a 50.1% stake in a subsidiary which leases out the 19,000-teu container vessels to Mediterranean Shipping Co (MSC).
NYSE-listed SFL, a diversified lessor, has netted $17.5m from the sale to Fredriksen company Hemen Holding, its largest shareholder.
SFL controls just four containerships of this size. They are the the 19,000-teu MSC Reef, MSC Erica, and MSC Anna (all built 2016) and the MSC Viviana (built 2017).
The vessels are operated by the 2M Alliance partners AP Moller-Maersk and MSC on services between Asia and Europe. The two lines account for 85% of SFL’s liner backlog.
The transaction strengthens SFL's equity ratio and limits the reduction in its distributable cash flow to approximately $0.7m per quarter.
$165m quarterly loss
SFL notched up a loss of $165m for the in the fourth quarter ended 31 December, as well as a net loss of $224m for the whole of 2020.
The loss was anticipated after SFL announced it would take a $187m accounting hit after Seadrill filed for Chapter 11 protection in the US.
The Oslo-listed drillship and rig group, also backed by Fredriksen, made the application in the Southern District of Texas on 10 February as it tries to secure a viable long-term future in depressed oil and gas markets.
SFL owns three rigs chartered to Seadrill. It has come to an agreement with Seadrill that ensures uninterrupted performance on the sub-charters of the West Linus (built 2014) and West Hercules (built 2008) to oil majors.
But the company recorded a gross impairment of $252.6m on the drilling rig West Taurus (built 2008) in the fourth quarter, which it partly offset by a debt extinguishment amount of $66.1m.
The rig is expected to be redelivered to SFL, which is evaluating potentially recycling at an EU approved recycling facility.
“With the anticipated Chapter 11 filing in Seadrill now in progress, we are pleased to see two of the rigs being continuously employed in the relatively strong harsh environment drilling market,” said Ole Hjertaker, chief executive of SFL Management.
“The agreement in place with Seadrill will, subject to final court approval, ensure cash flow and uninterrupted operations for the oil majors who use these rigs.”
Focus on markets with low carbon footprint
SFL’s owned and managed fleet of more than 80 vessels produced operating revenue of $114.9m for the fourth quarter 2020 and $471m for the full year.
“Cash flow from these assets have remained strong with no material operational impacts following the pandemic outbreak,” said Hjertaker.
“We see signs of a positive supply and demand balance in many maritime markets, and our strong investment capacity remains intact," he added.
SFL said that uncertainty relating to Seadrill had to be more careful with new investments over the past year.
But the company deems itself to be better positioned to evaluate new investment opportunities including green technologies and assets.
“Importantly, we are committed to expanding our investment focus to assets and markets with a lower carbon footprint, to position our portfolio for the future,” said Hjertaker.
