John Fredriksen-controlled tanker owner Frontline has finalised a $544m sale-and-leaseback financing deal to fund its acquisition of 10 suezmaxes from Trafigura.
The company had said in its fourth quarter results last week that the transaction with China's ICBC Leasing (ICBCL) was close to being agreed.
The financing is for seven years at interest of Libor plus 2.3%.
Frontline has purchase options throughout the term, and must buy back the vessels at the end.
Proceeds will settle the amount it owes to the Dutch trading giant after agreeing the fleet acquisition last year. That deal will close on 16 March.
Based on Frontline’s estimates, the financing will reduce the break-even level of those vessels by at least $2,500 per day.
Frontline agreed to pay between $538m and $547m in cash for up to 14 2019-built ships, in addition to issuing 16m new shares to Trafigura at $8 each. But it decided not to acquire the other four.
Attractive cost of capital
Frontline chief financial officer Inger Klemp said the agreement was an "important" one for the company and ICBCL.
"This transaction extends our capital sources at a very attractive capital cost, maintains our industry leading cash break-even rates and maximises potential cash flow per share after debt service.”
Last week, Frontline revealed new financing worth $62.5m as it also lined up further funding for tankers under construction.
The owner said it had secured a commitment from French lender Credit Agricole for a senior secured term loan worth up to $62.5m.
This will part-finance its VLCC resale under construction at Hyundai Samho Heavy Industries in South Korea.
The 300,000-dwt Front Dynamic is due in May.
The debt matures over five years after delivery and carries interest of Libor plus 1.9%.
The company said it was also in talks with banks to finance the four LR2 newbuildings to be delivered in 2021 and 2022 from China's Shanghai Waigaoqiao Shipbuilding.
