Ship Finance International (SFL) has revealed it has signed a deal to fit seven of its containerships with scrubbers for a customer thought likely to be Maersk Line.
Meanwhile, the diversified shipowner, which is backed by John Fredriksen, has had a profitable second quarter, though it was impacted by some of the company's less successful investments.
Scrubbers will be fitted on seven SFL containerships, which range in size from 8,700 to 10,600 teu and are on contract to an unnamed long-term charterer believed by market sources to be Maersk Line.
The charterer has agreed to extend certain of the vessels' contracts, which SFL said would add an extra $160m to its fixed-rate charter backlog.
Chief executive Ole B Hjertaker told TradeWinds that four of the vessels will have their charter periods extended, while the other three vessels will be chartered at a higher daily rate.
This gives two different structures that will help offset SFL's capital expenditure in fitting scrubbers onboard the ships, he said by phone on Tuesday.
"We were always open to putting on scrubbers, but of course we would only do that if we can deploy our capital in a reasonably good way; otherwise we'd put our money in other assets," Hjertaker said.
Other installations
SFL has 29 vessels in its fleet that are scheduled to be fitted with scrubbers ahead of IMO 2020.
Hjertaker told TradeWinds the vessels comprise mainly boxships plus a few tankers, of which two operate in the spot market and for which scrubbers will be fully funded by SFL.
During the firm's quarterly conference call, SFL would not be drawn on exactly how many installations it will finance and how many will be covered by its customers.
"Most" installations will take place onboard vessels that will have their respective charters extended, which will help finance the systems, Hjertaker said during the call.
Any capital expenditure from SFL's side will be financed with cash or from its balance sheet and will be spread evenly over the next three or so quarters, the chief executive said.
"We have currently committed approximately $50m towards scrubber instalments, and continuing discussions with customers for retrofitting additional units," the company said in its report.
"Some of the capital expenditure is expected to be financed by senior bank debt."
Second-quarter results
Hjertaker told TradeWinds it was a "relatively quiet" quarter and that the overall feeling was "steady as she goes".
The owner also declared its 62nd consecutive quarterly dividend to shareholders, which was $0.35 per share for the second quarter.
Net profit for the three-month period was $28.1m or $0.26 per share, which is up around 78% on the same quarter last year when it totalled $15.8m or $0.15 per share.
SFL earned around $152m in charter hire from its vessels and rigs during the quarter.
It also added around $200m to its contract backlog for its fleet of 89 vessels and rigs, which currently stands at around $3.7bn.
Investment impacts
SFL recorded a $16.8m gain on mark-to-market movement on its equity securities during the second quarter.
Its marketable securities had a combined value of $116m at the end of the quarter and include 11m shares in Fredriksen's tanker company Frontline, plus investments in secured bonds and other securities.
Other investments didn't fare as well and SFL was impacted to the tune of $14.6m.
The company sustained a $4.4m loss related to mark-to-market movement on hedging derivatives and a $2.0m loss in amortisation of deferred charges.
It also recorded a $8.2m non-cash impairment on a note issued by a subsidiary of Solstad Offshore related to the sale of the 15,000-bhp anchor handler Sea Bear (built 1999) in 2016 and the termination of its charter.
During the final quarter of 2018, SFL took a $35.7m writedown on five vessels it has on charter to Solstad Offshore, in which John Fredriksen is also a shareholder.
All five vessels are still in layup, SFL said.
Bond finance
During the second quarter, SFL issued NOK 700m ($90m) in five-year senior unsecured bonds, the proceeds from which will be used for "general corporate purposes", as TradeWinds has reported.
New York and Oslo-listed SFL added to this in July by raising approximately NOK 100m ($11m) through a tap issue on the bond loan, which matures in September 2023.
The bonds were issued at a premium to par value, after which the new outstanding amount after the tap issue is NOK 700m.
The incremental amount has been swapped to US dollars at a fixed interest rate of approximately 5.9%, SFL said.
