John Fredriksen’s Flex LNG has snapped up five newbuildings from its billionaire backer in a deal which delivers significant scale in an improving market.
Oslo-listed Flex is paying $180m for each of the five vessels at DSME and Hyundai Samho Heavy Industries.
An extra $6m will be paid on each of the three DSME ships for the addition of full reliquifaction systems.
The deal means Flex will have more than doubled its fleet in around six months and will take its market capitalization close to the critical $1bn level.
Flex is funding the transaction with a $300m private placement handled by DNB Bank, Pareto Securities, ABN AMRO, Arctic Securities, Fearnley Securities and Skandinaviska Enskilda Banken.
In a move which is signature Fredriksen, the capital will be raised overnight, with the private placement book set to close tomorrow morning.
Oystein Kalleklev, chief executive of Flex LNG, told TradeWinds the company is using the equity markets to build scale at a time of fairly good sentiment around the LNG space.
LNG 'leap-frog'
He explains the transaction will make Flex the number one LNG shipping company in terms of fifth generation modern tonnage and a top 10 player overall.
“Then we are able to scale our business to a relevant size, both in terms of the physical trade, when we get the deliveries, and also in terms of the financial scale,” he said.
“We will hit around the $1bn market cap, which makes it a bit more interesting for big institutional investors and others to invest in our company.
“Now we are able to leap-frog and get to that kind of scale by doing this one transaction.”
Flex will have 13 ships post-deal, none of which are locked into long-term charters, allowing the company to benefit from the improving market, the executive says.
“The recovery of the LNG shipping market has just begun,” he added. “This is just to scale and get exposure to that market.
“We think this market will stay firm for a very long period of time.
“It’s not like this is it and we are done. We will continue building this company. By doing this we can get to very big scale with one transaction."
Referencing an article in TradeWinds last week, he concluded: “As I said to you last time, ‘when we want to do something, we do it big time’.”
