John Fredriksen's SFL Corp will reinvest cash from selling three VLCCs back to Hunter Group in new assets.
The New York-listed owner said Arne Fredly-backed Hunter is taking advantage of its right to reacquire two VLCCs it offloaded in a sale and leaseback in September.
The 300,000-dwt Hunter Atla and Hunter Saga (both built 2019) will be delivered in late August, and Hunter's option to buy the sistership Hunter Laga will be declared later this year, SFL expects.
The initial transaction is expected to increase SFL’s cash balance by $23m, SFL added.
SFL chief executive Ole Hjertaker said: "With a versatile toolbox of time charters, bareboat charters and financing structures, SFL stands out as a unique partner to companies in the maritime industry and we see an increasing number of opportunities to deploy capital in our core segments, given the increased need for alternative capital providers in the maritime industry."
Low risk, high return
The Fredriksen shipowning vehicle said the Hunter transaction had been very attractive, as it generated a strong return on an investment with a very low risk profile.
"Our ambition is always to structure tailor-made chartering or financing arrangements for our customers in combination with attractive risk-adjusted returns for our shareholders, and in this project we agreed on repurchase flexibility in exchange for higher return on capital," Hjertaker said.
Hunter said in May it had arranged new financing that would allow it to reacquire the trio.
SFL paid $60m for each VLCC while chartering the DSME-built vessels back over five years, with purchase options attached.
VesselsValue assesses the ships as worth $90m each.
The new facility is an accordion addition to Hunter's existing $220m loan with Danske Bank, DNB, Nordea and SEB.
This was arranged in the first quarter to finance its final four new VLCCs, and carries interest of Libor plus 275 basis points.
Cash break-even lowered
Hunter has already drawn $55m in connection with the March delivery of the Hunter Freya.
Fearnley Securities said the refinancing deal will cut $5,000 per day from its break-even figure.
"This would require $5m of equity per vessel, which shouldn’t be a large problem given a cash balance of $35m and remaining equity of $20m," the investment bank added.
The deal with SFL in September caused Hunter to cancel a $420m senior secured term loan for the ships that it announced last May.
This had financed 60% of the construction cost.
Hunter has four VLCCs in the water and three more to come from DSME this summer.
SFL beefed up its core contract coverage with a VLCC resale purchase in May.
The shipowner bought a 308,000-dwt tanker ordered in 2015 by an affiliate of Landbridge Group.
The Chinese group has chartered it back for seven years on a bareboat basis, adding nearly $60m in contract backlog for SFL.
