John Fredriksen shipowning vehicle SFL Corp has moved to beef up its core contract coverage with a VLCC resale purchase.
The New York-listed company has bought a 308,000-dwt tanker ordered in 2015 by an affiliate of Landridge Group.
The Chinese group has chartered it back for seven years on a bareboat basis, adding nearly $60m in contract backlog for SFL.
The Landbridge Wisdom is due in the second quarter from Dalian Shipbuilding in China.
SFL is paying $65m for the ship, while VesselsValue assesses it as worth $97m.
The ship lessor called the price "significantly below current broker estimates for VLCC resales, effectively providing SFL with a very attractive risk profile", the company said.
Landbridge has secured a three-year sub charter to an oil major, providing good cash flow visibility, the company added.
The Chinese company can buy back the VLCC at various points, the first of which comes after three years.
Landbridge is obliged to acquire it at the end of the deal, however.
New loan fixed up
SFL is funding the purchase with a $50m loan at "very attractive terms", the shipowner said.
After paying instalments on this, SFL expects to enjoy cash flow of more than $4m per year on average during the first three years of the charter.
SFL has been consistent in saying it is always evaluating such core deals, while cutting back exposure to struggling offshore vessel markets by cancelling charters and offloading ships.
The company is also in talks with Fredriksen-backed Seadrill over reductions to bareboat rates for drillships chartered to Seadrill in the offshore downturn.
"Amidst the recent market volatility, we see attractive investment opportunities in our core markets," SFL chief executive Ole Hjertaker said.
Less competitive market
"Some of the best investments can be made when the general market is less competitive, and staying focused and able to execute on accretive growth opportunities through the market cycles is a key differentiating factor."
Leasing rival Ocean Yield said this month that it expected less competition in the sector as banks and other traditional leaseback companies pull back.
Shandong-based Landbridge has six VLCCs in operation, all built at Dalian since 2016. Landbridge Wisdom is its final newbuilding,
Last June, Norwegian lessor Sole Shipping struck a double VLCC sale and leaseback deal with the company, involving $91m of financing.
And the month before, US alternative investment firm Varde Partners acquired Landbridge's 308,000-dwt Landbridge Prosperity (built 2016) in another leaseback arrangement.
Landbridge continues to operate the vessel under a bareboat charter, before it must repurchase it at the conclusion of the charter period, the length of which was not disclosed.
Negative result amid impairment, finance charges
SFL Corp posted a loss of $87.1m for the first quarter, primarily due to non-cash losses and one-off items of $114m, including $80.5m in impairment charges on seven handysizes.
It also sustained $41m in losses on securities investments, derivatives, amortisation and credit.
The company was still able to provide an adjusted dividend of $0.25 to shareholders.
“During the first quarter SFL did not experience any material business interruptions resulting from the Covid-19 pandemic, chief executive Ole Hjertaker said.
"We have maintained a continuous focus on operational safety with a significant number of proactive measures to ensure safety for crew onboard our vessels as well as for onshore employees."
