Ship Finance International, the US-listed company in John Fredriksen’s business empire that invests in ships and rigs that it then charters out on long-term contracts, said on 22 August it has agreed to acquire three 2015-built 10,600 teu container ships.
IHS Markit data show that the ships are likely to be Maersk Line's Cap San Juan, Cap San Lazaro, and Cap San Vincent. The three were built by Daewoo Shipbuilding & Marine Engineering in South Korea in 2015.
Ship Finance expects to take delivery of the vessels in the near term, it said, adding that the purchase price is confidential.
The vessels will go on long-term timecharter to an undisclosed leading container line and the contracts would run for a minimum of six years, with options for the charterer to extend the charters by up to 10 years. There is also a purchase option with profit split at the end of the initial period.
Ship Finance’s fixed rate charter backlog would increase by approximately USD260 million as a result of the deal, increasing to about USD430 million if the charter extension options are exercised. Its EBITDA contribution from the vessels is estimated to be about USD35.5 million/year.
The company has expanded its exposure in the container shipping sector, with two deals unveiled in the past few months. According to Ole B. Hjertaker, CEO of Ship Finance Management, the acquisition highlights the group's strength and ability to achieve sustained growth “through repeat transactions with the world's largest liner companies”.
“We have firmly established ourselves as a quality operator of vessels, and our financial flexibility enables us execute swiftly on new transactions. Over the last five months we have added more than USD800 million to our charter backlog and expect to continue increasing our fleet of vessels and charter backlog in 2018,” he added.
Following the latest acquisition, Ship Finance’s charter backlog has increased to USD3.6 billion.
Maintaining a strong profile
In a separate statement released with the company’s second quarter (2Q18) interims results, Hjertaker said 2018 had been an active year where Ship Finance has significantly grown and renewed its fleet with transactions. The company sold three 2002-built very large crude carriers as part of its fleet renewal strategy last month.
According to Hjertaker, this expansion has increased the company's cash flow visibility and diversified its counterparty exposure while enabling Ship Finance to maintain a strong liquidity profile. This allows the company to act decisively on accretive growth opportunities that fit its investment profile, he added.
Ship Finance reported 2Q18 net profit of USD15.8 million, down from USD20.1 million in the same period last year. Revenues grew to USD96.8 million from USD94.2 million year on year. The company had a cash balance of USD144.8 million as of 30 June.
Hjertaker said Ship Finance’s approach continues to be agile and opportunistic, which allows the company to execute its long-standing strategy of acquiring attractive assets with long-term charters to reputable operators in the shipping and offshore markets.
“We believe the combination of a challenging banking market for many operators and low asset prices will continue to create significant investment opportunities for the company, particularly in market sectors where downside asset risk is limited and the potential exists for asset value appreciation,” he said.