Frontline Terminates VLCC Charter-in Contracts
Frontline Ltd. has agreed with Ship Finance International Limited to terminate the long term charter parties for the 1998 and 1999 built VLCCs Front Champion and Golden Victory and Ship Finance has simultaneously sold the vessels to unrelated third parties. The charter parties are expected to terminate in November 2013.
The Company said the decision to terminate the long term charter parties was taken in view of the required investment to take the vessels through the 15 year special survey and current market rates.
“While the VLCC spot market has recently shown some signs of recovery, there is still a fundamental oversupply in the market and the retirement of older vessels should assist in balancing the market going forward,” said Frontline.
Frontline has agreed an aggregate compensation payment to Ship Finance of approximately $90 million for the early termination of the charter parties, of which approximately $11 million will be paid upon termination and the balance will be recorded as notes payable, with similar amortisation profiles to the current lease obligations, with reduced rates until 2015 and full rates from 2016.
These transactions will reduce the Company’s obligations under capital leases by approximately $105 million and the remaining obligations under capital leases following these terminations will be approximately $735 million related to 15 VLCCs and five Suezmax tankers.
