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Frontline to acquire a fleet of Suezmax tankers from Trafigura

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Christian Fernsby ▼ | August 23, 2019
Frontline announced that it has entered into a sale and purchase agreement with Trafigura Maritime Logistics ("TML"), a wholly-owned subsidiary of Trafigura and certain related entities to acquire ten Suezmax tankers built in 2019 through the acquisition of a TML special purpose vehicle which holds the vessels.
Acquisition   Frontline has options to acquire an additional four Suezmax tankers
As part of the Acquisition, Frontline has options to acquire an additional four Suezmax tankers built in 2019 through the acquisition of a second TML special purpose vehicle.

Topics: Frontline Suezmax tanker Trafigura

Acquisition overview:

Frontline to acquire ten Korean 2019-built Suezmax tankers all fitted with exhaust gas cleaning systems.

Transaction consideration to consist of (i) 16,035,856 ordinary shares of Frontline at an agreed price of USD 8.00 per share issuable upon signing; and (ii) a cash amount ranging from USD 538 to 547 million, payable upon the closing of the Acquisition.

Closing of the Acquisition is targeted as soon as practically possible with November 15, 2019 being the earliest and March 15, 2020 being the latest expected date.

To obtain earlier exposure to the vessels, Frontline has agreed to time charter all the ten vessels from Trafigura until closing of the Acquisition at a daily rate of approximately USD 23,000.

Frontline has also agreed to charter five of these vessels back to Trafigura on three-year time charters at a daily base rate of USD 28,400 with a 50% profit share above the base rate.

Frontline is in discussions with leading lending banks who have indicated an interest in providing financing for the Acquisition.

An affiliate of Hemen Holding Ltd., Frontline's largest shareholder, has offered a USD 547 million commitment at closing of the Acquisition through a three year facility at terms viewed as attractive.

Following the closing of the Acquisition, Trafigura will own approximately 8.48% of the ordinary shares of Frontline, and Frontline will have a total of

89,153,166 outstanding shares par value USD 1.00 each Frontline has two separate options to acquire two plus two additional Suezmax tankers that expire on September 12, 2019 and September 24, 2019.

The second option will expire if the first option is not validly exercised.

The transaction structure for the four optional vessels will be similar to that of the ten firm vessels.

The number of ordinary shares to be issued if one or both of the options are exercised will be based on the volume weighted average trading price of Frontline's ordinary shares on the NYSE over the 20 days prior to the option exercise date.

All four option vessels are 2019 Chinese built and fitted with exhaust gas cleaning systems.