Frontline, the largest independent global oil tanker operator, completed its restructuring with the help of Norwegian tycoon John Fredriksen, a key step in its revival as the industry struggles with weak demand and overcapacity.
The move splits Frontline in two, with the listed entity relieved of much debt, its costly newbuild programme, and handed lower charter rates, Frontline said in a statement on Monday.
“Through the sale of a limited number of the company’s assets, Frontline has avoided a heavy dilutive new equity offering and will thereby keep significant upside for the existing Frontline equity holders if the market recovers in the years to come,” the company said.
The new entity, called Frontline 2012, will take over six newbuilds, four Suezmax ships and bank debt associated with the newbuilds for $1.121 billion.
The split, first announced in early December, means the listed entity will miss out on a potential share dilution with top shareholder Fredriksen putting up some of his own $10 billion plus fortune to shore up the new entity.
Fredriksen, known as Big Wolf, takes a big gamble with the move but stands to reap benefits once the slump, forecast to last into 2013, ends, analysts said.
Analysts said Monday’s news is a confirmation of what markets already knew but it was still positive for the stock.
“There is not much new information in this release, but still, it is very good that Frontline reached an agreement with lenders and charter companies. This will help the company during a period with a tough market in 2012 and 2013,” Swedbank First Securities analysts Erik Folkeson Jensen said.
“We’ve been waiting for this.”
At 0913 GMT, Frontline shares were up 4 percent, outpacing a 0.6 percent drop in the benchmark index.
For the listed Frontline entity, existing gross charter obligations have been cut by $320 million through 2015 and bank debt is reduced from $679 million to zero.
Frontline 2012 will be owned mostly by Fredriksen and institutional investors while Frontline will also hold an 8.8 percent stake.
Source: Reuters