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Frontline dependent on market recovery to service debts

Frontline dependent on market recovery to service debts
Despite what it perceives as signs of recovery in the VLCC spot market, Frontline warned that a demand - supply balance was still a way off and dependent on the phasing out of existing tonnage.

Listing its obligations comprising $841m in lease obligations to Ship Finance International, $66m in lease obligations to German KGs and $215m in convertible bond loans, totaling $1.1bn, the company highlighted its dependence on the market to meet repayments.

"A full repayment of this debt is, to a large extent, dependent on a sustained improvement in tanker rates in the years to come... The board is actively monitoring the situation and looking for opportunities to restructure the balance sheet and improve the company's financial position," Frontline stated in its earnings release.

Frontline's third quarter loss of $36.5m brings the year to date loss at the company to $175.5m.

Vessel impairments totaled $22.4m for the quarter and $103.7m for the first nine months of the year.

After the reporting period, Frontline terminated the charters for and sold a pair of 14 and 15-year-old VLCCs as part of their strategy of renewing and diversifying their fleet.

For the company's VLCCs, time charter equivalent earnings averaged out at $16,100 per day, up from $12,300 to the same period last year. Suezmax TCE earnings were $12,400, compared to $10,500 in Q3 2012.

For the remainder of 2013, Frontline estimates an average cash breakeven TCE rate of $33,400 for its VLCCs and $16,700 for its Suezmax tankers.

TAGS: Europe