Frontline is acquiring ten 2019-built suezmaxes fitted with scrubbers from Trafigura Marine Logistics (TML) with options for four more 2019-built tankers in a second transaction.
The deal is worth up to $675.3m with Frontline issuing 16m new shares worth $128.3m to Trafigura and a cash amount ranging from $538m to $547m payable on closing. Following the deal Trafigura will own an 8.48% stake in Frontline.
Ahead of closing of the deal Frontline has time chartered all 10 vessels at a rate $23,000 daily. Trafigura is also chartering back five of the vessels for three years at a base rate of $28,500 per day with a 50% profit share above the base rate.
Robert Hvide Macleod, ceo of Frontline Management commented: “This transaction is backed by our strong belief in tanker market fundamentals and reflects our ability to act swiftly and decisively with the support of our largest shareholder. We welcome Trafigura as a strategic shareholder and believe the transaction reflects the value they ascribe to our equity.
“The structure of the transaction creates an immediate impact to our earnings at a time when we expect freight rates to increase significantly.
Trafigura undertook a major newbuilding programme in 2017 ordering 35 tankers comprising MR tankers, LR2 and suezmaxes.
Rasmus Bach Nielsen, global head of wet freight at Trafigura, commented: “This marks a continuation of an approach that has long been integral to Trafigura’s strategy, namely investing in infrastructure assets in support of commodity flows and then collaborating with a market leader like Frontline to maintain sufficient access to those assets for our trading business.”