Ship sale and leaseback deals together with the postponement of deliveries of newbuildings unveiled yesterday has given Golden Ocean Group (GOGL) breathing space. However, the threat from the continuing weak market remains, shipping analysts at Arctic in Oslo said.
“We see the transactions lifting GOGL’s cash position substantially to a trough cash position of about USD240 million on our base case rates. However, should the market turn out to be USD4,000/day lower than our base case for Capes (2015: USD12,000/day, 2016: USD16,000/day, 2017: USD18,000/day) – we see GOGL running out of cash. Nevertheless, the company has created a substantial runway to weather the soft market,” said Kurt Waldeland and Erik Nikolai Stavseth, shipping analysts at the Oslo-based investment bank.
“While the sale of assets was more or less in line with the prevailing market, we estimate GOGL paying an interest of closer to 7.5-7.6% to SFL (Ship Finance International) on the eight leased vessels. We find this to be on the high side, but think GOGL has chosen this over the refinancing risk for the eight vessels over the coming two years,” the two analysts said in a market report emailed to IHS Maritime.
Golden Ocean, which is listed in Oslo and New York, said yesterday it had sold eight ships to Ship Finance International, the listed tonnage provider in John Fredriksen’s business empire, and leased them back.
“The total acquisition price will be USD272 million, or an average of USD34 million per vessel. The vessels are expected to be delivered to Ship Finance in July 2015, subject to customary closing conditions,” Golden Ocean said in a statement.
They will be chartered on time-charter basis to a subsidiary of Golden Ocean for a period of 10 years. The daily base charter rate will be USD17,600 during the first seven years, and USD14,900 thereafter.
In addition, there will be a 33% profit share for revenues above the base rate, calculated and paid on a quarterly basis. Golden Ocean will also have a purchase option after year 10 of USD112 million enbloc, and if such an option is not exercised, Ship Finance will have the option to extend the charters by 3 years at USD14,900 per day.
Golden Ocean has also reached agreements with several of its yards to delay the construction of the newbuilding contracts by about 75 months on an aggregate basis. “This will postpone capital expenditure and possible cash burn on sailing vessels as the market is currently below cash break even. After this, it is expected that six vessels will be delivered in 2015, 15 vessels in 2016 and six vessels in 2017. “There is still work in progress to improve delivery positions further,” the company said.
The company has also agreed to sell four of the Capesize vessels currently under construction at a Chinese yard to a third party. “The company will finalise the construction of the vessels and transfer ownership to the new owner upon delivery from yard. For three of the vessels Golden Ocean will charter the vessels back on time charter for six to 12 months. The sales price is in line with the original contract price. In addition, it has sold the vessels Channel Alliance and Channel Navigator to a third party, as part of its fleet renewal, Golden Ocean stated.