FSL – BT

FSL Trust’s Q3 DPU drops 36.7%

FIRST Ship Lease Trust has announced a distribution per unit (DPU) of 0.95 US cents for the third quarter – unchanged from the second quarter but 36.7 per cent lower than the year-ago DPU of 1.5 US cents.

The DPU – which represents an annualised tax-exempt yield of 10.3 per cent – works out to a Q3 distribution of US$5.7 million, down 28.6 per cent year on year. The fall was largely due a US$8 million repayment of secured bank loans for the quarter.

Revenue also took a hit from the premature termination of the long-term charters for FSL Hamburg and FSL Singapore – falling 4.9 per cent to US$23.4 million during the quarter due to the loss of US$3.8 million in bareboat charter revenue from the two tankers.

The tankers were arrested in China and Japan respectively by Daxin Petroleum in June on claims Daxin had not been paid by the ships’ lessees for the bunker that it supplied to the vessels.

FSL Hamburg and FSL Singapore were known as Nika I and Verona I, respectively, at the time of their arrest. The lessees of Nika I and Verona I had been Rovina Shipping and Mesino Shipping, respectively.

The trust’s management has since filed a suit claiming losses and damages caused by the arrests of the tankers from Daxin and its officials. The defendants have also filed their defence. ‘Legal proceedings are on-going and there are no material developments at this point,’ the trust’s management said yesterday.

According to it, both tankers were introduced to the product tanker spot market after their re-deliveries during the third quarter and had gained approvals from several oil majors.

‘Despite volatile freight rates in the spot market, the trustee-manager believes the vessels are now well-positioned to attain their full earnings potential,’ said Philip Clausius, chief executive of FSL Trust Management.

For the first nine months, the trust’s DPU stood at 3.4 US cents, 46.9 per cent lower than the previous year’s 6.4 US cents.

Amount available for distribution for the same period fell to US$20.4 million, from US$33 million a year earlier.

‘Asset values have recovered substantially and we are in full compliance with our debt covenants,’ said Mr Clausius.

As of September this year, the trust’s fleet had a charter-free value of US$700.3 million, compared to its outstanding secured debt of US$461.1 million as at Oct 1. This means that the trust has a value-to-loan (VTL) ratio of 152 per cent – satisfying the minimum ratio of 100 per cent stipulated by its credit facility’s debt covenant.

‘Assuming the current charter-free valuation of the vessels remains unchanged, the projected VTL ratio in July 2011 will be 160 per cent,’ the trust’s management said.