FSL – BT

FSLT buys product tanker in sale-and-leaseback deal

This will raise the trust’s portfolio size to 24 vessels

FIRST Ship Lease Trust (FSLT) is buying a product tanker for US$46 million and leasing it out on a seven-year bareboat charter.

The Long Range II (LR2) product tanker – FSLT’s first – will be bought from Torm Singapore Pte Ltd, a wholly owned subsidiary of Torm A/S, and leased back to Torm Singapore. The vessel is expected to be delivered within this month.

‘The bareboat charter agreement is structured with recourse to Torm and contains a purchase option at the expiry of the base lease term, an early buy-out option on or after the fifth anniversary of the lease term, as well as three extension options of one year each,’ FSLT’s trustee manager said in a statement on Wednesday night.

The purchase of the vessel will be fully financed by the drawdown of US$23 million from the trust’s existing revolving credit facility and the utilisation of US$23 million from the previous equity issue in September 2009, which raised net proceeds of US$28.3 million.

After funding this transaction, the trust’s total projected outstanding secured debt as at July 1, 2011, will be about US$460 million.

This deal will be immediately cash flow accretive to the trust and will increase its total remaining contracted revenue to US$602 million, excluding extension options.

‘We believe that the growing demand for alternative shipping finance such as ship leasing will present a healthy pipeline of transaction opportunities that we are well-positioned to take advantage of,’ said Vijay Kamath, senior vice-president and head of sales of First Ship Lease Trust Management.

‘While we now have the flexibility to take on both time and bareboat charters with terms shorter than seven years, our ship leasing business will remain ‘long-biased’.’

The average remaining lease term of the trust’s portfolio remains at the current 6.8 years.

The acquisition of the 109,672 deadweight ton product tanker – called the MT Torm Margrethe – will bring the trust’s portfolio size to 24 vessels. Including Torm, the trust will have eight lessees.