Ship Finance International has successfully completed previously announced amendments to chartering agreements with Frontline.
Ship Finance has agreed to temporarily reduce charter rates by US$6,500 per day per vessel from 2012 through 2015, and thereafter revert to previous charter rate levels.
In return, Frontline paid a cash compensation of US$106 million to Ship Finance. In addition there will be a cash sweep feature, whereby Ship Finance will receive 100 percent of vessel earning up to the old base rates. The old profit share arrangement has been improved from 20 percent to 25 percent, and will be calculated from the old threshold levels. Of the US$106 million upfront payment, US$50 million is a non-refundable, early payment of profit split for revenues above the old threshold levels. The cash sweep and the profit split will be payable on an annual basis, as before.
Following the agreement with Frontline, Ship Finance has prepaid US$156 million of related bank financing, of which US$106 million represents the cash compensation from Frontline. Consequently, the bank financing relating to the vessels has been reduced from approximately US$740 million to approximately US$584 million at year-end 2011.
