Golden Ocean moves to strengthen its cash position

APRIL 27, 2015 — John Frederiksen's Golden Ocean Group Limited said today that though it is not abandoning its strategy to be a "much needed consolidator" in the dry bulk sector it is "positioning itself for interesting opportunities which are expected to be available over the coming months."

In line with this, it has entered into several agreements concerning its fleet, including a sale and leaseback deal with Ship Finance International Limited for eight Capesize vessels currently owned by Golden Ocean and were built in Korea and China between 2009 and 2013. Ship Finance will pay a total acquisition price of $272 million, or $34 million average per vessel for the ships which vessels are expected to be delivered to Ship Finance by end July 2015.

The vessels 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 $17,600 during the first seven years, and $14,900 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 have a purchase option after year 10 of $112 million enbloc, and if such option is not exercised, Ship Finance will have the option to extend the charters by three years at $14,900 per day.

Golden Ocean has also reached agreements with several of shipyards to delay the construction of various 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," says the company. "After this it is expected that six vessels will be delivered in 2015, 15 vessels in 2016 and 4 vessels in 2017. There is still work in progress to improve delivery positions further."

Golden Ocean has also agreed to sell four of the Capesize vessels currently under construction at a Chinese yard to a third party. The company will finalize 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 6 to 12 months. The sales price is in line with the original contract price.

The company has also sold the vessels Channel Alliance and Channel Navigator to a third party, as part of the company's fleet renewal. These vessels will be delivered to new owners within the end of June 2015.When these adjustments to the fleet have been completed the company will have an owned and long term chartered in fleet of 40 Capesize vessels, in addition to one vessel owned in a JV, ten ice class Panamax vessels, one Panamax vessel, nine Kamsarmax vessels and nine Supramax vessels.
Of the total fleet, 17 Capesize vessels and four Supramax vessels are newbuildings to be delivered to the company. Following these transactions Golden Ocean has secured financing for all newbuilding contracts except nine vessels with delivery in 2016 and 2017 and none of the existing loan facilities are due for refinancing before 2018.

Golden Oceans says these various initiatives are being taken "in order to strengthen the cash position and balance sheet of the company in the current weak market. "

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