Ship Finance International buys two car carriers

OCTOBER 24, 2012 —  John Fredriksen’s Ship Finance International Limited ( NYSE : SFL ) has gotten into the car carrier business. It reported today that it has agreed to purchase, “at attractive prices,” two Japan-built vessels have a capacity of approximately 6,500 car equivalent units (CEU) and were built in 2005 and 2006, respectively.

The vessels will be time chartered to an investment grade logistics company, publicly listed in Asia. The charter period will be five years, adding approximately $85 million to Ship Finance’s charter backlog. Expected delivery of the vessels will be in October and November 2012.

The funding of the vessels will be a combination of equity and loans, and Ship Finance has already received indications for 70 percent financing of the purchase price at favorable terms. The aggregate net cash flow after estimated operating expenses, interests and loan amortization is projected to be approximately $4.8 million in aggregate per year, or approximately 20 percent annual return on invested equity during the charter period.

Ole B. Hjertaker, CEO of Ship Finance Management AS, said in a comment: “We are very pleased to expand our long-standing relationship with one of the premier logistics companies in Asia. The purchase price is very attractive compared to replacement cost for similar high specification assets, and there will be an immediate positive cashflow effect for the Company already in the fourth quarter.”