SFL - Acquisition of Two 13,800 Teu Container Vessels and Long-Term Charters

Ship Finance International Limited (NYSE: SFL) ("Ship Finance" or the "Company"),today announced that it has entered into an agreement to acquire two 2010-built 13,800 TEU container vessels Magellan and Corte Real from CMA CGM SA ("CMA CGM" or "the Charterer") in combination with 15-year time charters back to CMA CGM.
The gross purchase price is $171 million per vessel, which includes a subordinated seller's credit of $55 million per vessel. The transaction will be financed through a French tax lease structure, where Ship Finance's investment is limited to $25 million per vessel, or $50 million in total, and secured by junior mortgages.
The vessels will be managed by an affiliate of the Charterer, and the time charter includes a compensation clause whereby Ship Finance will be compensated for any increase in operating expenses. The transaction is expected to generate an annual free cash flow in excess of $7 million, or approximately $0,09 per share, after operating costs and debt service.
The Charterer has been granted several purchase options throughout the term of the charters, the first starting in 2014. The purchase options also include a profit sharing arrangement whereby Ship Finance on certain conditions may receive additional amounts upon the exercise of such purchase options.
The acquisition is expected to be completed within the next couple of weeks and will add approximately $275 million to our charter backlog. The vessels will most likely be accounted for as 'investment in associate' similar to our drilling rigs.
Ole B. Hjertaker, CEO of Ship Finance Management AS, said in a comment: "We are very pleased to announce this transaction with CMA CGM, the world's third largest container line. This transaction expands our presence in the container sector, which is one of the sectors where we see interesting growth opportunities going forward. The transaction will be accretive to earnings and is expected to have a positive impact on our distribution capacity going forward"
Source: Press Release