In a deal announced this week, five capesizes under construction at Shanghai Waigaoqiao Shipbuilding in China, as well as 2013-built capesize bulker will be acquired by Knightsbridge Tankers Ltd. (Nasdaq: VLCCF) at a price of $61 million and $55 million each, respectively. The newbuilds were originally ordered by Frontline 2012 and have expected deliveries of between May and September 2014. The 2013-built bulker is currently owned by Karpasia Shipping, a trust controlled by shipping tycoon John Fredriksen and his immediate family.
Ola Lorentzon, Chief Executive Officer of Knightsbridge, commented on the transaction:
“The purchase by Knightsbridge of the six Capesize vessels will help us in developing the leading New York listed Capesize owner. We believe that acquiring these vessels will greatly benefit our shareholders through additional scale and reduced fleet age and we believe it will increase our opportunity to benefit from a dry bulk market recovery. We will seek to have a moderate debt level per vessel and favorable amortization profile, with the ambition to create a structure that allows for high distribution capacity. Needless to say, it is a major step for the Company.”
Knightsbridge notes that by the end of September, they expect to have ten Capesizes in their fleet with another four newbuilds on the way in 2015. The company notes in their press release that additional acquisitions from market, as well as from Frontline 2012 – which has 25 newbuild Capesizes contracted to be delivered by 2016 – may occur in the future.
Financing the Deal
Of the total consideration of $360 million, Knightsbridge notes $186 million will be paid in shares of VLCCF at $10 per share, $150 million in absorption of remaining newbuilding capex and $24 million in cash. Accordingly, Knightsbridge has agreed to issue 15.5 million shares to Frontline 2012 and 3.1 million shares to Karpasia, or another company controlled by trusts established by John Fredriksen for the benefit of his immediate family, on closing of the transaction.
Chairman of Frontline 2012, John Fredriksen commented on the deal noting the transaction “is in line with our strategic plan of creating pure plays in different shipping segments through consolidation, divestments and spin offs.”
Knightsbridge will seek to raise around $30 million in bank debt per vessel.
Following the issuance of the shares, Knightsbridge will have 49.1 million shares outstanding.