Trafigura Sells 10 New Tankers to Frontline
On Friday, global commodities trading house Trafigura announced that it is deepening its business ties with John Fredriksen's tanker division, Frontline, with a sale-leaseback arrangement for 10 tankers.
Frontline will buy ten brand new Korean-built Suezmax tankers fitted with exhaust gas scrubbers from Trafigura, paying with a combination of about $130 million in Frontline shares and about $550 million in cash. The share issuance will give Trafigura an 8.5 percent stake in Frontline.
In order to take over operation of the vessels quickly, Frontline will charter them from Trafigura at a day rate of about $23,000 each until the transaction is completed. After the transfer is complete, Frontline will charter half of the vessels back to Trafigura at about $28,000 per day, plus a 50 percent profit sharing arrangement.
The agreement contains options for Frontline to buy as many as four new Chinese-built Suezmax tankers from Trafigura by the end of next month.
In a statement, Rasmus Bach Nielsen, the global head of wet bulk freight at Trafigura, said that the transaction's structure is one that has worked well for the firm in the past - "investing in infrastructure assets in support of commodity flows and then collaborating with a market leader . . . to maintain sufficient access to those assets for our trading business."
Nielsen said that Trafigura foresees opportunity in the dirty tanker business due to a low order book, an aging fleet and an export boom on the U.S. Gulf Coast. "We therefore see significant upside potential in our equity in Frontline, a company with vast commercial scale and capabilities with whom we already enjoy a close working relationship," he said.
Frontline and Fredriksen's bulker business, Golden Ocean, partnered with Trafigura earlier this month on a bunker-buying joint venture. Frontline and Golden Ocean hold a combined 25 percent, while Trafigura holds the balance and provides its physical bunkering capabilities to the operation. It will be the bunker purchaser for the Frontline and Golden Ocean fleets, along with Fredriksen's other businesses and any third-party shipping companies who would like to buy from it.