Each quarter announce about 1.5 cents, 6 cents annually, total 6/46 = 13 % dividend yield woo la la.
FIRST SHIP LEASE TRUST PROVIDES UPDATE ON THE RE-DELIVERY OF ‘VERONA I’ AND ‘NIKA I’
• Vessels continue to perform under Contracts of Affreightment with Rosneft
• Trustee-Manager continues to explore alternative commercial solutions that
optimise revenue generation
• No trigger of event of default under loan agreement and no interest cost
impact
• 2Q FY10 distribution per unit (“DPU”) guidance of US1.5 cents under review
Singapore, 11 May 2010 - FSL Trust Management Pte. Ltd. (“FSLTM”), Trustee-Manager of First Ship Lease Trust (“FSL Trust” or the “Trust”) refers to the earlier announcement1 on 4 May 2010 and wishes to provide an update on this matter.
The lessees of the vessels ‘Verona I’ and ‘Nika I’ (the “Lessees”), which are affiliates of Groda Shipping & Transportation Ltd. (“Groda Shipping”), made requests to FSL Trust on 3 May 2010 to take re-delivery of the two vessels. The Lessees have indicated that it has become increasingly difficult for them to improve their cash flow and the reasons appear to be:
a. the higher voyage expenses due to escalating bunker prices;
b. under-utilisation of the vessels under the Contracts of Affreightment with OJSC Rosneft Oil Company (the “COAs”); and
c. limited options to generate incremental revenue given the trading area of the vessels.
For the month of May, the Lessees made full payment only for ‘Nika I’ but not for ‘Verona I’. They have informed FSLTM that they will not make full payments for either vessel from June 2010 onwards under the respective bareboat charter agreements.
FSLTM has received confirmation that both ‘Verona I’ and ‘Nika I’ are in good operating condition and that FSL Trust’s subsidiaries, as owners of the vessels, are properly insured against all major maritime risks. In addition, FSLTM has appointed Columbia Shipmanagement (Singapore) Pte. Ltd. as technical advisor to provide assistance in all technical and operational matters.
At this juncture, FSLTM expects both vessels to continue to perform smoothly under the respective COAs. Two important factors that will affect the cash flows of the two vessels are bunker expenses and the actual cargo volume shipped under the COAs. Based on prevailing bunker prices and the conservative assumption that the vessels carry only the contractually guaranteed cargo volume without any incremental revenue from other sources, the vessels could earn approximately US$13,000 per day/vessel on a time charter equivalent basis (or about US$7,000 per day/vessel on a bareboat charter equivalent basis2).
Mr Philip Clausius, CEO of FSLTM said: “While this contingent event is regrettable, the management has, in a very short period of time, assumed control of the situation and we are putting systems in place to deal with the new circumstances in a professional manner. The vessels have planned voyages under the COAs and our immediate priority is the continued smooth operation of the vessels whilst we explore alternative commercial solutions that would optimize our revenue generation. Notwithstanding the fact that management is spending exponentially more time on these two vessels, FSLTM has decided to voluntarily suspend the management fee it is entitled to receive from the Trust for these two vessels until further notice.”
Mr Cheong Chee Tham, CFO of FSLTM said: “It is important to highlight that this specific event does not trigger an event of default under our loan agreement nor does it result in an increase in interest expense. Whilst the near-term cash generation potential for these two vessels might be substantially less than the originally contracted bareboat charter rate, it is worth noting that the US$6 million cash security deposit provides a cushion against the loss. As a result of this development, our DPU guidance for 2Q FY10 and beyond is under review by our Board of
Directors.”
FSLTM would like to highlight that all its other lease agreements are structured with full recourse to entities of substance, either through a corporate guarantee, or otherwise on the basis of direct contractual recourse. FSLTM is presently not aware of any information that would lead it to believe that its other customers would not continue to fulfil their lease payment obligations.
My Yield Estimator for FSLT
Net Distributable Income - US$8.3 million
Loss of Income from Groda US$3.73 million
Gain of Income from Rosneft: US$1.26 million
Gain from forfeit of Management fees: US$0.15 million
New Distributable Income: US$5.98 million or US$0.01/quarter
Note this excludes the following -
a) Gain of Income from newly acquired vessel (estimated US$1 million/quarter). Vessel should be delivered in 2Q 10.
b) Usage of US$6 million for either cash payout or loan repayment which will reduce interest expense.
c) FSLTM charters the vessel out to a different party. It is still exploring other commercial options while the 2 vessels carry out their planned voyage.
1 comments:
FSL trust is quoted in USD rite? there are many REIT trust giving high yields... FIRST, CAMBRIDGE, LIPPO... etc