ICBC Financial Leasing (ICBCL) has signed a sale and leaseback agreement for ten 2019 built Suezmax tankers with Frontline Ltd, which operates one of the largest and most modern fleets of oil tankers in the industry.
The US$544 million lease financing has a tenor of seven years, pays a margin of Libor plus 230bp, has an amortization profile of 17.8 years and includes purchase options for Frontline throughout the term, with a purchase obligation at the end of the term.
Law firm Watson Farley & Williams advised ICBCL on the deal.
Frontline used the proceeds to fund the acquisition of the ten vessels from Trafigura Maritime Logistics, a wholly-owned subsidiary of Trafigura Group Pte Ltd.
On March 16 Frontline announced that it had closed the acquisition of the ten Suezmax tankers under a sale and purchase agreement with Trafigura.
The proceeds of the leasing deal with ICBCL will be used to finance the cash amount payable upon closing of the acquisition of these tankers. A Suezmax is the largest type of oil tanker that can pass through the Suez Canal.
“We are very pleased to have signed the Lease Financing with ICBCL, which marks an important transaction between ICBCL and Frontline," comments Inger M Klemp, chief financial officer of Frontline Management. "This transaction extends our capital sources at a very attractive capital cost, maintains our industry leading cash breakeven rates and maximizes potential cash flow per share after debt service.”
Singapore headquartered Trafigura Group is a market leader in the global commodities industry.
Trafigura has recently bolstered its capital position by closing two major facilities in the international syndicated bank loan markets, and issued long tenor notes in the US private placement market.
Trafigura refinanced its flagship 365-day European multi-currency syndicated revolving credit facility (the 365-day ERCF) totalling US$1.9 billion.
The 365-day ERCF was arranged by mandated lead arrangers & bookrunners Bank of China Limited, London Branch, ING Bank N.V. and UniCredit Bank AG acting as active bookrunners, along with Rabobank and Societe Generale Corporate & Investment Banking acting as passive bookrunners.
A statement from the company said that the ERCF, initially launched at US$1.5 billion, was well received by the bank market and closed substantially oversubscribed, allowing the company to upsize the facility.
The 365-day ERCF will be used to refinance the maturing US$2.05 billion 365-day facility dated March 14 2019, as well as for general corporate purposes. The pricing of the facility was unchanged from last year. In addition, the company decided to exercise the second extension option available on the three year tranche of its 2018 ERCF, thereby extending the facility by 365 days and maintaining a three-year tenor.