SINGAPORE - Mainboard-liste First Ship Lease Trust (FSL Trust) said on Monday (Oct 26) that it has signed a memorandum of agreement to purchase a 2007, Japanese-built, medium range product (MR) tanker for US$21.8 million (S$30.5 million).
The move will enable the trust to deliver on its stated strategy to improve revenues by 2016, its trust manager said.
The acquisition will be financed through existing cash reserves totalling US$41.8 million as at June 30.
The vessel is expected to be delivered to the trust between Nov 1, 2015, and Jan 31, 2016, and is intended to be employed in the spot market through a first class commercial manager. This will deliver an annual cash-on-cash yield of 14.5 per cent based on a conservative TCE rate of US$16,500 per day over the next three years. TCE or time charter equivalent rate is a standard shipping industry performance measure, the trust manager said.
Upon delivery of the vessel, FSL Trust's fleet will stand at 24 vessels, comprising seven containerships, 12 product tankers, three chemical tankers and two crude oil tankers.
Commenting on the acquisition, Alan Hatton, CEO of the trust manager said it "demonstrates the ongoing execution of our strategy, outlined earlier this year, to renew the fleet and generate incremental revenue ahead of the scheduled redelivery in 2016 of the Panamax containership vessels, currently on bareboat charter to Evergreen."
"The acquisition will be entirely cash-financed. This is possible due to strengthened cash generation in the trust resulting from the improved deployment of redelivered vessels and by attaining new time charters with quality counterparties at higher rates. The new investment will, therefore, have a positive effect on our ability to generate cash moving forward, as well as our overall fleet leverage."
In April, the trust announced a two-year time charter agreement with a US domestic oil company for FSL Hong Kong, a crude oil tanker. It also recently secured new time charter agreements, worth up to US$61 million over the next three years, for the Aframax crude oil tanker, FSL Shanghai and, MR product tankers, FSL Hamburg and FSL Singapore, with a leading global commodities trader.