SINGAPORE - First Ship Lease Trust (FSL Trust) plans to buy two product tankers for a total of US$97.6 million (S$133.9 million) as part of plans to renew its fleet of vessels, the trust said on Thursday (Dec 13) before the stock market opened.
Its wholly owned subsidiaries - FSL-28 and FSL-29 - and shipbuilder Cosco Shipping Heavy Industry (Yangzhou) struck a deal on Wednesday for the purchase of two 114,000 deadweight tonnes scrubber fitted Tier III LR2 product tankers, which are expected to be delivered in November 2020 and January 2021, respectively.
In a filing with the Singapore Exchange, FSL Trust said that the purchase will be paid for in five staggered instalments based on the progress of the construction schedule of the new vessels starting from early 2019 and ending upon the respective expected deliveries of the vessels in November 2020 and January 2021.
The acquisition of the vessels will be paid for from the net proceeds of FSL Trust's preferential offering of up to US$31 million, proceeds from the potential sales of vessels from its existing fleet of up to US$21.3 million, and through a combination of surplus cash flows from operations and bank financing to be obtained by FSL Trust subsidiaries.
FSL Trust said: "It is expected that the bank financing, of between 50 per cent and 70 per cent of the aggregate consideration for the newbuilding acquisition, will only need to be made available on or around late 2020 and early 2021 when the new vessels are expected to be delivered respectively."
The acquisitions are expected to have a positive financial impact on FSL Trust.
FSL Trust said that it expects the new vessels will be more efficient to operate and that they will be more fuel-efficient making them easier to charter to counterparties, "at a substantial premium compared to the vessels in FSLT's current fleet".
The new vessels will also be more attractive for long-term leases to major petroleum companies, therefore allowing FSL Trust to potentially secure better returns, the trust added.