Significant cash flow
Ship Finance International Limited (SFL) expects to receive total cash proceeds of ~$77.5 million. This includes ~$10.5 million cash compensation from Frontline Ltd (FRO), and ~$48 million in 7.25% amortizing notes from Frontline. The amortization profile and maturity of the notes matches the three current vessel charters—Front Opalia, Front Comanche, and Front Commerce—with reduced rates until 2015, and full rates from 2016.
At the end of the second quarter, Ship Finance reported more than $60 million of free cash—after the delivery of a Suezmax new building without leverage. Meanwhile, Ship Finance also raised more than $50 million over the last few quarters by issuing new shares.
Claim settlement enhancing cash balance
In March 2014, Ship Finance announced a claim settlement relating to four Handysize dry-bulk carriers, re-delivered in 2012 before the expiry of their charters. Out of the total settlement amount of ~$30 million, Ship Finance received ~$15 million in the first quarter and $5 million (gain recorded) in the second quarter. Meanwhile, the remaining balance is scheduled to be paid in two installments in the second half of 2014.
Ship Finance declared an increase in its second-quarter dividend to $0.41 per share, from $0.39, year over year. With its 42nd consecutive quarterly dividend, the current dividend yield stands at a strong 8.4%. Industry peers including Navios Maritime Partners L.P. (NMM), Capital Product Partners L.P. (CPLP), and Teekay Offshore Partners L.P. (TOO) do not generate such a high-dividend yield. The Guggenheim Shipping ETF (SEA) tracks these shipping companies.