Ship line capital expenditures and financing overview

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Updated

2Q capital expenditure

At the end of its second quarter, Ship Finance International Limited (SFL) reported four container vessels under construction in Korea. The company also expects two Kamsarmax driver carriers to be delivered in the third quarter. In February, the company took delivery of West Linus, and between March and May, nine container vessels were approved for charter to Mediterranean Shipping Company.

Capex overview

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The nine second hand container vessels with 4,100 to 5,800 TEU (twenty-foot equivalent unit) were built in 2001 and 2002, and originate from the German KG market. Three of the vessels were delivered to Ship Finance in March and the remaining six vessels were delivered during the second quarter. The vessels have good specifications, including 1,300 reefer plugs. Some of the vessels have also been upgraded with shore-based power systems.

Financing aspects

What Ship Finance paid for the nine ships is only a fraction of construction costs and just marginally higher than current scrap values.

The four new buildings are state-of-the-art 8,700 TEU container vessels with a total contract price of $340 million, of which $127 million was paid at quarter’s end. The yard payments made so far were funded through the company’s available liquidity. For the remaining balance, financing is arranged at very attractive terms. Meanwhile, Ship Finance will provide only a limited guarantee for loans.

The financing amount is higher than the remaining CapEx, and so the delivery of each vessel will positively effect cashflow. In May, the company announced the acquisition of 2012 Kamsarmax driver carriers with over eight-year charters to a state-owned Chinese charter. The vessels were delivered in July and August, funded from the available liquidity.

Ship Finance operates in the container industry with other companies including DryShips Inc. (DRYS), Navios Maritime Holdings Inc. (NM), Safe Bulkers, Inc. (SB), and Diana Containerships Inc (DCIX). The Guggenheim Shipping ETF (SEA) tracks these companies.

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