Frontline Purchases Pertamina VLCCs

Monday, June 14, 2004
PT Pertamina (Persero) has entered into a definitive Sale and Purchase Agreement pursuant to which Windstar Marine Inc. and Speed Shipping Corp. two single purpose companies nominated by Frontline Ltd. in accordance with the Terms of Reference for Bid, but presently controlled by Frontline's majority shareholder Hemen Holding Limited ("Hemen"), have agreed to acquire Pertamina's two Very Large Crude Carriers ("VLCC") which are currently being constructed by Hyundai Heavy Industries Co. Ltd. More than 40 bidders were invited to participate in the bidding process and finalists were short listed including the Buyers, Essar Shipping Ltd. of India and Overseas Shipholding Group Inc. of USA. Frontline is a major Bermuda based tanker company listed on the New York, London and the Oslo Stock Exchanges. Frontline has a market capitalization of over US$ 2.8 billion and currently has 35 VLCCs under its ownership or management. The total consideration paid for the two vessels is $184 million. Hemen has initially backed the transaction financially in order to give the Frontline group the time to structure financing, charter agreement and security package in an optimum way. It is the intention that vessels during the next six months ultimately will be taken over by Ship Finance Int. Ltd. Ship Finance will seek to charter the vessels long term to Frontline. The Ship Finance take-over is dependent that agreements can be reached on financing and long-term charter agreement. Frontline is considering to offload some exposure by using the present strong market to charter the vessel out to third party for short to medium term. Such a charter will generate a strong initial cash flow and thereby substantially reduce the risk in the remaining charter period. CEO of Frontline Management, Mr. Oscar Spieler, is pleased that a solution is found with the major shareholder, which gives Frontline and Ship Finance time to structure the transaction in an optimum way. In the current strong market with more OPEC production to come we feel that this investment is a very attractive opportunity to increase the market exposure at the right time. Compared to ordering ships with delivery in 2007 - 2008 at the same price level we feel this deal has a substantially higher upside and a much better risk profile. If consummated it will create growth in Ship Finance and confirm Frontline's position as the world's largest operator of modern crude oil tankers.
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