FSL Trust Improves Operational Profile

Press Release
Monday, October 29, 2012

Deploys all redelivered vessels on longer term employment.


• Revenue stability enhanced; two product tankers time chartered to Petrobras and three chemical tankers deployed in the ‘Nordic Siva’ pool

• Cash reserves rose to US$33.2 million; improving resilience against uncertainties in shipping market

• Revenue continues to be at risk

 

FSL Trust Management Pte. Ltd. (“FSLTM”), as trustee-manager of First Ship Lease Trust (“FSL Trust” or the “Trust”), has announced  the financial results of FSL Trust for the third quarter ended 30 September 2012 (“3QFY12”). In 3QFY12, FSL Trust successfully delivered its three chemical tankers into the ‘Nordic Siva’ pool as well as a second product tanker, FSL Hamburg, to Petròleo Brasileiro S.A. (“Petrobras”) for the commencement of her three-year time charter. Prior to their redeployment, these vessels were trading in the spot market where earnings were more volatile.


Revenue declined 6.5% to US$26.7 million against the same period last year. However, after deducting voyage and vessel operating expenses, revenue on a bareboat charter equivalent (“BBCE”) basis fell 5.6% year-on-year to US$22.4 million. The breakdown of revenue by charter types is as follows:-


                                                                                   3QFY12                3QFY11         Decrease
                                                                                   US$’000              US$’000              %


Rentals from vessels on bareboat charter       18,250                  23,592                 (22.6)
BBCE revenue of vessels in:-
- Time charter                                                          976                       -                             N.M.
- Pool                                                                        1,437                    -                             N.M.
- Spot                                                                        1,769                   172                        N.M.
Total bareboat charter/BBCE revenue               22,432                 23,764                 (5.6)


i) Bareboat Charter
Rentals from vessels on bareboat charter fell 22.6% year-on-year to US$18.3 million. This was mainly due to the payment default by the subsidiaries of PT Berlian Laju Tanker Tbk for three chemical tankers since February 2012 and the lower rentals from vessels leased to TORM A/S (“TORM”) as the leases were being restructured. Despite the lower rentals received in 3QFY12, the long-term bareboat charters continue to underpin the overall earnings of FSL Trust.


ii) Time Charter
From 16 May 2012, FSL Singapore entered the time charter with Petrobras and hence she enjoyed the full three months of time charter income. FSL Hamburg, however, entered a similar time charter with Petrobras on 23 August 2012. The gross daily time charter rate for each vessel is US$14,000. On a combined basis, these two vessels contributed BBCE revenue of US$1.0 million from their time charter employment during the quarter.


iii) Pool
The ‘Nordic Siva’ pool commenced deployment of the Trust’s chemical tankers, FSL New York and FSL Tokyo in July 2012 and the third chemical tanker, FSL London in August 2012. Collectively, these vessels generated net pool revenue of US$2.9 million. After deducting vessel operating expenses, these vessels earned BBCE revenue of US$1.4 million in 3QFY12.


iv) Spot
Total freight income of US$3.8 million was derived from the three chemical tankers before they entered the ‘Nordic Siva’ pool and from FSL Hamburg before she started her time charter with Petrobras. After deducting voyage and vessel operating expenses, these vessels generated BBCE revenue of US$1.8 million in 3QFY12. For the same period last year, only FSL Hamburg and FSL Singapore traded in the spot market and these vessels contributed BBCE revenue of US$172,000.
Other operating expenses declined 8.0% year-on-year to US$16.0 million. The lower expenditure was due mainly to lower depreciation from the three chemical tankers (-US$1.0million) and from the two vessels leased to TORM (-US$0.3 million), arising from the changes in the expected useful life and residual value of the vessels.
Consequently, FSL Trust achieved a marginal improvement of 1.0% in net operating income to US$6.5 million. After accounting for finance expenses and other non-operating items, the Trust reported a small loss of US$186,000 compared to a small profit of US$152,000 in the same quarter last year.
Net cash generated from operations declined 11.0% year-on-year to US$13.9 million and the Trust continued to pay its regular loan amortisation of US$11.0 million during the quarter. In line with the temporary loan covenant relaxation obtained in June 2012, no distributions have been declared. Cash and cash equivalents rose to US$33.2 million as at 30 September 2012 (US$30.8 million as at 30 June 2012).

 

Vessel Portfolio Profile
20 out of 25 vessels in the Trust’s portfolio remain employed on long-term bareboat charters whilst two vessels are employed on time charters. As at 30 September 2012, these 22 vessels have a dollar-weighted average remaining lease period of approximately five years1. Including the remaining three chemical tankers employed in the pool, the combined portfolio of 25 vessels has a dollar-weighted average age of approximately seven years.
As an update to the Trust’s announcement relating to its TORM charters made on 3 October 20122, FSLTM would like to add that subject to technical completion of TORM’s restructuring agreement, FSL Trust will receive an equity stake amounting to approximately 2.5% in the enlarged share capital of TORM in return for permanently amending the terms on its two charter contracts.


Outlook
Mr. Philip Clausius, Chief Executive Officer of FSLTM said: “With the successful redeployment of our two product tankers and three chemical tankers from spot market to time charter and pool employment, we can expect more stable earnings from our vessel portfolio. Together with the

loan covenant relaxation previously obtained from our lenders, this improves our operational profile and should stand us in good stead to ride out the challenges ahead.
However, some of our lessees continue to be under pressure and there is possibility of further downside risks. We will stay vigilant and continue to manage our vessel portfolio responsibly to secure a sustainable future for the Trust.”


Conference Call for 3QFY12 Results
FSLTM will host a conference call for all registered participants on Tuesday, 30 October 2012 at 10.00 am (Singapore time) to discuss the results. An audio recording of the conference call will be available on FSL Trust’s website at www.FSLTrust.com from 12.00pm (Singapore time) on Wednesday, 31 October 2012.

1 Excluding extension periods and early buy-out options.
2 Press release: “FSL Trust provides update on TORM charters”, dated 3 October 2012.

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