FSL Trust reduces debt facility and FY2014 debt repayments with disposal of vessels
FSL Trust Management Pte. Ltd., as trustee - manager of First Ship Lease Trust has sold its two dry bulk vessels, MT Stella Fomalhaut and MT FSL Durban, the company said in its press release. The Disposal is expected to save FSL Trust approximately US$3 million (approximately S$ 3.8 million based on the prevailing exchange rate 1) in dry dock capital expenditure in the financial period ending 31 March 2014 (“1QFY2014”) and reduce its cost of debt service in 1Q FY2014 and the financial period endin g 30 June 2014 (“ 2QFY2014 ”) by at least US$5 million (approximately S$ 6.3 million based on the prevailing exchange rate) .
FSL Trust has sold the dry bulk vessels for a cash consideration of US$ 23.55 million before commissions and transaction costs (approximately S$ 29.8 million based on the prevailing exchange rate) in cash , which took into account current strong market asset prices and the advantage to FSL Trust of saving the significant cost of a third special survey and dry dock ing of each vessel in Q1FY 2014 . The net proceeds from the Disposal will be applied to the outstanding loan facility and to reduce subsequent principal re payments in 1Q FY2014 and 2QFY2014 .
The Disposal represents an additional element of the previously announced agreement with lenders to extend the loan covenant relaxation till 31 December 2014. The Disposal is part of the Trust’s efforts to stabilise its position and to conserve cash following the series of lessee defaults and subsequent reduction in revenues over the past 24 months . The sale is opportunistic in nature due to the recovery of valuations of this vintage of vessel in the dry bulk market and is consistent with FSL’s business of managing a modern and well maintained portfolio of vessels.
By ensuring that the Trust need not incur the cost of dry docking the vessels , and through obtaining at least US$5 million of relief from its lenders in relation to scheduled loan repayments in 1Q FY2014 and 2QFY2014, the liquidity position and prospects for the Trust are significantly improved. This is p art of the ongoing restructuring of the Trust but there are no immediate plans for further vessel sales.