SFL Corporation Ltd (SFL) 2014 Q1 法說會逐字稿

Good day, and welcome to the Q1 2014 Ship Finance International Ltd.

earnings conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Ole B. Hjertaker.

Please go ahead, sir.

Thank you, and welcome, everyone, to Ship Finance International and our first-quarter conference call.

With me here today I also have our CFO, Harald Gurvin; and Senior Vice President, Magnus Valeberg.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995.

Words such as expects, anticipates, intends, estimates, or similar expressions, are intended to identify these forward-looking statements.

These statements are based on our current plans and expectations, and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Important factors that could cause actual results to differ include conditions in the shifting offshore and credit markets.

For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission.

The Board has again increased the cash dividend and it is now $0.41 per share.

This is incidentally also the 41st consecutive dividend declared by the Company.

The dividend represents $1.64 per share on an annualized basis or 9% dividend yield based on closing price on Friday.

Net income for the quarter was $41 million or $0.44 per share.

Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associates, was approximately $160 million.

This is including the $11.7 million or approximately $0.13 per share cash sweep from the Frontline vessels in the quarter.

The EBITDA equivalent cash flow in the second quarter was approximately $130 million, and last 12 months, the EBITDA equivalent was approximately $490 million.

Several new assets will be delivered to a fleet in 2014, and we have significant capital available for new accretive investments.

In the fourth quarter, and including all 100% owned assets, 48% of our charter revenues came from the Offshore segment, around 35% from tankers, and the remaining 17% split between our dry bulk and container assets.

This includes cash sweep and profits-based contribution.

In March, we announced the acquisition of nine secondhand container vessels between 4100 and 5800 TEU built in 2001 and 2002.

These vessels originate from the German KG market, and the sales were under instructions by the financing banks.

Three of the vessels were delivered to us in March, and the remaining six vessels were delivered to us in April and May.

After the financial crisis in 2008 and 2009, we have paid special attention to the German market due to the volume of deals placed in the KG market before that, and the liquidity squeeze many of these came under.

But we have not seen many opportunities combining low acquisition costs, good technical quality, and long-term charter opportunities like these deals.

While the aggregate acquisition costs in this specific deal is not very high, it is interesting to note that the banks are getting more realistic in their price expectations and willingness to book losses where loan amounts significantly exceed underlying values.

We will, of course, keep our eyes open for more opportunities in this market, but will be very selective with respect to the assets we do acquire.

Due to the circumstances, we cannot disclose the exact terms of the deal, but price is only a fraction of the construction costs and marginally higher than the current scrap values.

The vessels have good specifications, including 1300 reefer blocks, and some of the vessels have also been upgraded with shore-based power systems.

We have secured long-term [payable] charters for all the vessels for periods between five and six years, and there are purchase options with profits that feature at the end of the charter periods.

We also have an expansion option in our favor if the purchase options are not exercised.

The vessels are expected to generate approximately $15.5 million in aggregate EBITDA per year.

The Company's four 8700 TEU container vessels under construction in Korea are ahead of schedule, and three vessels are now expected to be delivered this year, with the final vessel in early 2015.

The vessels are built to very high specifications, including high reefer capacity and the latest in eco-design features.

We have now secured long-term charters for the vessels with a major container line at terms we believe reflect the expected operating efficiency for these new vessels.

We cannot disclose the exact terms of the chartering arrangement, but the EBITDA contribution from the vessel is estimated at approximately $46 million per year on average during the seven-year charter period, giving us a very good return on invested capital.

There are no options for the charterers to extend the charters or purchase the vessels at the end of the chartering period.

We have also recently agreed to acquire two 82,000 deadweight ton Kamsarmax bulk carriers in combination with long-term charters to a state-owned charter in China.

The vessels were built in China in 2012, and the charter is for a period of approximately eight years.

We expect to take delivery of the vessels within the next two months, and the annual EBITDA contribution is estimated to approximately $7 million on average during the eight-year charter period.

Similar, as for the 8700 TEU container vessels, there are no options for the charterer to extend the charters or purchase the vessels at the end of the chartering period.

The $600 million West Linus transaction was agreed in June last year, and we paid $195 million of the purchase price at that time.

The drilling rig was delivered from the Jurong Shipyard in Singapore in February, and the $405 million balance was paid at that time.

The total financing of the transaction is a combination of $125 million equity investment, which was already arranged in June last year, and $475 million in bank loans.

The repayment -- the remaining payment at delivery was therefore fully covered by the committed bank facility.

The rig has been mobilized to Norway, and this weekend, it commenced the subcharter to Conoco Phillips for five years.

The charter rate to North Atlantic Drilling from the subcharter is approximately $375,000 per day for the charter period, and there are also additional extension options for up to four years on top of the five-year period.

Our charter rate between us and North Atlantic Drilling was approximately $85,000 per day during the mobilization period, and has now increased to $222,000 per day for the next five years.

This gives us approximately $80 million EBITDA contribution per year in this period.

As for the seater rigs, North Atlantic Drilling will compensate us for fluctuations in interest rates.

We have a put option at the end of the 15-year charter period, and this rig would also be accounted for as an equity investment under US GAAP.

In the first quarter, we agreed to settle a claim relating to four Handysize dry bulk carriers, which were re-delivered to us in 2012 before the expiry of their charters.

We started an arbitration process, and the charterer has now agreed to pay up and settle the claim.

The total settlement amount for Ship Finance is approximately $30 million, of which approximately $15 million was received in the first quarter.

and the remaining balance is scheduled to be paid in three installments of approximately $5 million each during 2014.

The Company booked a gain of $10.2 million relating to this settlement in the first quarter, and the next payments will also be recorded as gains.

We have security for the remaining payments, and we therefore expect it to be paid when due.

The tanker market rebounded sharply towards the end of the fourth quarter, which gave the first quarter a very good start.

The market softened later in the quarter, and has remained at soft levels into the second quarter.

We have an exposure to the crude oil market -- the crude tanker oil market via the cash sweep agreement with Frontline, which gave a $11.7 million contribution in the first quarter, and also through our two modern Suezmax tankers operated in the spot market.

These vessels are in a pool with sister vessels owned by Frontline 2012.

And the average time charter equivalent for the first quarter was approximately $26,300 per day.

Due to the significant delays of the shipyard in China, we had to cancel the last two contracts for 4800 TEU container vessels.

The deliveries were originally scheduled for 2013, but long-term charters financing arrangement and newbuilding contracts closely tied together.

While the contracts allowed for some flexibility with respect to construction time overruns, the delays exceeded this limit.

And following negotiations with all parties involved, it was deemed that the best solution for us was to terminate the contracts.

The monies paid to the shipyard will be refunded to us with interest within the next few weeks, and the termination of the new building contracts will not lead to any book losses or asset impairments.

We have already received the refunds relating to the first two vessels.

The backbone of our business remains in our significant portfolio of long-term charters.

Most of our vessels are charted out on a long-term basis and we still have nearly 10 years weighted average charter coverage.

Full details on a vessel by vessel basis is available by contacting us on email, IR@shipfinance.no.

We have $5.1 billion of fixed rate order backlog, and the estimated EBITDA equivalent backlog is approximately $4.4 billion or around $47 per share.

These numbers include only the reduced based rate from the Frontline vessels and do not include the cash flows from the two Suezmax vessels operated in the spot market.

I would also add that most of our offshore assets and tanker assets have been down significantly already, and underlying asset exposure is very limited, even in our softening market scenario.

With respect to Frontline, we have the interesting combination of very low financial leverage -- actually way below current scrap levels -- and significant leverage to the market through the cash sweep arrangement.

We have amortized down the debt of these vessels very quickly, and have reduced the loan amounts by more than 80% since 2008.

Even compared to reported scrap values, the financial leverage is only 50%, as illustrated by the red line in the graph on slide 7. With this low leverage, there is no net loan amortization acquired, and even with the scratch base rates from Frontline, the free cash flow is approximately $17 million or $0.18 per share per quarter this year.

On top of that, if the VLCC market for the year should hit $25,000 per day, the cash fee could be around $0.11 per share per quarter, increasing to $0.13 per share per quarter in a $30,000 per day market, like we saw in the first quarter.

The threshold level kicks in already at $17,675 per day for most of the VLCCs, and $13,200 per day for the Suezmaxes, and is capped at $6500 per day per vessel.

The cash sweep is an annual calculation, so the average over the year will determine the final payment.

And with the strong first quarter, there is actually a buffer here for the next three quarters.

Frontline, on their side, reported more than $111 million of free cash at the end of the first quarter, and have raised more than $50 million over the last two quarters by issuing new shares.

If we then switch to our performance last 12 months, the normalized contribution from our projects, including vessels accounted for as investment in associates, the EBITDA -- which we define as charter hire plus profit share less operating expenses, and general and administrative expenses -- was nearly $490 million in the period.

Net interest was $130 million or approximately $1.21 per share.

But more importantly, our normalized ordinary debt installments relating to the Company's projects was approximately $202 million.

This is excluding prepayments relating to sale of older assets and without net amortization on the Frontline vessels.

As mentioned earlier, the Frontline-related assets have very low leverage currently, and no amortization was required during the year.

If the loans had been fully drawn in the period, the amortization would've been $74 million or $0.79 per share for the full-year.

Going forward, we expect the positive contribution from a recent acquisition.

And with that, I will leave the word over to Mr. Harald Gurvin, our Chief Financial Officer, who will take us through the numbers for the first quarter.

Thank you, Ole.

On this slide, we have shown our pro forma illustration of cash flows for the first quarter compared to the fourth quarter of 2013.

Please note that this is only a guideline to assess the Company's performance and is not in accordance with US GAAP.

For the first quarter, total charter revenues were $147.9 million or $1.59 per share compared to $151.9 million in the previous quarter.

Revenues from VLCCs were slightly down due to the sale of two older VLCCs during the fourth quarter, while revenues from Suezmaxes were up in the first quarter, due to better earnings on the two Suezmaxes trading in the spot market.

Revenues from liners, which includes container vessels and car carriers, was down in the quarter, following CMA CGM's exercise of purchase options for the two 13,800 TEU container vessels, which were delivered to them in end of January and beginning of March this year.

This is also reflected in the lower operating expenses for the quarter.

The increase in offshore revenues is due to West Linus being delivered in February 2014.

The agreed day rate was lower during the initial mobilization period, but the rig is now earning full day rate following commencement of the subcharter to Conoco Phillips in end of May, which will have a full effect in the third quarter.

Vessel operating expenses in G&A were $34 million compared to $41.2 million in the previous quarter, mainly due to exercise options on the two CMA CGM vessels, and no drydockings in the first quarter.

We recorded a cash sweep of $11.7 million from Frontline in the first quarter, representing a full cash sweep on all 20 vessels, and also a profit share of approximately $500,000 relating to four of our Handysize dry bulk carriers.

Income from financial divestments was $3.6 million in the first quarter, slightly up from the previous quarter.

So, overall, this summarizes to an EBITDA of [$109.7 million] for the quarter or $1.39 per share compared to $114.3 million in the previous quarter.

We then move on to the profit and loss statements as reported under US GAAP.

As we have described in previous earnings calls, our accounting statements are slightly different than those for other traditional shipping companies.

As our business strategy focuses on long-term charter contracts, a large part of our activities are classified as capital leasing.

As a result, a significant portion of our charter revenues are excluded from our book operating revenues, and as debt booked as revenues classified as repayment of investment in finance leases, result in associates and long-term investments, and interest income from associates.

If you wish to gain more understanding of our accounts, we will also, this quarter, publish a separate webcast which explains the finance lease accounting and investment in associates in more detail.

This webcast can be viewed on our website, ShipFinance.org.

Overall for the quarter, we reported total operating revenues, according to US GAAP, of $82.7 million, up from $71.7 million in the previous quarter.

The figure includes the $11.7 million in cash sweep from Frontline in the quarter.

We recorded a gain of $10.2 million following the settlement of the claim relating to the four Handysize dry bulk carriers, which were redelivered to us before expiry of the charterers.

The total settlement is $30 million, of which $15 million was received in the first quarter, with the remaining balance to be repaid during 2014.

Total operating expenses were $46.2 million, giving net operating income of $46.6 million, up from $23.4 million in the previous quarter.

So overall, and according to US GAAP, the Company reported net income of $40.7 million or $0.44 per share in the quarter, up from $18.3 million in the previous quarter.

Moving on to the balance sheet, we showed $37 million of consolidated cash at the end of the quarter.

In addition, we had approximately $297 million available for drawdown under revolving facilities.

Available-for-sale security, or $60.7 million, includes $39.4 million invested in the short-term tradable securities as a short-term liquidity placement.

In addition, the second lien notes in Horizon lines are recorded on available-for-sale securities at $21.3 million or 40% of par value, including accrued interest.

The $79 million amortizing Frontline notes are included in amount due from related parties in the current and long-term assets.

The remaining balance after March 31 was $76 million, but the notes are conservatively recorded in our balance sheet as 72% of par value.

The three ultra deepwater units on charter to Seadrill, and the harsh environment jackup drilling rig to North Atlantic Drilling, are included in the balance sheets under investment in associates, an amount due from related parties long-term.

Our investment in the subsidiaries owning the units is in the form of both equity and shareholder loans from the parent company.

The total equity investment in the rigs is just a combination of the two.

And the split between equity and shareholder loans from quarter-to-quarter will depend on intercompany accounting.

Short-term debt and current portion of long-term debt at quarter-end includes $72 million on one of our NOK bonds, which was repaid at maturity in April.

Stockholder equity stands at approximately $1.3 billion, including the $105 million of deferred equities.

The book equity ratio, including deferred equity, was approximately 42% at the end of the quarter.

Then looking at our liquidity and financing status.

As mentioned, the Company had a total available liquidity of approximately $334 million at the end of the quarter, which includes $37 million in cash and approximately $297 million freely available under revolving credit lines.

It should be noted that $73 million of available liquidity was used to repay the NOK500 million bond at maturity in April.

We also had $61 million in available-for-sale securities at quarter-end, as previously described.

In March, we successfully placed a five-year unsecured bond in the Norwegian market.

The offering was significantly oversubscribed, and was upsized from the originally targeted amount of NOK600 million to NOK900 million, equivalent to $150 million.

The pricing of the bond is very attractive at NIBOR plus 410 basis points, significantly down from the NOK bond issued in October 2012.

All payments have been swapped to US dollars with a fixed interest of 6.03%.

As mentioned, part of the proceeds were used to repay the $73 million net outstanding under the NOK bond maturing in April 2014, giving a net increase in liquidity of $77 million.

On the debt side, we had approximately $3.2 billion of gross interest-bearing debt outstanding at quarter-end.

Consolidated bank loans were $900 million, down from $1.1 billion at December 31.

We continue our steep repayment profile on the bank debt, and also had reduced drawings under revolving facilities at quarter-end through reduced interest expenses.

In addition, the $70 million predelivery facility for West Linus and $37 million of bank debt relating to the first two accounts of newbuilds in China, was repaid during the quarter.

Bank loans in our subsidiaries, accounted for as investment in associates, was $1.5 billion at quarter-end, up from $1.1 billion at December 31, following a drawdown of the $405 million postdelivery facility for West Linus in February.

In addition, we had approximately $790 million of consolidated senior unsecured notes outstanding as per March 31.

The figure includes the NOK500 million bond repaid at maturity in April 2014, of which $72 million was net outstanding at quarter-end.

The new five-year NOK900 million bonds issued in March 2014, of which $150 million was outstanding, and the NOK600 million bonds maturing in 2018, of which $93 million was net outstanding.

The figure also includes the $350 million convertible notes maturing in 2018, and $175 million convertible notes maturing in 2016.

Both are outstanding convertible notes, can be repaid in shares at the Company's option at maturity.

The graph shows the scheduled installments and amounts to be refinanced over the next years.

Following the refinancing of the three ultradeep water units and our senior note in 2013, and the NOK bond in March this year, we have very limited refinancing requirements over the next years.

We are also comfortably in compliance with all financial covenants under our loan agreements.

It is worth noting that Ship Finance has been in full compliance with all financial covenants for each of the 41 quarters since the Company was established.

Given the financial turmoil and depressed shipping markets over the last years, this gives us a very strong standing in the banking market.

The next slide provides some more detail on our remaining CapEx at the quarter-end.

Following delivery of West Linus in the fourth quarter, and adjusted for the cancellation of the last two container vessels in China in the second quarter, we have four remaining container vessels under construction in Korea at quarter-end.

The newbuildings are state-of-the-art 8700 TEU container vessels with a total contract price of $340 million, of which $190 million has been paid so far.

The yard payments have so far been funded from our available liquidity, and we expect to firm up the post-refinancing for the vessels at very attractive terms well before delivery, which is expected to give a positive cash affect on delivery of each vessel.

The remaining six of the nine container vessels we agreed to acquire in March this year were delivered to us in April and May.

The vessels have been funded from our available liquidity, and we are in the process of arranging financing for the vessels at attractive terms.

In addition to the above, we announced acquisition of two Kamsarmax dry bulk carriers with no income charters in May this year, which are expected to be delivered before July this year.

We will arrange financing of these vessels in due course.

Then to summarize.

Net income for the quarter was $40.7 million or $0.44 per share, including $12.2 million in cash sweep and profit split.

The aggregate EBITDA was $179.7 million or $1.39 per share.

The Board has declared an increased quarterly cash dividend of $0.41 per share for the quarter.

This represents a dividend yield of 9% based on the closing price as of May 23.

We have taken delivery of 10 vessels and rigs so far in 2014, all employed under long-term charters and supporting a long-term distribution capacity, with the investment opportunities in multiple segments and our capital available for new investments.

And with that, I give the word back to the operator, who will open the line for any questions.

(Operator Instructions).

Fotis Giannakoulis.

Congratulations for all these good new deals.

I just want to ask you to give us a little bit more color behind this acquisition of these charters that you announced.

First of all, how is it that the German KG market and -- what was the background behind these charters with the container line?

Did this then come from banks or it came directly from the line of Company?

Yes.

And you know you referred to the nine 4100 to 5800 TEU container ships, right?

That is correct, yes.

Yes, yes.

Thank you, Fotis.

Well, these vessels -- these KGs had filed for insolvency a couple of months ago.

So, there were actually a couple of players out there who were looking at the vessels and inspecting the vessels.

The KGs were under administration by the bank by an appointed administrator.

And the banks were willing to sell -- or let the KG sell the asset, and then effectively face the music and the losses relating to their exposure.

What we did, we teamed up with the charterer in this instance.

And therefore, we went in and bid for the vessels on -- basically on cash basis.

And we managed -- because of who we are, we believe, I would think the banks would know that we could pay off, then actually perform under the obligations.

So, we won the asset basically.

And at the same time, we had the arrangement with the charterers lined up, so we could combine a deal like that.

I think we would've been a little bit careful with buying the vessels, just based on the spot market or based on deployment in the spot market, because the market there is really soft.

I would say you can charter any vessel virtually up to 5000 TEU, and the charter revenues will just barely cover your operating expenses, and there will be nothing left for the capital.

Instead, we secured a long-term charter, which is servicing the capital, giving us a nice return.

And also, based on where we bought the assets and the scrap value, we have a very, very comfortable, call it, exposure.

So we could say that, well, if the vessels have to be scrapped at the end of the charters, so be it.

Even if we scrapped it, it will be a very nice deal.

But we believe the specification of these vessels will -- could give these vessels a significantly longer life than the base charter period.

Thank you, Ole.

Can you tell us, give us an idea of the returns you are expecting, of how much equity are you investing?

And what will the announcing that this deal comes together with?

Well, we bought the vessels for cash.

And you know, you could say that -- cash on cash return on the deal is in the 12%, 13% range, if you compare the EBITDA contribution and the investment.

But we have had banks contacting us who are very keen on financing, so we will look into putting some relatively small financing amount on these vessels, which will enhance, call it, the equity return.

But we believe, particularly based on where we bought the assets -- which is only a fraction of construction price, high specifications -- we believe these assets may well have a very good value going forward.

Most -- many -- several of these vessels have already been deployed in a new trade by the charterer, where they have replaced reefer -- dedicated reefer vessels.

Because one of the unique features here is that these have very high reefer capacity.

And when they were built in 2002, I believe they were the biggest reefer vessels in the world.

Thank you.

Would that be too much to ask how much equity from your investment in this deal?

(multiple speakers) If you haven't yet disclosed?

Well -- yes.

We have not given the exact numbers, but I would think that in the end, we would be looking at sort of a, I would say, $40 million to $50 million, call it, equity investment (multiple speakers) -- financing to be secured.

But as we have not concluded it, it's a little bit early to give you specific details.

Okay.

Thank you, Ole.

That's very helpful.

And regarding the acquisition of Kamsarmax vessels, what kind of returns are you expecting there?

And I assume these are new vessels.

You would get some financing -- what kind of debt analysis are we expect there?

Well, you know, similar for these vessels, you know and that's maybe the benefit of having a strong balance sheet as we do have.

We can go and do transactions without having financing subject, et cetera.

So, when we see a deal or we see a good strong -- good vessels or we see strong chartering counterpart; we've seen strengthening in the financing market recently where banks are, I would say, compared to a year ago, are -- there are a lot more banks out there who are very keen to finance in the segment.

We have comfort to go ahead and do acquisitions without financing subject.

So, the same -- this deal similar to the container vessels we talked about, we concluded the deal without any financing subjects.

We do, of course, expect the financing to be secured, but we have not done that yet.

All right.

And in terms of returns, I mean, this is a very interesting transaction.

I didn't expect that there are available this kind of long-term contracts for dry bulk vessels.

Can you give us an idea of the cash on cash returns that you are getting right now?

Well, the cash on cash return is relatively -- it's relatively in line with the container vessels, I would say, as I mentioned.

But we plan to arrange financing in due course.

So, as we cannot communicate the acquisition price, it's a little bit awkward for me to be too specific on that, other than that cash on cash returns are good.

And we believe there is also good opportunities linked to the residual market there, because there are no purchase options or extension options for the charter on these vessels.

I fully understand.

Thank you for this answer.

And in terms of additional opportunities, obviously, these deals, they have opened investors' appetite for more transactions.

Where are the opportunities more possible to arise?

Is it dry bulk container ship sector?

Or other sectors that you are exploring right now?

I would say right now, we are looking at deals across all our four main sectors.

We are looking at offshore--related opportunities; we are looking at tankers; we are looking at bulkers and container ships.

Generally, I would say that bulkers is a segment -- where we have also communicated previously -- it's a segment where we are, I would say, more careful, because we see more counterparty issues in that segment, as we also experienced with the four Handysize bulkers where we received the settlement recently, so -- while, in the container and offshore space, you see more long-term chartering opportunities.

But we also -- and we are selective and we are out there.

I think one of the benefits we have -- and that's also with the association to Mr. Fredriksen and, I think, our standing in the market, I think we see a good -- a lot of deal opportunities.

So, hopefully, over time, by picking deals, we can perhaps secure better long-term returns than we would -- certainly, than we would if we only looked at one single segment.

Thank you, Ole.

And if you had to give us your outlook for over the next couple of years for each of the sectors that you are involved, what would that be, given the current weakness of both the dry bulk and the tanker markets?

Yes.

I think with our business model, we are set up so we can invest and make, hopefully, good transactions, both in the low cycle and also in high cycle.

I would say that the deepwater rigs that we structured back in 2008 was a good example of how we structured deals when asset prices are peaking.

We structured the frontloaded charter payment, reducing asset exposure quickly, and also financial leverage.

When we were down in a cycle, we could do shorter charters, take more asset exposure -- like we ordered the four 9000 TEU container vessels on speculation a year ago -- and then we can sit on it, and basically, get better returns by having a little bit patience and patience and ice in our stomach.

What you've done also in the past, it's acquiring vessels from one party, and finding the charter and combining where we combine the charter, which also gives us interesting opportunities.

So, while I don't want to give specific guidance on markets, I would say that there are definitely opportunities in all these segments.

But we structure the deals very differently, depending on where we believe we are in the cycle

Okay.

Thank you very much, Ole.

Thank you for the answers.

Thank you, Fotis.

Herman Hildan, RS Platou Markets.

Just a quick question.

I'm wondering, you've -- you mentioned that you booked Frontline bond marked 73% to par.

If you look at the unsecured bond marked Frontline at [92%].

Is there any particular reason why you booked it so low?

No.

No other particular reason than at the time, we want -- we had a preference for booking it as conservatively as we could under US GAAP.

And, you know, that's the number we came up with.

I mean, we have our claim for the full amount.

And as you hopefully -- as we all have seen in the past, we look after our interests and, of course, you know, expect Frontline to perform on their obligations.

Okay.

And also, you mentioned that some opportunities on the tanker market as well.

Any particular segments -- like, for example, the Suezmax segment -- where you see deals?

Well, you know I would say we see deals in several subsegments in the tanker space.

Also, both on the crude side but also on products, chemical, we see deal opportunities in the gas.

So it's a difficult answer.

I mean, we are -- you're looking at a lot of opportunities.

And -- but, of course, not everything materializes.

So, I think we prefer to comment when we do the transactions.

But I think we have the flexibility to look at multiple broader segments and also a lot of subsegments.

What we typically prefer is commodity type of assets.

And we have in our, call it, bigger group of companies, we have exposure to many of these subsegments and can find employment, if need be, if and when we get vessels back in and need to employ them ourselves in the market -- like we're doing in the Suezmax market, where we have two modern Suezmaxes that we are operating effectively in the spot market.

And to be a bit more precise, I mean, should have guessed Frontline has been kind of de-risking with the ATM offering, and as you mentioned, a very low leverage on those assets.

Would you wait until, call it, the balance sheet of Frontline is fully repaired?

Or are you willing to do deals with them ahead of, call it, potential restructuring?

Well, you know, a prominent shipowner once said the fat lady has not sung yet.

And I think that is certainly also the case with Frontline, where we have seen -- where it's still too early to tell exactly what the solution will be.

But we look after our interests.

We have 20 vessels remaining on charter to Frontline.

And as you saw in the first quarter, the market may surprise us.

And we -- if you look at the analyst expectations, like yourself, we should base it on those kind of projections, with both later in 2014 and certainly in 2015, your markets could change.

So, other than that, I cannot really comment on the Frontline situation.

They are fully performing on their obligations and they have not been late with any payments to us.

Okay.

Thank you very much.

Thank you.

Kenneth Coleman, private investor.

Thank you for the fine report.

My questions also revolved around Frontline.

So I think you've addressed them probably as much as you'd like.

Thank you.

Thank you.

Thank you.

As there are no further questions, I would like to turn the call back to the speaker for any additional or closing remarks.

Well, thank you.

And thank you, everyone, for joining our first-quarter conference call.

As we hopefully conveyed in the call, we are, of course, happy to, again, increase our quarterly distribution.

And we believe there are good opportunities out there to continue building our portfolio based on accretive investments.

If you do have any follow-up questions, there are contact details in the press release.

And with that, I wish you all a very nice day.

Thank you.

That will conclude today's conference call.

And thank you for your participation, ladies and gentlemen.

You may now disconnect.