SFL Corporation Ltd (SFL) 2017 Q2 法說會逐字稿

Good day, and welcome to the Q2 2017 Ship Finance International Limited Earnings Conference Call.

Today's conference is being recorded.

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

Please go ahead.

Thank you, and welcome, everyone, to Ship Finance International at our second quarter conference call.

With me here today, I have our CFO, Harald Gurvin; and Senior Vice President, André Reppen.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. 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 includes conditions in the shipping, 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 declared a quarterly dividend of $0.35 per share.

The dividend is lower than in the previous quarter, reflecting the current uncertainty relating to the Seadrill charters and also lower profit split from the tankers.

While we do not know the final outcome of the Seadrill restructuring, we believe the market has already discounted the worst-case scenario for Ship Finance as with prior to this dividend reset, we're trading at more than 13% yield.

And once the Seadrill restructuring is behind us, we will be able to return our focus to growing our cash flow by evaluating acquisitions that may be accretive to our dividend.

The $0.35 dividend represent $1.40 per share on an annualized basis or 10% dividend yield based on the $13.70 closing price yesterday.

This is our 54th consecutive dividend and we have now paid more than $23 per share in dividends or $1.9 billion in aggregate since 2004.

Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associate, was approximately $150 million and the EBITDA equivalent cash flow in the quarter was approximately $118 million.

Last 12 months, the EBITDA equivalent has been approximately $471 million.

The reported net income for the quarter was $20 million or $0.22 per share.

But adjusted for certain noncash amortization of deferred charges of $2.3 million and a $5.7 million negative mark-to-market valuation, noncash of hedging instruments, the net income was approximately $0.30 per share.

In June, the jack-up drilling rig, Soehanah, started its drilling operations for a national oil company in Asia for a period of 12 months with an option to extend the charter by an additional 12 months.

The rig was previously idle but will now earn a net bareboat rate of approximately $10,000 per day with full cash flow effect in the third quarter.

Today, we also took delivery of the second of 2 114,000 deadweight ton product tankers, also called LR2 type.

The vessels have been chartered out on time-charter basis to Phillips 66 with a minimum period of 7 years plus 5 optional years.

The minimum period represents a backlog of approximately $113 million, and the aggregate annual EBITDA contribution from the vessels is estimated to approximately $11 million on average with full cash flow effect in the fourth quarter.

We have over the last few years primarily invested in new design container vessels between 9,000 and 19,000 TEU.

And most of our vessels are chartered to the world's 2 largest container lines.

This quarter, we have full cash flow effect from the second ultra-large 19,000 TEU vessel to MSC.

And over 22 container vessels, only the 2010-built 1,700 TEU container vessel, SFL Avon, is operated in the short-term charter market.

We also have 2 car carriers, the Glovis Conductor and the Glovis Composer, and we have now agreed to extend the charters until mid-2018.

The base charter rate for the extension is lower than the current level of approximately $24,000 per day and the charters include a repositioning period from Europe to Asia.

Net rate is estimated to $12,000 to $13,000 per day on time-charter basis, depending on availability of cargo for the repositioning period.

Given the balance in the car carrier market, with very few vessels under construction, our preference has been to charter out these vessels for a shorter period at this stage instead of locking in the vessels for a longer period now.

And over the 5-year period the vessels have been on charter to Glovis, we have amortized down the debt significantly and thereby reduced the breakeven level going forward.

Owning a significant fleet of vessels also means that we will have to continuously renew and diversify the fleet.

We have recently sold the 17-year-old VLCC Front Scilla and the 20 -year-old Suezmaxes, Front Brabant and Front Ardenne to unrelated third parties and terminated the respective charters to Frontline Shipping Limited.

We now have 9 crude oil carriers remaining on charter to Frontline and all the vessels are VLCCs.

This is down from nearly 50 vessels at the peak in 2004.

The profit share arrangement on these vessels have provided us with interesting leverage to the tanker market and kicks in already from $20,000 per day for the VLCCs.

In 2015, we also changed the profit split calculation from annual to quarterly basis, adding optionality value for us.

And this quarter, we benefit by this as there is no clawback of the $5.6 million profit split earned in the first quarter.

For the third quarter, Frontline is guiding $16,800 per day for 62% of their VLCC capacity, which also includes their newer vessels.

We therefore believe earnings on our vessels will be below the profit share threshold this quarter as well unless the market strengthens significantly towards the end of the quarter.

In addition to the Frontline vessels, we also have exposure to the crude oil tanker market through 2 modern Suezmax tankers, which are traded in a pool with sister vessels owned by Frontline.

For these vessels, the average charter rate in the second quarter was approximately $27,000 per trading day compared to our breakeven level of approximately $17,000 per day after interest and amortization for those vessels.

In 2017, we have covered nearly 3/4 of the vessel days with a combination of charters with a floor rate and profit split, which serves as a buffer in the current soft markets, and still with some upside if and when the market strengthens.

And in addition to these crude oil tankers, we have the newbuilding 114,000 deadweight ton product carriers to Phillips 66, which I mentioned earlier, and also 2 2008-built chemical carriers chartered until next year.

We now have 22 dry bulk vessels in the fleet with 15 larger vessels chartered out on long-term basis and 7 Handysize vessels traded in the spot market.

One of our long-term objectives is to combine stability and predictability in cash flows with optionality, as we have seen over time that market volatility can generate super returns from time to time.

So when we renegotiated the deal with Golden Ocean for 8 Capesize bulkers in 2015, we included a 33% profit split in addition to the base rate.

At the time, not much value was attributed to the profit split due to a soft chartering market, but we've seen no charter fixtures a level above our base rate of $17,600 per day.

And going back in time and even if we exclude the Chinese super cycle for bulkers from 2008 to -- sorry, from 2004 to 2008, we have seen charter rates levels well in excess of our base rates.

So while we didn't expect the rebound to happen so soon, we are not surprised to see market rates move upwards.

The profit split will be based on actual performance by these specific vessels so we cannot guide you on if and when a profit share will materialize on the Capesize bulkers.

But as the profit share is calculated and payable on a quarterly basis, we believe there is good probability for profit shares over the remaining 8-year charter period.

For the 7 Handysize dry bulk carriers we currently trade in the spot market, the rates achieved in this quarter were approximately $7,000 per trading day, which is in line with the previous quarter.

There are indications that market sentiment may be gradually improving for this segment as well and we intend to continue trading these vessels in the spot market until long-term rates improve.

We have, in the last few quarters, discussed our drilling rigs and corresponding charters at length, and in particular, the 3 rigs on charter to Seadrill.

These rigs are chartered to fully guaranteed subsidiaries of Seadrill, and last quarter, they contributed approximately $0.16 per share to our distributable cash flow.

One of these rigs, the West Linus, is sub-chartered to ConocoPhillips on the charter originally set to expire in May 2019, but which was recently extended until 2028, adding significant backlog for Seadrill.

Our other 2 drilling rigs chartered to Seadrill, the West Taurus and the West Hercules, are currently idle, but the harsh environment rig, West Hercules, has recently been awarded a short-term contract for Siccar Energy in the U.K. starting in the first half of 2018.

Ship Finance acquired the West Taurus and the West Hercules in 2008 at an approximately cost of $850 million per rig and commenced 15-year charters to Seadrill upon their respective deliveries.

We structured the charters such that half of the aggregate charter hire risk received over the first 5 years of the charters with the balance spread out of the remaining 10.

While around 6 years remain on the charters, around 70% of the aggregate charter payments have already been paid to Ship Finance, as illustrated in the chart at the right side.

And West Linus, the jack-up rig was delivered some years later, but the charter has been structured in a similar fashion.

Ship Finance has amortized nearly 60% of the loans associated with the drilling rigs chartered to Seadrill.

The initial debt on the 3 rigs of $1.9 billion has been reduced to just over $800 million.

And of this aggregate outstanding loan balance, only $235 million or less than 30% is guaranteed by Ship Finance.

Seadrill is in the midst of negotiating a comprehensive restructuring plan and has announced that they are in advanced discussions with various creditors and certain third party and related party investors and their secured lenders on the recapitalization of the company.

Seadrill has informed the market that such restructuring will most likely involve Chapter 11 proceedings in the U.S. on or before September 12, 2017.

Ship Finance has engaged in constructive talks with Seadrill as we believe it will be in all parties' interest to take a proactive approach in order to find a sustainable long-term arrangement.

This also excludes discussions with the banks that are financing the 3 rigs in order to find a balanced solution.

And so far, Seadrill has continued to perform on its obligations to us.

We can, unfortunately, not make any further comments relating to this restructuring or the communication we may have had with any of the parties involved.

But our objective is, as always, to maximize long-term value for our stakeholders.

And as I mentioned earlier, the 2007-built drilling rig, Soehanah, is now employed under a drilling contract with a national oil company in Asia for a period of 12 months with an option to extend the charter by an additional 12 months.

This is through Apexindo.

And the net bareboat revenues to us are approximately $10,000 per day with full cash flow effect this quarter.

This rig is debt-free so there are no financing expenses.

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, defined as charter hire plus profit share less OpEx and general and administrative expenses, was $471 million in the period.

Net interest was $108 million or approximately $1.15 per share.

And our normalized ordinary debt installments relating to the company's projects was $178 million or approximately $1.92 per share in the 12-month period.

This is excluding prepayments relating to sale of other assets or refinancings.

Net contribution after this was $182 million or $1.95 per share over the last 12 months.

And for the same period, we have declared dividends of $1.70 per share or $159 million in aggregate.

And for this illustration, in the second quarter alone, the net contribution from our assets after interest and ordinary debt and installments was approximately $0.46 per share while the declared dividend is $0.35 per share.

From our inception 13 years ago, we have paid out approximately 80% of net income in dividends, which illustrates the moderate dividend policy and it has allowed us to significantly grow our business organically.

And with that, I will give the word over to our CFO, Harald Gurvin, who will take us through the numbers for the second quarter.

Thank you, Ole.

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

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

For the second quarter, total charter revenues were $147.2 million or $1.57 per share, up from $143.8 million in the previous quarter.

VLCC and Suezmax revenues were slightly down in the quarter, mainly due to the sale of 2 VLCCs and 1 Suezmax tanker in the first and second quarters.

Liner revenues were up in the quarter, mainly due to a full quarter of earnings on the second 19,200 TEU container vessel delivered in March.

Dry bulk revenues were slightly up, mainly due to improved earnings on the smaller Handysize dry bulk carriers trading in the spot market.

Offshore revenues were also slightly up due to an extra day of earnings in the second quarter compared to the first quarter.

Further, the jack-up drilling rig, Soehanah, commenced its new bareboat charter at the minimum rate of $10,000 per day in the end of June, which will have full effect in the third quarter.

There was no profit share under the 50% profit share agreement with Frontline compared to $5.6 million in the previous quarter.

The crude oil tanker market remains at soft levels during the second quarter and also so far in the third quarter.

So overall, this summarizes to an adjusted EBITDA of $117.6 million for the quarter or $1.26 per share, only slightly down from $1.27 in the previous quarter despite no profit share in the second quarter.

We'll then move on to the profit and loss statement as reported under U.S. GAAP.

As we have described in previous earnings calls, our accounting statements are slightly different than those of a traditional shipping company.

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 U.S. GAAP operating revenues and instead booked as revenues classified as repayment of investment and finance leases, results 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 investments in associates in more detail.

This webcast can be viewed on our website, shipfinance.bm, under Investor Relations and Webcasts.

Overall for the quarter, we reported total operating revenues according to U.S. GAAP of $94 million.

We also recorded a net gain of $800,000 on the sale of vessels and termination of charters, which includes compensation received for a termination of the previous charter for the jack-up drilling rig Soehanah, a gain on the 5-year higher purchase lease agreement with MSC for the 1,700 TEU container vessel MSC Cialis, offset by a loss on the sale of the 2 older tanker vessels in the second quarter.

Total operating expenses were $56 million, resulting in an operating income of $39 million.

Interest expenses were up in the quarter, mainly due to a full quarter of interest expense under the lease financing for the second 19,200 TEU container vessel delivered in March.

We also recorded a negative noncash mark-to-market of derivatives of $5.7 million during the quarter and $2.3 million of negative noncash amortization of deferred charges.

So overall, and according to U.S. GAAP, the company reported net income of $20 million or $0.22 per share.

Moving on to the balance sheet.

We showed $249 million of consolidated cash at the end of the quarter, excluding amounts freely available for drawdown under revolving credit facilities.

The strong cash position is due to drawings under revolving credit facilities during the quarter.

In addition, we had $9 million in restricted cash relating to a short-term guarantee.

Current portion of long-term debt includes the remaining $184 million outstanding under the $350 million convertible notes due February 2018, which include the share settlement option at maturity.

Further, the financing of the Frontline vessels matures in end June 2018.

This financing is just above current scrap levels for the vessels with an outstanding amount at quarter end of $178 million, which has been reduced to $171 million following the sale of the Suezmax tanker in July.

Stockholders' equity was approximately $1.1 billion, giving a book equity ratio of 35% at the end of the quarter.

Now looking at our liquidity and financing status.

The company had total available liquidity of approximately $279 million at the end of the quarter, which includes approximately $29 million freely available under revolving credit facilities.

Available for sale securities of $111 million includes the investment in senior secured bonds and other securities with a fair value of $48 million at quarter end and also our 11 million shares in Frontline with a market value of approximately $62 million based on the closing share price yesterday.

We have secured a $76 million bank financing at attractive terms for the 2 newbuilding product tankers, which are both delivered in the third quarter.

The remaining CapEx at quarter-end was approximately $65 million, giving a positive net cash effect from the financing.

The financing term is 7 years, matching the term of the charters with Phillips 66 and will have limited recourse to Ship Finance, who will provide a $30 million guarantee.

In June, we also issued NOK 500 million in senior unsecured bonds in the Scandinavian market equivalent to approximately $60 million.

The 3-year bonds have a coupon at NIBOR plus 4.75% and all payments have been swapped to U.S. dollars at a fixed rate of 6.9%.

The proceeds of the bonds were used to partly refinance the NOK 600 million bonds due in October '17.

The remaining outstanding was settled post quarter end, following the exercise of the call option by the company.

Then to summarize.

The board has declared a quarterly cash dividend of $0.35 per share for the quarter.

This represents a dividend yield of 10% based on the closing share price yesterday.

Net income for the quarter was $0.22 per share or $0.30 per share adjusted for certain noncash items.

We continue our fleet renewal with the sale of 3 of the older tanker vessels and delivery of the 2 product tankers with 7-year charters to Phillips 66.

We have a strong liquidity position with $279 million in available liquidity at quarter end, in addition to $111 million in marketable securities and no remaining CapEx following delivery of the 2 product tankers in August.

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

(Operator Instructions) We will now take are our first question from Magnus Fyhr from Seaport Global.

Just a couple of questions.

I guess, the first one on the dividend.

What kind of assumptions went into that $0.35 number as far as future cash flows?

Well, the dividend is set by the board on a quarter-by-quarter basis.

And it's typically not specifically tied to the quarterly results isolated but more based on a long-term view and a balanced view for what the board believes is a more sustainable level on a longer-term basis.

Of course, we do not know currently and I cannot make any comments relating to the Seadrill restructurings and the discussions that we may have there.

But the board believes that a $0.35 dividend is a sustainable level.

And also, if you look at the share price and how the share has actually been trading, we are still in excess of 10% dividend yield.

So we believe this is -- it has already been priced into the stock for some time.

Okay.

And with the distributable cash flow potentially declining, what type of payout ratio are you guys comfortable with going forward?

Well, we are not tying it to a specific payout ratio based on individual quarterly results.

As we know, the quarterly results may vary over time.

What we focus on is we basically look at this -- this is management and our recommendation to the board.

We base this on what we believe is long-term sustainable revenues from our various assets, asset by asset effectively.

And then based on that, we make a recommendation to the board on what we believe is a sustainable level.

And naturally, that factors in, when there is uncertainty, we factor that into our effectively then long-term recommendation.

But there is no specific payout ratio as such.

But if you look at the long term, in the long-term picture, we've paid out around 80% of net income from our inception.

And I think for a dividend yield type company, that is quite moderate.

We have seen other dividend -- other companies with significant dividends who have paid out over time significantly more than what they have earned.

We believe that is a -- well, to do that, you have to assume that your assets are going up in value, and therefore, that your depreciation is effectively wrong.

And while we have taken a more preservative approach and paid out less than our net earnings over time, which, of course, also has meant that we have been able to grow organically and not only by raising capital every time we buy new assets.

Okay.

And once you -- I mean, you mentioned that you may start focus on new projects once the Seadrill restructuring is behind.

Where do you currently see the best opportunities for Ship Finance as far as expanding further?

Is a container still one of the better areas?

Well, containers are still interesting.

I mean, it's been down.

It's been -- there's been sort of a downturn on the container market for some time, it's come back.

It's corrected back somewhat.

And we don't see much ordering now on the container side.

There are rumors that some of the liners are looking at big assets again.

But it's been relatively slow from a pumped ordering perspective or newbuilding perspective.

But yes, we believe containers are still interesting.

These are assets that typically go into a logistics systems where the users, the container lines, have a long-term use for the assets within their systems.

We also see opportunities on the tanker side and right now probably more on the LNG side, gas side, but there are also opportunities on the tanker side.

So I think it's fair to say that we see opportunities across the board.

And we are -- while we have been, of course, careful to ensure that we maintain a very strong balance sheet, also, what we say, "factoring in" uncertainty around the Seadrill restructuring, we have continuously, of course, screened for new projects.

But we have taken a conservative approach and we believe that doing that is prudent.

At the same time, we see now that asset values and newbuilding values and also fully deployed values based on what newbuilding costs have come down to quite attractive levels in several segments.

So we believe that from a cycle perspective, it's an interesting point of time to invest capital.

But of course, we have to make sure we do that with the right assets and we work with the right customers and at least that we work with sound, call it, conservative assumptions so we don't get a nasty surprise at the end of the charter if effectively the depreciated value then is higher than what the market may be.

So it's all a balanced approach.

We do see project opportunities but I cannot comment specifically on what we do.

We prefer to try to do the right deals and not to sort of promise a certain percentage in any specific segment because that could lead us to do the wrong -- make the wrong decisions.

Okay.

So would it be fair to assume that you would not do any deals until you have this Seadrill restructuring behind you?

Nothing -- we should never say never.

But I think as Seadrill has communicated that the restructuring is pending within just a few weeks now.

I think it's fair to say that until that is certainly clarified and we have more visibility on sort of the impact also on our leases, we will be careful.

But that said, there is, hopefully, a good chunk left of the year and we will continue to look for deal opportunities, obviously.

(Operator Instructions) We will now take our next question from Fotis Giannakoulis from Morgan Stanley.

I'm sorry if my questions were asked earlier, I joined the call a little bit late.

Ole, I want to ask you about, if there is a Chapter 11 for Seadrill, how long do think that it will take to be clarified what the exposure in Ship Finance is going to be?

And in relation to that, how confident you are that the guarantee is that you have provided to the banks for the 3 rigs are not going to involve West Linus that is already in a contract with ConocoPhillips?

Thank you, Fotis.

I can, unfortunately, not comment on the specifics relating to the Seadrill restructuring.

As you've seen in other Chapter 11 proceedings in other companies is that it usually takes some periods, takes a few months before it's finalized.

But -- so we just have to wait and see exactly how it plays out relating to our leases.

With respect to the financings, we have limited guarantees on the financings, on the bank financing attached to sort of -- to each of the rigs.

And the guarantees there are, of course, only payable if and when the banks accelerate the loan, i.e., and go after the securities, which, of course, includes equally the mortgage over the rig and then our guarantee.

So we then, in any case, have the opportunity at that stage to pay down the loans if that -- if we believe that is a better and viable opportunity for us.

And of course, then they wouldn't call on the guarantee nor could they take the asset away from us.

But again, this is all hypothetical and we have to wait until there is announcement from Seadrill before we can comment on the expected impact on us.

And we will -- we expect, of course, to send out the press release.

Whenever there is announcement we make, we will also send a press release and give more information on status for us and what potential impact could be for our leases.

Ole, just to a little bit clarification about the ConocoPhilips contract.

Is this contract on the rig?

Or is this contract on a Seadrill?

And how is this structured if -- and what would happen if there is a Chapter 11?

Will this contract continue to exist?

Well, the -- this is -- it's our charter in counter party who has the contract with ConocoPhillips.

But in the agreement there, there is a step-in right if there is a default-type situation.

But of course, ConocoPhillips would then -- and then, of course, if we want -- if we would want them to step in, we would have to ensure that we have operational management lined up for the rig to take care of that.

Again, very hypothetical.

But of course, any such step-in would also require the charter's consent.

But we have that built into the agreement, that there is this a step-in right.

One last question about your capital allocation.

If you can comment about how do you view the use of your liquidity between supporting or paying dividends and growth.

And what is your target capital structure?

Would you envision issuing some preferred or additional unsecured debt?

What is the loan-to-value ratios that we are looking for?

Well, we will, of course, try to optimize our balance sheet all the time.

We typically -- what we do when we do new transactions, we typically finance the transactions, isolate it, and we try to limit the guarantees, all depending on where we think the risk profile is in the specific, call it, project like with 1 vessel, we could be 10 vessels in a package.

We typically finance that and, so far, finance that in the bank market where we have steep amortization on the assets and that's also how we also think we can justify having some financing at the corporate level, which currently includes 2 NOK-denominated bond loans and 2 convertible notes at the parent level.

But we -- so it's all about sort of optimizing capital left at the different levels.

And I would also say that leverage, it's relevant.

What we do give out to everyone who wants it is our full charter backlog asset by asset.

And you can say, what is the value of an asset in our portfolio?

Well, one, it's the cash flow they generate.

And two, it's whatever residual value you assume after the end of the charter period.

And I would say that depending on the various counterparties and the various assets, should probably depreciate it back, this is mathematically, with different factors implying the, call it, the relevant risk in the deal.

So we don't communicate sort of loan-to-value as such.

But what I would say is that we have never been in violation with covenants in our various loan facilities over the 13 years that the company has been in existence.

So I think we have a very strong standing in the bank market and that we get very good financing terms as illustrated by the 2 LR2 product tankers that we have just secured financing for, where the amount is higher than the final installments.

So you could say that it's -- the final delivery is a net cash positive for us.

We have the $280 million approximately of cash and available liquidity at quarter end.

Then, we had $110 million, $115 million of liquid securities on top of that.

So I think we have a relatively robust financial position, and hopefully, decent investment capacity to build our distributable cash flow going forward.

We will now take our next question from [John Prochaska].

My question is concerning the political and military uncertainty in Asia.

To what impact is that affecting the company's outlook and its financial stability?

Yes.

Thank you.

We are, of course, following the developments in Asia closely through the media, as I'm sure all of us are.

Our vessels trade all over the world so they are not specifically only trading in Asia or within the regions where there is tension.

But I would also say that over the years, there has always been tension here or there, whether it's in Korea or North Korea or whether it's relating to terrorists or sort of hijacking in Eastern Africa.

So you need to be vigilant.

We are, of course, working very closely with -- also with our insurance companies and also making sure that our vessels do not violate any trading restrictions under the various governmental rules, including, of course, the U.S. rules.

So they trade all over the place.

If you look at what the impact on us would be, the question is how will this affect world trade?

Because after all, our assets are, in the end, used to transport primarily raw material.

Tankers and bulkers are basically the cheapest way to move raw material from one place to another, and then containerships and car carriers are more finished goods moving from between the various areas.

And what we have seen over time is that the raw material is dislocated from where it's been used, and therefore, there has been also in times of, call it, international conflicts, they've always been used for transportation capacity.

But more than that, it's difficult to judge specific impact on us.

Of course, if it should affect the capital markets, that would, of course, have an impact on our ability to raise capital internationally, I'm sure.

But that's something that would affect everyone involved in the overall business.

One last question, if I may.

I came in late.

The restructuring under Chapter 11, is this for Ship Finance International or just a subsidiary?

Well, it's our customer, Seadrill Limited, the drilling operator whom we have chartered 3 drilling rigs to.

So we have -- we own, through our subsidiaries, we own 3 drilling rigs that are chartered into Seadrill -- to subsidiaries of Seadrill, but they're fully guaranteed by Seadrill.

Seadrill is in the midst of a financial restructuring and they have announced that they -- it may well be through Chapter 11 proceedings and they've also indicated that it could be on or before September 12.

Of course, when Seadrill and these 3 rigs then, which is effectively the charter of the 3 rigs, file for Chapter 11, that also has an impact on our charters, we assume.

So we have engaged in discussions, both with Seadrill and also our financing banks, relating to this.

But I can, unfortunately, not give any specific details on our discussions, unfortunately, because I'm prohibited to do that.

But once it's clarified and once Seadrill is announcing something, we will, of course, also make an announcement on our side, giving more details on what we think effect -- the effect would be on -- relating to our charters.

(Operator Instructions) There are no further questions, sir.

Thank you.

Then, I would like to thank everyone for participating in our second quarter conference call.

If you do have any follow-up questions, there are contact details in the press release or you can get in touch with us through the Contact pages on our web page, www.shipfinance.bm.

Thank you.

Ladies and gentlemen, this concludes the Q2 2017 Ship Finance International Limited Earnings Conference Call.

Thank you for your participation.

You may now disconnect.