As expected, self-made shipping tycoon John Fredriksen seems to have a plan to save his vast tanker-owning company Frontline and his fellow investors. Shares initially soared on the news, but then settled back again this week.
Major Norwegian banks had said from the outset that they had strong faith in Fredriksen, even after his right-hand man Olav Troim had to report heavy third-quarter losses last month. A miserable market for Fronline’s huge oil tankers, with daily charter rates generating far less than what it costs to operate a super tanker, meant the company would run out of cash shortly after New Year.
Now Fredriksen plans to split Frontline in two, with its 10 newest vessels being sold along with the contracts for five new 300,000-dwt tankers to a new company called Frontline 2012. The rest of Frontline will be an operations company. Meanwhile, Fredriksen will put up a guarantee of NOK 1 billion.
“It’s easer to discuss a solution (for a company) when you have a main shareholder who comes forward in this manner,” the boss for ship finance at one of Fredriksen’s banks, Nordea, told newspaper Dagens Næringsliv (DN).
Frontline 2012 will be the “inner filet” where company growth is expected to take place, and the plan is to invite existing Frontline shareholders to buy new shares in it. That sent Frontline’s own battered share flying on Tuesday, climbing more than 26 percent before falling back again later in the week, but still up from where it was.
Frontline will also also likely cancel some orders for new ships, or postpone them, and may also ask for a moratorium on loan payments for a while, to preserve cash. The banks were non-committal, but one called Fredriksen’s plan “constructive.”
Fredriksen is known as a walking encyclopedia of tankers and has long had a knack for averting crisis and making huge profits. His passion for the businesses he’s built up remains intact. Fredriksen, who grew up on Oslo’s working class east side and now lives in London, has routinely been ranked as one of the world’s wealthiest men.
Views and News from Norway/Nina Berglund
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