Peter T. Leach | Mar 23, 2011 9:16AM EDT
Ship Finance International on Tuesday revealed details of its reported agreement to buy two container ships from CMA CGM and charter them back to the French carrier under 15-year time charters.
Ship Finance is buying the Magellan and Corte Real, which have capacities of 13,800 20-foot equivalent units, for a gross price of $171 million per vessel with a subordinated seller's credit of $55 million per vessel.
The transaction will be financed through a French tax lease structure, wherein Ship Finance's investment is limited to $25 million per vessel, or $50 million in total, and secured by junior mortgages.
The vessels, which were built in 2010, will be managed by a CMA CGM affiliate. The time charter includes a compensation clause whereby Ship Finance will be compensated for any increase in operating expenses.
The transaction is expected to generate an annual free cash flow in excess of $7 million, after operating costs and debt service.
CMA CGM has several options to purchase the ships during the term of the charters, the first starting in 2014. The purchase options also include a profit sharing arrangement whereby Ship Finance on certain conditions may receive additional amounts upon the exercise of such purchase options.
The acquisition is expected to be completed within the next couple of weeks.
-- Contact Peter T. Leach at pleach@joc.com.