Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Author: Hohum777 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 21252  
Subject: JF and a White Dwarf? Date: 3/6/2013 10:40 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 5
JF is John Fredriksen.

White Dwarf, as in a celestial body?? Well, kinda, sorta.

Let me say, normally, this thread would have been titled "FRO in 2013". Although Frontline is trying
its darndest to prove me wrong today (3/6/13), it has spent a few days below $2/sh. Q4 2012
results might have been okay if the tanker rates trend had kept its upward trajectory into
Q1. But it didn't in January, and the tanker market outlook for Q1 doesn't appear too
uplifting for the VLCC and Suezmax tanker categories (the FRO fleet's two vessel categories).

So we step back in time for a moment. After the Q3 2011 results, FRO worked out a restructuring
plan that involved carving off the new assets, and placing them into a separate entity named
Frontline 2012 (FRNT on the Oslo exchange). I understood from the onset that this was a
strategic move on JF/Frontline management's part. Basically, if things got really, really,
really bad, one of JF's Frontline tanker plays would fall out of the race. But again, market
conditions would have to be really, really, really bad for that to happen. Then again,
things could just be really, really bad for an extended period of time to have the same effect
as really, really, really bad.

So where are we at? I think we are currently in the third consecutive quarter of really,
really bad. The crux of the issue is that, while Fredriksen helped alleviate some of FRO's
debt issues, there are still a lot of debt obligations. The issue is made more complicated by
the fact that a majority of the remaining debt obligations are lease payments owed to another
Fredriksen-backed entity, Ship Finance International (SFL). In the past, the SFL CEO has
indicated these lease payments cannot just be terminated. Then again, if FRO totally run out
of gas, there won't really be an easy way to enforce repayment. That's a White Dwarf- a star that
has burnt out.

In FRO's Q4 2012 earnings call, there is a really funny (at least to me) Q & A exchange
between the Frontline Chief Financial Officer (CFO) and an analyst, Jonathan Chappell.
Mr Chappell recreates the first restructuring- selling newer assets to Frontline 2012, selling off
older vessels, reworking charters terms. He asks, "What else can FRO do?" The FRO CFO responds,
"We can always restructure the company again" Now, I understand the analyst's angle, and how he
was viewing things. Excluding the Frontline 2012 vessels, FRO's fleet consists of 38 vessels and
2 newbuilds. But, of all those vessels, SFL owns 22 of them, 9 are secured by bond obligations,
and 7 are owned by other parties. What's left? 2 newbuild vessels and the tie-in's between
Fredriksen's corporate structures.

Is FRO a White Dwarf? Currently, ... Yes. No idea what JF's thinking is with regards to
somehow breathing life into this bright former star. Or whether he intends to let it slowly
consume itself up, and just start things afresh with the new star, Frontline 2012.

Small positions in both FRO & SFL
HoHum
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: TMFHockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13863 of 21252
Subject: Re: JF and a White Dwarf? Date: 3/7/2013 8:18 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
I wish I had more time, but I'm volunteering with Red Cross in NJ for SuperSandy about full-time.

I was looking at FRO several days ago:

Here is their current vessel list:
http://www.frontline.bm/fleetlist/index.php

I also look at those spinoffs and what seems to be the percentage of the company they still own, although I don't see Frontline 2012
http://www.frontline.bm/IR/spinoff.shtml

I look at their bonds due and don't see a problems until 2015.
http://www.frontline.bm/IR/bonds.shtml

Finally (and I can't find it), I did look at the year end results and they are bad, but frankly don't seem THAT bad.

I'm probably missing a lot, but don't think I'm looking at a different company. But I don't see the "white dwarf", but looking at the stock price, I'm clearly in the minority.

Bob ... people are STILL slammed in NJ after Sandy. It's amazing!
RYR Home Fool

Print the post Back To Top
Author: Hohum777 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13864 of 21252
Subject: Re: JF and a White Dwarf? Date: 3/7/2013 9:28 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
I was looking at FRO several days ago:

Here is their current vessel list:
http://www.frontline.bm/fleetlist/index.php


Ah! But what the fleet list doesn't show is who owns the vessels. High level picture
- 22 vessels (17 VLCCs + 5 Suezmaxes) owned by SFL
- 9 vessels (6 VLCCs + 3 Suezmaxes) owned by subsidiary ITCL
- 10 vessels (6 VLCCs + 4 Suezmaxes) owned by Frontline 2012
- 4 vessels (2 VLCCs + 2 Suezmaxes) owned by German KGs
- Mayfair owned by VLCCF, DHT Eagle owned by DHT

I also look at those spinoffs and what seems to be the percentage of the company they still own, although I don't see Frontline 2012
http://www.frontline.bm/IR/spinoff.shtml


The spinoffs are the past- the great times when tanker rates were high, and FRO decided to unlock
value by tossing off dividends and/or shares in those other entities (SFL, Golden Ocean)

I look at their bonds due and don't see a problems until 2015.
http://www.frontline.bm/IR/bonds.shtml


The bonds are not an immediate problem. The bigger issues are payments to SFL and financing
of the two newbuilds.

Finally (and I can't find it), I did look at the year end results and they are bad, but frankly don't seem THAT bad.

Q4 was better than Q3, but that is typical of cyclical nature of the sector. But here's what I
was basing my comments on- trending of tanker rates (bottom of Slide 7)
http://hugin.info/182/R/1680462/549052.pdf

Of the $137M in cash, $52M in "cash sweep" is owed to SFL in the next month or so. Plus,
FRO have to piece together financing for the two newbuilds. Now, selling one or both new
vessels (to either Frontline 2012 or SFL) is a possible, and likely, option, but it is a
short-term gap filler.

I'm probably missing a lot, but don't think I'm looking at a different company. But I don't
see the "white dwarf", but looking at the stock price, I'm clearly in the minority.


It was a "cigar-butt" play when JF agreed to the Dec 2011 restructuring of the company.
Can it be a "cigar-butt" play again? Don't know. That all depends on the moves JF and the
FRO team come up with to get through 2013.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post Back To Top
Author: Hohum777 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13876 of 21252
Subject: Re: JF and a White Dwarf? Date: 3/8/2013 4:57 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
I should post more luke-warm perspectives on my tanker picks. While both TNK and FRO pulled back
some, they both got really nice bounces today :)


Got another Fredriksen-backed idea in the works

Print the post Back To Top
Author: TMFHockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13878 of 21252
Subject: Re: JF and a White Dwarf? Date: 3/8/2013 8:01 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Luke warm??? Nahhh. Your indepth analysis is VERY valuable. I buy stocks on my own, and really appreciate all reasoned discussion. As I've said several times -- who'da thunk I'd be interested in shipping, but you and my neighbor have both sparked an interest. And while I'm at it -- you're not arrogant about your knowledge. THAT's even better! Thank you!

bob

Print the post Back To Top
Author: Hohum777 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13881 of 21252
Subject: Re: JF and a White Dwarf? Date: 3/9/2013 6:01 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Luke warm??? Nahhh. Your indepth analysis is VERY valuable.

I probably phrased that badly. I guess it is my outlook for both FRO and TNK that is luke warm.
I think I am more positive on TOO in this market.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Next Thread
Advertisement