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 intoQ1. 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, marketconditions 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 effectas 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'sdebt 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 anotherFredriksen-backed entity, Ship Finance International (SFL). In the past, the SFL CEO hasindicated these lease payments cannot just be terminated. Then again, if FRO totally run outof gas, there won't really be an easy way to enforce repayment. That's a White Dwarf- a star thathas burnt out.In FRO's Q4 2012 earnings call, there is a really funny (at least to me) Q & A exchangebetween the Frontline Chief Financial Officer (CFO) and an analyst, Jonathan Chappell.Mr Chappell recreates the first restructuring- selling newer assets to Frontline 2012, selling offolder 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 hewas viewing things. Excluding the Frontline 2012 vessels, FRO's fleet consists of 38 vessels and2 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 betweenFredriksen's corporate structures.Is FRO a White Dwarf? Currently, ... Yes. No idea what JF's thinking is with regards tosomehow breathing life into this bright former star. Or whether he intends to let it slowlyconsume itself up, and just start things afresh with the new star, Frontline 2012.Small positions in both FRO & SFLHoHum
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.phpI also look at those spinoffs and what seems to be the percentage of the company they still own, although I don't see Frontline 2012http://www.frontline.bm/IR/spinoff.shtmlI look at their bonds due and don't see a problems until 2015.http://www.frontline.bm/IR/bonds.shtmlFinally (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
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 DHTI also look at those spinoffs and what seems to be the percentage of the company they still own, although I don't see Frontline 2012http://www.frontline.bm/IR/spinoff.shtml The spinoffs are the past- the great times when tanker rates were high, and FRO decided to unlockvalue 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 Iwas basing my comments on- trending of tanker rates (bottom of Slide 7)http://hugin.info/182/R/1680462/549052.pdfOf 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 newvessels (to either Frontline 2012 or SFL) is a possible, and likely, option, but it is ashort-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 theFRO team come up with to get through 2013.
I should post more luke-warm perspectives on my tanker picks. While both TNK and FRO pulled backsome, they both got really nice bounces today :)Got another Fredriksen-backed idea in the works
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
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.
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