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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 1057  
Subject: One year done Date: 12/28/2012 8:44 AM
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Almost done with 2012. A tough year, but probably somewhat better than 2011 for the tanker
market. Yes, tanker biggie OSG collapsed. But from what is being discovered now, this was
a company that hid the degree of their rot well. FRO ended 2011 with a major restructuring,
one that split the company into two. As this year winds down and with the way events played out,
it appears FRO will survive. It seems like the restructured FRO will, minus a bunch of vessels, exit
2012 in a similar manner as 2011. By that I mean, an uncertain upcoming year, no bank debt, some
cash and the same types of obligations- capital leases, ITCL bond obligations, and the
convertible bond obligations. But there are some differences.

The OBO category will disappear from the fleet by early 2013. Not sure on the exact revenue
contribution the OBO vessels provided, but my guess is probably less than $100M. Still, the OBOs on
time-charters were a reliable income resource in 2012, one the company will not have most of next year.
Likewise, the SH VLCCs. While not major revenue producers, each vessel exit from the FRO fleet provided,
or, will provide in Q1 2013, a small pile of cash.

FRO made an installment payment on the two Suezmax newbuilds, so it looks like capex spending
will show up in 2013. The FRO CFO suggested the company could get 70% financing on the vessels.
If so, that would be both good and bad. Good because it will reduce FRO's cash burn rate.
I figure, 70% financing would only require another $20M cash on FRO's part. OTOH, bad because
bank financing typically adds restrictions and covenants. Of course, with Fredriksen working
behind-the-scenes, FRO always have a wild card. But since one of the vessels delivers in the
first half of 2013, we will find out soon enough.
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