Message Font: Serif | Sans-Serif
No. of Recommendations: 2
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.
Print the post  


Live Video Event Monday!
The GP team is hosting a live video event on Monday at 4 p.m. ET. Don't worry if you can't make it — we'll have a replay and a transcript. Click for more!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.