Frontline Looks to Creditors for Help as Shares Fall

Frontline Ltd., the world’s largest operator of oil tankers is seeking talks with creditors as shares plunge to new lows.

The company’s says they may run out of cash next year, a realization that comes after eight months of losses. In a statement released Tuesday, the company says the tanker “rates are currently at operating cost levels with no contribution to capital and values have fallen approximately 25-50 percent, depending on age, during the last year.”

Frontline says they’re facing a “challenging situation” with loan agreement payments, negative operating cash flow, and funding the newbuilding program and the decrease in 4th quarter values. They need funding to meet cash obligations in the fourth quarter and first half of 2012.

Two of the seven vessels in the newbuild program have received committed financing but five remain unfinanced.

In an attempt to relieve obligations, several assets have been sold, including its 1994-built Suxemax tanker Front Fighter, 1996-built Suzemax tanker Front Hunter, and the 1993-built Suzemax tanker Front Delta. Several charter agreements were also terminated to liquefy assets.

Frontline Ltd.’s board is seeking talks with its creditors to find restructuring solutions to reduce the company’s liabilities and improve cash flow. The board has set a deadline of December 31, 2011 to explore all alternatives and find a solution.

Frontline Ltd. Is a Bermuda based tanker company that was established in 1996 as the result of the acquisitions of companies and vessels. They are among the largest seaborne transporters of crude oil, with one of the largest fleets of VlCC’s and Suxemax tankers. 

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Photo: John Fredriksen, Chairman and CEO of Frontline Ltd., being named Connecticut Maritime Association's 2008 Commodore. (Courtesy of CMA)