Frontline Ltd. (FRO) is a shipper I follow primarily because of its ship leasing spinoff, Ship Finance International (SFL). FRO thinks its future is bright enough to support a bond issue:
FRO has some justification for its confidence. Its net income has increased three years in a row (from 2006-08, although '09 numbers aren't final yet), impressive in light of the recession in most advanced countries and the collapse in 2008 of the Baltic Dry Index. Pricing power for most shippers has only recently returned.
That line in the article about reacting to attractive market opportunities probably means they're in the hunt for acquisitions. That's not a surprising sentiment given the problems facing other shippers, but there's plenty of risk for FRO if that's really their intent. Their long-term debt load as of 2008 was over 3.69 times its net income, so increasing this debt may pose a serious problem for the company if the global economy lapses back into recession.
Nota bene: Anthony J. Alfidi holds no position in FRO or SFL at the time this post was published.
Frontline said the proceeds from the sale will be used for general corporate purposes, financing the remaining equity investments in the company's newbuilding program and also will improve its ability "to react to attractive market opportunities."
FRO has some justification for its confidence. Its net income has increased three years in a row (from 2006-08, although '09 numbers aren't final yet), impressive in light of the recession in most advanced countries and the collapse in 2008 of the Baltic Dry Index. Pricing power for most shippers has only recently returned.
That line in the article about reacting to attractive market opportunities probably means they're in the hunt for acquisitions. That's not a surprising sentiment given the problems facing other shippers, but there's plenty of risk for FRO if that's really their intent. Their long-term debt load as of 2008 was over 3.69 times its net income, so increasing this debt may pose a serious problem for the company if the global economy lapses back into recession.
Nota bene: Anthony J. Alfidi holds no position in FRO or SFL at the time this post was published.
