ShippingWatch

Fredriksen's new Capesize giant: We're big enough

Growth is not part of the agenda right now, CEO Ola Lorentzon, Knightsbridge Tankers, tells ShippingWatch following the announcement of the new major Capesize carrier. The company will foucs on taking delivery of the many newbuildings in coming years.

Skibet er et Golden Ocean tørlastskib. Golden Ocean er et andet Frederiksen-selskab. | Photo: Golden Ocean

The new carrier Knightsbridge, created yesterday, Thursday, through the merger of the two John Fredriksen-controlled companies Frontline 2012 and Knightsbridge Tankers Limited, has enough ships in the 39 dry bulk vessels the carrier will own in the coming years, newbuildings included.

"We don't have any growth plans at this time. Hopefully things will work out well, but you never know, so we expect that this transaction will be sufficient for now," Knightsbridge Tankers CEO Ola Lorentzon tells ShippingWatch.

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In a press release, the new company, which has tank as well as dry bulk in its portfolio, described itself as a large-scale Capesize carrier.

"We're the biggest one listed on the New York Stock Exchange. But we don't have a big market share. Not that many percentages. Dry bulk is a fragmented market with a lot of small players," says Ola Lorentzon.

Attractive deal

The transaction between Knightsbridge Tankers Limited and Frontline 2012 was expected, several sources tell ShippingWatch, and with a fleet set to more than double in the years to come, Knightsbridge will naturally gain better access to growth. And the deal is also attractive in light of the fact that, in the current market, it can be difficult to get access to this type of ships, sources say. For Frontline 2012, this transaction is seen as the best way to realize the company's values as part of the ships are paid through shares in Knightsbridge.

Meanwhile, Knightsbridge - according to ShippingWatch's sources - has a very simple corporate structure and is one of the only stock-listed carriers in the United States that actually is a Capesize carrier. This could be an advantage in terms of future capital, as US investors are looking for simple corporate structures that they can relate to, and not least simple policies in relation to returns. With an exposure focused exclusively on the Capesize market, it becomes fairly easy to calculate potential returns based on various rate fluctuations in the years to come.

When Knightsbridge back in March announced the first deal to acquire five Capesize vessels, the move was received positively by the market and the company's shares increased 14 percent. But whether the carrier remains equally attractive to investors going forward depends entirely on how the Capesize market develops as well as ship growth in the time ahead. And these matters are still fraught with uncertainty, sources say.

The future will be handled

And CEO Ola Lorentzon is not troubled by the current conditions on the dry bulk market, with lower rates than expected.

"We believe the analysts who say that demand will surpass the supply in the second half of the year. We're pleased with the ship's delivery dates," he says, referring to the fact that the carrier will take delivery of five ships this year, fourteen in 2014 and six during 2016.

John Fredriksen owns 70 percent of Knightsbridge, and the carrier works in the same facilities as Fredriksen's other dry bulk carrier, Golden Ocean.

In the press release, John Fredriksen made the following comment on the merger:

"We are very pleased to be able to enter into this transaction with Knightsbridge for the remaining Capesize fleet of 25 newbuidings, which is in line with our strategic plan of creating pure plays in different shipping segments through consolidation, divestments and spin offs."

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John Fredriksen establishes new Capesize carrier 

Frontline 2012 in solid 2013 finish 

Investors call off 2014 shipping rebound 

Early 2014 does not look like a shipping rebound 

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