Frontline Ltd’s (“Frontline”) subsidiary CalPetro Tankers (Bahamas III) Limited will take redelivery from Chevron Transport Corporation (“Chevron”) of the vessel Virgo Voyager (to be renamed Front Voyager) with effect from 1 April 2006. This vessel is one of four vessels that are central in the financial structure of California Petroleum Transport Corporation, including the latter’s 8.52% First Preferred Mortgage Notes (term notes) due 2015.
As part of the returning of the vessel, Chevron will pay a termination fee of US$ 5,050,000.
Frontline will through another wholly owned subsidiary replace Chevron as the bareboat charterer (the “New Bareboat Contract”) for the mentioned vessel with effect from the same date.
The New Bareboat Contract has been structured to fall within the definition of an acceptable replacement charter under the above mentioned bond’s indenture. The contract will follow the current Chevron contract save for logical changes. The hire for the two first years, from 1 April 2006 until 31 March 2008 will equal US$ 5,050,000 which is the same amount as Chevron had an option to extend at and also equal to the termination fee. Frontline will prepay this hire for the two first years on 1 April 2006.
In addition, the New Bareboat Contract contains seven annual options to extend the charter. The rates set will provide sufficient cash to honor the bond obligations in those years.