By Costas Paris
OSLO -- Shipping magnate John Fredriksen is trying to buy more
oil tankers despite a glut of vessels afloat, a looming $10 billion
in debt and two failed takeover attempts that have left his empire
reeling.
The self-made billionaire, who also is a major player in
offshore oil drilling and salmon farming, says he is working
17-hour days as he looks to expand his fleet of the most voluminous
tankers -- known as very large crude carriers, or VLCCs. He also is
pressing forward with a messy restructuring of his
offshore-drilling business, Seadrill Management Ltd.
"We used to be the biggest VLCC owner, but now we are No. 4" as
his tanker company, Frontline Ltd., shrank while rivals expanded,
said Mr. Fredriksen in a rare interview earlier this month. "I'm
looking to invest more than two billion [dollars] in acquisitions,"
he said, noting he is primarily looking to acquire companies
outright rather than buying tankers from rivals.
An oversupply of cheap oil and too many tankers chasing too
little cargo has respectively hit drilling and shipping hard. Mr.
Fredriksen reckons shipping companies will scrap three times as
many tankers this year than they did last year, with fewer new
vessels coming to market.
"Around 150 very large crude carriers, or about 20% of the
existing fleet, will be scrapped over the next couple of years,"
said the 73-year-old, known in the industry as "Big John." "To have
a say in the market you have to have size, so I'm looking to buy
tankers all the time."
The price of a five-year-old VLCC has fallen 17% to around $58
million over the past year. Amid this drop, Frontline pressed a
$765 million, hostile takeover for Norway's DHT Holdings Inc.
earlier this year.
DHT fought off that effort, prompting Mr. Fredriksen to drop his
bid and turn his sights on U.S.-listed listed Gener8 Maritime Inc.,
a deal that would have created the world's largest tanker fleet if
sealed. But the talks with Gener8 fell apart over price.
Frontline CEO Robert Hvide Macleod Monday said the company is
still on the hunt, but isn't currently involved in any takeover
activity. "We believe the market will offer good opportunities in
the future, and our strategy is to continue expanding the fleet,"
Mr. Macleod said.
Despite some consolidation among container liners, shipping
remains a highly fragmented industry, marred by overcapacity and
lengthy price wars. Dozens of companies that ship containers, oil
and commodities like iron ore and grain have declared bankruptcy
over the past three years. Others have fallen deeply into the red
as freight rates lurk well below break-even levels.
"The tanker market is depressed, so his quest to make Frontline
even bigger seems odd," said Mike Sapountzoglou, a director at
Athens-based ship management and financing company Flagship
Navigation Ltd. "But it will eventually recover and Fredriksen is
renowned for his sense of timing."
Mr. Fredriksen said U.S. hedge funds and Chinese state-owned
shipping companies were responsible for the cratering of the global
shipping market over the past few years. Industry executives say
around $30 billion was put into shipping from 2009 to 2015 by U.S.
investors, exacerbating a capacity glut.
The son of a Norwegian shipyard welder, Mr. Fredriksen dropped
out of high school and moved to Beirut to trade oil. He later
supplied fuel to the U.S. Air Force during the war in Vietnam. His
tankers moved crude out of Iran during that nation's war with Iraq
in the 1980s.
He gave up his Norwegian citizenship in 1996 and became citizen
of Cyprus. He also has offices in Singapore and Bermuda, where
taxes are substantially lower than in his native Norway.
Mr. Fredriksen has said his empire would be passed to his twin
daughters, Kathrine and Cecilie, who are increasingly taking
responsibilities in the group.
Apart from Frontline, Mr. Fredriksen also controls dry-bulk
shipping company Golden Ocean Group, vessel-leasing firm Ship
Finance International Ltd, Seadrill and the world's biggest
Atlantic salmon producer, Marine Harvest ASA. He is worth more than
$9 billion according to Forbes.
He faces a July 31 deadline to restructure some $10 billion of
debt in Seadrill, which operates 49 oil rigs and has an additional
13 under construction.
Demand for the company's rigs, which formerly commanded daily
leases of up to $800,000, dropped to around $200,000 as cheap oil
from U.S. shale drilling flooded the market. In May the company
said it had made significant progress with its banks on the terms
of a restructuring plan that would likely require filing for
bankruptcy protection in the U.S. or U.K.
"It's hard to answer if it will come out of restructuring, but
as long as I back it, we'll be OK," said Mr. Fredriksen, declining
to elaborate. "In the past, we've dealt with messier situations
than Seadrill, but we came through."
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
June 27, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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