Friday, May 26, 2000


Frontline unveils plan to absorb Golden Ocean
Bermuda-based Frontline Ltd. has signed an agreement with the Golden Ocean Group Limited under which the two parties will propose a joint plan for a financial restructuring of Golden Ocean. (the "Golden Ocean Plan").

Golden Ocean holds interest in 14 VLCCs (all built after 1995), 3 VLCC newbuilding contracts and 10 bulk carriers. It filed for a Chapter 11 restructuring in the Bankruptcy Court for the District of Delaware on January 14, 2000.

The Official Committee of Unsecured Creditors of Golden Ocean fully supports and will be a co-proponent of the Golden Ocean Plan. Once the plan becomes effective, Golden Ocean will become a wholly owned subsidiary of Frontline.

The plan includes a payment to all unsecured creditors in Golden Ocean including the bondholders. Frontline has committed to pay up to $33 million in cash, or to issue up to 4.1 million shares and 1.9 million warrants in Frontline valued up to $48 million to take over all unsecured debt and all upstream guarantees. These numbers do not include a "take out" of the $78 million Golden Ocean bonds currently controlled by Frontline.

The payment gives the bondholders a payment of between 15 % and 22 % of their claim dependent on which alternative they take. Other unsecured claims will receive approximately 5 %.

The issue price for the Frontline shares is set at $10.00 while the strike price for the warrants is set at $12.21. If the Frontline share price in the fifteen day period prior to closing is lower than $10.00 or higher than $12.21 certain price adjustments will be made.

Under the plan, the old share capital in Golden Ocean will be canceled while new share capital will be injected by Frontline. In addition, the plan will provide for the release of upstream guarantees in favor of the bondholders.

Frontline Chairman John Fredriksen commented that the Golden Ocean fleet "fits nicely" into Frontline's existing fleet of 41 modern VLCCs and Suezmaxes. He said "the combined strength in the chartering market will give the new Frontline group a unique opportunity to offer an even more flexible service to our clients. It is Frontline's idea to absorb the whole of Golden Ocean under the existing Frontline administration. We anticipate that a co-ordination with the Frontline fleet will reduce the Golden Ocean cost structure by approximately $10 million per year through a reduction in overhead and ship operating cost. Golden Ocean's existing charter portfolio, the planned reduction in cost plus the existing mortgage financing should secure the future financial stability of Golden Ocean. The combination of a limited equity investment, and an asset exposure in excess of $ 1 billion makes this into a very interesting investment opportunity in today's market."

Meanwhile, Frontline has signed a deal to buy the VLCC newbuilding, Kawasaki 1638( 300,000 dwt) from Golden Ocean for $73.8 million. The ship, to be named M/T Front Tina , will be delivered from the yard next week and will immediately after delivery enter the Tankers International pool.

If Golden Ocean Plan does not go into effect by October 1, 2000, Golden Ocean shall have the right to declare an option to repurchase the vessel back from Frontline at Frontline's actual cost plus a profit component. In order to finance the ship, Frontline Ltd. has placed three million shares through a private placement arranged by Fearnley Fonds ASA and Enskilda Securities. The issue price was $10.15 per share.

The purchase of the Kawasaki 1638 was approved by the U. S. Bankruptcy Court for the District of Delaware in Golden Ocean's chapter 11 bankruptcy case.

The ship is a sister vessel to two other Golden Ocean controlled vessels
currently on bareboat charter to Shell.

Commenting on the deal, Fredriksen, said: " With the current strength in the tanker market, we are excited to add another VLCC newbuilding to the Frontline fleet. With an interest in 16 modern VLCCs and an agreed plan to restructure Golden Ocean, which could add another 13 modern VLCCs, Frontline is uniquely positioned to benefit from the fundamental strengthening we now see in the tanker market. The deal should improve future earnings and value development per share.

In a comment on the private placement Fredriksen said: " We are very pleased with the group of investors who supported us in the private placement. They are all leading US institutions, who we expect will contribute positively to the further development and expansion of our company, and to increase the interest for the Frontline stock in the U.S. capital market.


Mosvold orders VLCC
Norway's Mosvold Shipping and Samsung have agreed upon the terms of a shipbuilding contract for the building of one ­ with the option of further one ­ crude
oil carrier of about 308,000 dwt for deliveries in November 2001 and 2003. The contract price is $72 million for the firm vessel and $74.1 million for the optional vessel.

Mosvold has nominated a Norwegian limited partnership, in which it has a 52.8% stake, as the owner of the contract and the option. The net proceeds of a 1:3444 rights issue of 15,000,000 shares at NOK 2.00 per share, which is underwritten, will be used to finance Mosvold's participation in the limited partnership.


Schat-Harding keeps it safe and simple
Schat-Harding has introduced a new series of simple, easy-to-maintain and space-saving boats and davits for the offshore and merchant marine industries. The prototype of the first 50-person KISS boat and davit system is likely to be ready by the end of this year. Keep it Safe and Simple is the philosophy behind the new system. The same philosophy will eventually be used to revise Schat-Harding,s entire range of conventional and freefall systems.

The KISS system will occupy twenty per cent less space than current systems of the same capacity. It will also weigh twenty per cent less. And maintenance will be twenty per cent less too, with cassette replacement of parts and simplified systems. "But safety will still be one hundred per cent," says Per Brinchmann, business development director of Schat-Harding.

One example of the new philosophy is the use of tiller steering. There are fewer components than in a wheel steering system, so there is less maintenance, and the system is less vulnerable in an emergency. Electrical components and systems are also kept to a minimum.

"Sophisticated problems demand sophisticated solutions. But there is a real demand in the offshore and merchant shipping world for simpler, more cost-effective boats, davits and evacuation systems," says Brinchmann. "There is also the question of weight. Until recently, the only way to ensure a boat was strong enough to withstand use in an emergency was to over-design it. Today we can use our experience and new technology to optimize design in a way which saves both weight and space, which are at a premium on offshore units and merchant ships. We use sophisticated technology to produce simple, safe, solutions."

The KISS system will be in production by the end of 2000, initially for the offshore market. "We will spread the concept over the range of conventional systems first," says Brinchmann. "There will be small, medium, large and extra-large sizes, to suit all types of units and ships." Whatever the capacity chosen, the KISS system will be smaller and lighter than its predecessors, and anything else on the market.



ICR marine gas turbine completes development phase
An industry team led by Northrop Grumman Corporation's Marine Systems business unit has successfully completed the U.S. Navy's development phase of the Intercooled Recuperated (ICR) WR-21 marine gas turbine engine program.

Design Review 5, conducted by the Navy, marked the culmination of an eight-year development program aimed at providing a more economical engine for future surface ships. This design review validated a successful 500-hour operational test of the engine at The Naval Surface Warfare Development Center in Philadelphia and confirmed that the targeted 25 percent fuel savings was achieved.

"Testing conducted over the full range of operational maneuvers certified that the engine is now ready for the final production qualification test," said Jim Hupton, vice president-Marine Systems, a unit of the company's Electronic Sensors and Systems Sector.

The WR-21 features a recuperator downstream of the power turbine that recovers energy from the exhaust gas to increase fuel efficiency. This translates into extended ship range for a given fuel capacity, more unrefueled time on-station, or reduced fuel storage requirements for a given range, thereby enabling more space for additional weapons payloads.

Because the engine can achieve near maximum efficiency at partial power, the ICR is ideal for electric drive configurations for future Navy combatants.

The WR-21 is also a candidate engine for European advanced combatants, with both the U.K.. and France investing in its development. Partnering with the U.S. Navy are the French and British navies, which also seek fuel economy in their new warship construction programs.

With development now complete, the production engine will begin endurance qualifications later this year in Indret, France, at the French Navy's Direction des Constructions Navales (DCN) test facility. Following these qualification tests and a U.S. Navy standard shock test, the ICR will be ready for final assembly and integration at a Northrop Grumman-managed facility located in the Philadelphia Naval Business Center.

Northrop Grumman's Marine Systems business unit, based in Sunnyvale, Calif., is prime contractor for the WR-21 engine program with overall responsibility for engineering and systems integration. Rolls-Royce Industrial & Marine Gas Turbines of Ansty, England, designed and developed the gas generator and power turbine, while AlliedSignal's Aerospace Systems & Equipment Group in Los Angeles provided the intercooler and recuperator heat-exchanger cores.

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