Q3 2020 SFL Corporation Ltd Earnings Call
Thank you for standing by and come to the Kids suite Twentytwenty hypothetical operational earnings conference call. At this time all participants on this and on site.
I will be a presentation, followed by question and answer session at which time if you wish.
A question. Please dial one on your tenant base.
Hi, Matt decided you took a conference is being recorded today pay state.
Well as of November 20, and <unk> I would now like to hand, but if I speak of it today or late Picasso.
<unk> CEO. Please go ahead.
Thank you and welcome.
Our first quarter conference call.
I would start the call by briefly going through the highlights of the quarter and following that our CFO axle will listen will take us through the financials and the call will be concluded by opening up for questions.
Before we begin our presentation I would like to note that this conference call.
Call will contain forward looking statements within the meaning of the U.S Private Securities Litigation Reform Act of 1995 words, such as expects anticipates intends estimates or similar expressions are intended to identify these forward looking statements forward looking statements are not guarantees of future performance.
Since these statements are based on our current plans and expectations and are inherently subject to risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward looking statements.
Important factors that could cause actual results to differ include but are not.
Limited to conditions in the shipping offshore and credit markets you should therefore not place undue reliance on these forward looking statements. Please refer to our filings with the Securities and Exchange Commission for more detail discussions over risks and uncertainties, which may have a direct bearing on our operate operating results.
Our financial condition.
The announced dividend of 15 cents per share represents a dividend yield of around 8% based on closing price yesterday and this is our 67th consecutive quarter with dividends.
In light of the continued uncertainty surrounding.
Seadrill and outcome of their pending financial restructuring the board decided to adjust the dividend down to 15 cents and thereby effectively exclude oil contribution from offshore rigs for the time being.
We believe that the market has already discounted this in the SSL share price as we prior to this dividend adjustment.
Mint retrading at more than 13% yield base.
Based on the on the prior dividend, which is a very high number in the current low interest rate environment.
When the Seadrill situation is resolved the board will reassess the situation and possibly reinstate contribution from the rigs and the dividend again.
And our focus will be on building the portfolio with accretive transactions in order to build a distribution capacity also by adding new assets going forward.
Over the years, we have paid more than $27 per share in dividends or 2.3 billion in total and we have a significant fixed rate.
Backlog supporting continued dividend capacity in the future.
The total charter revenue so $157 million in the quarter was in line with the previous quarter with more than 90% of this from vessel. So long term charters and less than 10% from vessels employed on short term charters on the spot market.
The EBITDA equivalent cash flow in the quarter was approximately $117 million and last 12 months. The EBITDA equivalent has been approximately $481 million similar to the situation in the last 12 months in the prior quarter.
Excluding.
Cash in the rig owning subsidiaries the consolidated cash position at quarter end was more than $200 million up from around $150 million at the end of the second quarter in.
In addition, we had $33 million in marketable securities at quarter end and after quarter end, we have used some of the cash to take out the file.
Mincing over the drilling rig west Taurus, but we still have a strong position with more than $100 million remaining.
Our fixed rate backlog stands at approximately $3.2 billion. After read recent charter extensions and vessel sales, providing significant cash flow visibility going forward.
Well this 2.4 billion relate to shipping assets alone and excludes revenues from 16 valla vessels trading in the short term market and also excludes future profit share optionality.
The profit share contribution, which I mentioned adds optionality value.
John.
It was.
Around $6 million in the third quarter.
This was primarily primarily from the two vlccs on charter to frontline, but also from fuel saving some container vessels, which scrubbers and a small contribution from bulkers.
Following the immediate.
Impact.
Of course with 19, some trades, including the car market came to a virtual halt we.
We have two vessels in this market and they were due to come off charters in may and in August this year and consequently, we put them in lay up in order to save costs as we believed at the time that it would take some quarters before the more.
Market would recover again.
We are very happy to see that it happened much quicker than anyone anticipated and both vessels are no trading out the charted out again on one on our 100 day charter and one for 11 months and the charter rates are essentially back to pre COVID-19 levels right.
[music].
Well the Seadrill restructuring is pending we have already addressed the bank structures in two of the rigs we have repurchased old adapt on the idled rig vest haaretz at the discount essentially limited to the 83 million dollar corporate guarantee the cash and the rigoni subsidiary, which was already pledged to the banks any.
The way plus a margin.
We have also agreed to guarantee the financing investing those in exchange for more flexible financing terms.
And with a large piece of assets it will always be acquisitions and disposals and the remaining vessel on charter to the Hunter group has been repurchased by them.
And delivered earlier this quarter.
Sorry this month the.
The hunt the deal was designed to give us a very high return on a low risk profile in exchange for flexibility on hunters part.
This is a good example of cost of capital arbitrage, where we could utilize or premium access to low cost fun.
And at the same time give flexibility that hunter was willing to pay for.
The deliberate took place yesterday and net cash loss is more than $10 million after repayment of the associated financing.
The proceeds are expected to be reinvested in new accretive transactions.
Excluding the drilling rigs, which I will cover on the next page the backlog from drift shipping assets was $2.4 billion at the end of the quarter.
Over the years, we have changed both fleet composition and structure I am in no 81 shipping assets in our portfolio and no vessels remaining from the initial FY.
Debt in 2004.
We have gone from a single asset class charter to one single customer to a diversified fleet and multiple counterparties and over time the mix of the charter backlog has varied from 100% tankers to nearly 60% offshore at one stage two container market being.
Being the largest right now.
In addition, we have 16 vessels traded into short term market, which we define as up to 12 month charters and also from time to time as I mentioned earlier significant contributions from profit shares.
On assets.
We do not.
Set mix in the portfolio focus on evaluating deal opportunities across the segments and tried to do the right transactions from a risk reward perspective will.
Over time, we believe this will balance itself out, but we tried to be careful and conservative in their investments and not invest just because money is burning in our pocket.
Our strategy has been to maintain a strong technical and commercial operating platform in corporation with our sister companies Indicee tankers group.
This gives us the ability you have to offer a wider range of services to our customers from structured financings to full service time charters, which is the bigger part overpriced.
Portfolio.
But more importantly, we also believe it gives us unique access to deal flow in our core segments.
And with full control over vessel maintenance and performance, including energy efficiency and emission minimizing efforts, we can impact improvements through our vessels through the life of the assets and only.
Passively owning vessels employed on Bareboats, where the customers may not always have an incentive to make such improvements.
So unlike most of the companies with the financing profile in the maritime world more than three quarters over shipping charters revenues come from vessels on time charter and a smaller.
Depiction from bareboat chartered assets and even if we include the drilling rigs, which are all on bareboat charters. The time charter portion is still more than two thirds.
As the fellows three drilling rigs charter to subsidiaries of Seadrill.
All three.
Three rigs were employed on bareboat charters seadrill and generated approximately $24 million in charter hire in the third quarter.
Net of interest and amortization the contribution was approximately $8 million or around seven cents per share.
The harsh environment Jackup rig restlessness has.
Important sub charter to clinical Phillips on through the end of 2028, while the harsh environment semi submersible rig best Harkless is employed on consecutive sub charters to Ecuador in the North Sea.
Semisubmersible rig best tolerance has been stack is since 2015.
Seadrill hottest.
As those studies currently engaged in discussions with its financial stakeholders with regard to a comprehensive restructuring of its balance sheet and thats such a restructuring may involve the use of a court supervised process similar to the 2017 restructuring.
At that time, the loan balance on the rigs was much.
Much higher and we have reduced leverage by more than 50% in this three year period as we illustrated on this slide.
At the end of the second quarter Seadrill reported a cash position of $1 billion and while Seadrill did pay full charter higher in the third quarter no charter.
Our hiring has been received so far in the fourth quarter.
Seadrill.
[music].
Has also not paid interest on its bank that recently.
And announced the forbearance agreement with its financial banks and and some other stakeholders in mid September which was subsequently extended through.
October.
The non payment of charter hire by Seadrill does constitute an event of default under the leases and in certain of the corresponding financing agreements.
On the secured a wave this could result in enforcement of search default provisions.
From the start of that transaction with Seadrill.
All the way back from 2008.
All the revenues from the sub charters of these assets and in this instance, more importantly hear now from the two drilling rigs that are working the.
The restless on Investor analysts.
And the revenues from the Subcharter have been paid into accounts pledged to Esa felts regarding entities under financing banks.
As a result of the current events of default situation caused by Seadrill Seadrill will need prior approval to affect access these funds to pay for.
Operating expenses and other expenses and will have to source. This from their cost cash position until the situation is resolved.
The gross hire is significantly higher than the bareboat hire to us and keep accumulating on the pledged to count for now.
We can unfortunately, not make any further comment.
Relating to the rates or on the pending risk or the pending restructuring.
But our objective is as always to maximize long term value for our shareholders.
In the meantime, we have adjusted the quarterly distribution to exclude all distribution from the office lease offshore assets.
And when the Seadrill situation.
Members will the board will reassess the situation and possibly reinstated contribution from the rigs in the future.
And with that ill give the word over to our CFO OXXO listen who will take us through the financial highlights of the quarter.
Thank you Miss the Iraqi.
On this slide we are showing.
This pro forma illustration of cash flows for the third quarter.
Please note that this is only a guideline to assess the company's performance and is not in accordance with us GAAP and also on that of extraordinary and non cash item.
The company generated gross charter hire approximately a $157 million in the.
During the quarter with more than 90% of the revenue coming from a fix our trade backlog, which currently stands at 3.2 billion.
And while the current charter backlog relating to our offshore assets may be impacted by the pending to use restructuring the backlog from a shipping portfolio stands at a solid 2.4 billion profit.
Turning off the strong stability on our cash flow going forward.
At quarter end, SFL, allowing the feet of 48 container vessels and two car carriers then.
The benefit generated close charter hire of approximately $80 million.
Of this amount approximately 98% well through.
From our vessels on long term charters.
At quarter end as severe flooding the fees backlog was approximately $1.8 billion.
Average remaining shorter term of approximately four and a half years, where approximately seven years of.
We've waited bushart revenue.
Approximately 84%.
Have to lighten the backlog is through worlds largest liner operators myrisk line and empathy with a balance of approximately 16, 16% to evergreen.
Our tanker fleet generated approximately $24 million and gross charter hire during the quarter, including 4.8 million and profit split contribution.
Not to be to seize on charters to frontline.
The vessels are fixed on profitable sub charters until the end of the quarter and certainly stability on the quarter profit split also for the fourth quarter.
The net contribution from the company's two Suezmax tankers was approximately $3.3 million in the third quarter and the vet.
Those are traded in the short term market we're climbing.
Some of them were 11, the contrary redeliver Dillard. Please proceed to the hunk to groups of declaration of a purchase option offered.
After repayment of the associated with financing the transaction increase as of both cash balance by approximately $10.7 million.
In the third quarter of dry bulk fleet generated approximately 24 28.4 million and gross charter hire of.
Of this amount approximately 70% was derived from our vessels on long term targets.
During the quarter the comp net 10, handysize vessels employed in spot and short term market.
The vessels generated approximately $7 million in that chart to higher compared to $2.4 million in the previous quarter.
At the end of the third quarter as the following three drilling rigs.
All of our drilling rigs on long term bareboat charters to fully guaranteed affiliates of Seadrill limited and generated approximately.
$24.4 million in charter hire during the quarter.
This summarizes to an adjusted EBITDA of approximately $170 million for third quarter or one dollar or eight cents per share.
We then move on to the profit and loss statement.
And as reported under Us GAAP.
As we have described in previous earnings calls our accounting statements are different from those of a traditional shipping company.
And as our business strategy focuses on long term charter contracts.
A large part of our activities are classified as capital leasing.
As a result.
An important for charter revenues are excluded them from us GAAP operating revenue and.
And instead booked as revenues classified as repayment of investments in finance leases and less loans.
Results in associates, and long term investments and interest income from associates.
For the third quarter report total operating revenues according to us GAAP approximately $160 million.
Which is less than the approximately 157 million of charter hire actually received for the reasons just mentioned.
In the quarter the company reported profit space income of 4.8.
Then from what tanker vessels on charter to frontline and 800000 from profit split arrangements related to fuel savings on some of our large container vessels.
Beginning in Twentytwenty assets classified as financial assets, including several of us have both vessels or rigs on long term lease.
Yes.
Acerbic to general credit loss provisions similar to those requirements for banks and financial institutions.
The net change in sales provisions is recorded in the income statement each quarter.
Third quarter, the credit loss provisions increased approximately $6.2 million primarily in whole.
Wholly owned Nonconsolidated subsidiaries.
Furthermore, the company recorded a non recurring and non cash items, including negative mark to market effects relating to interest hedging currency swaps and liquid investments of 600000 and amortization of deferred charges of two point.
Yeah.
So overall and according to us GAAP the company reported net profit of 16 million or 15 cents per share.
Moving onto the balance sheet.
At quarter end, a civil had approximately $206 million of.
Cash and cash equivalents.
Excluding 22 million of cash held in wholly owned Nonconsolidated subsidiary.
Furthermore, the content and marketable securities of approximately $33 million based on market prices at the end of the quarter.
This included 1.4 million.
'cause shares in frontline.
4 million shares in Mds crude carriers and other investments in marketable securities.
In connection with the sale of three older reveal to cease to Eddie as crude carriers back in 2018 as sales of shares in the company as part payment.
It.
Yes has now sold all the vessels at attractive prices.
And it's expected that the net proceeds from the vessel sales will be returned to investors.
And including a dividend received the value is estimated at approximately $12 million illustrating how as a fell from time to time take steps to maximize value.
Value for our shareholders.
At quarter end.
All had five that for your vessels with a combined short future value for approximately 40 million based.
Based on average broker appraisals so.
So based on Q3 Twentytwenty figures.
The content of the book equity ratio of approximately 26.
<unk> percent.
Then to summarize.
The board has declared a cash dividend of 15 cents per share for the quarter.
This represents a dividend yield of approximately 8% based on the closing share price yesterday. This.
This is the sixth and seventh consecutive court.
Quarterly dividend since inception of the company in 2004.
Answer to $7 per share or $2.3 billion in aggregate.
Has been returned to shareholders through dividends.
And while we continue to collect revenue from Arctic Shortbread backlog, we also upside from profit split arrangement.
Six marvin's disease.
In addition to profit split arrangements related to fuel savings on some of our large container vessels.
Despite the relatively volatile market in Twentytwenty, yes.
We have added more than 250 million for fixed charter rate backlog over the last 12 months.
I.
We actively continue to explore new business opportunities.
And while risk premiums on energy and shipping investments have increased with the recent volatility in financial markets.
This is Philip has at the same time risks new attractive financing and expanded its group of lending banks, especially in February.
This.
Now represent more than 40% of our lending volume.
SFL business model has been continuously tested throughout his 16 years of existence.
Previously been highly successful in navigating periods of volatility.
And with that I get revert back to the operator.
We will open the line for questions.
Okay, ladies and gentlemen, tedious questions or comments please.
I want to do this and then wait for you to Indiana.
You can send your questions. Please.
Well the ski.
Yes.
It still line for any questions or maintain is dependent.
Hello.
Yeah. The first question is coming from the line of questions today.
Please go ahead.
Name.
Yeah, Hi, Thanks, It's Chris Wetherbee from Citi I appreciate you taking the question.
<unk>.
I guess I wanted to start on the offshore side and could you give us a sense of from a cash perspective, how far in our rigorous we are with the payment here in Fourq you in and sort of what are the quarterly cash maybe give us a little bit more clarity on sort of the quarterly cash impacts of not paying the charters.
Thanks.
Yes and.
Thanks, Thanks for calling in.
We were paid in full and.
In the third quarter.
Around $24 million.
The the charter rate is in the region of around $90000 per day on average for these vessels.
And.
And of course, the that that higher has not been paid in October and as so far not being paid in November well, but but but importantly here you know two of the rigs are employed on profitable sub charters as I mentioned and as part of the.
Core the chartering structure, we agreed from from outset that all the charter hire is being paid into pledged accounts that is pledged in favor of AOS. So all the revenue say get in from their respective sub chopper spirit Conoco Phillips for mono the rigs and Ecuador, and the other everything goes into.
The accounts, where seadrill cannot use that money on unless we give our prior consent.
So okay. There is there is on a much bigger than.
The charter hire due to loss that is accumulating on on on those bank accounts right now.
Doing that that cannot that that is really sort of tax such workers a sitting there right now you can say status quo.
There is more money accumulating but of course over time I mean, some of this money you know a sales is it should be used for operating expenses, So seadrill needs to fund that.
From other sources right now so.
So, but I guess the again. This is represented we continue our discussions and negotiations and Seadrill of course has similar discussions and negotiations with other stakeholders. So we cannot give any comments on the details of outdoor.
That's exactly how this could play out overtime.
Okay, Okay understood, but that's very helpful. Information. So I appreciate that and then when you think about what that could you know what that.
Assuming that you know non payment it continues through the quarter, how that impacts your thought process around dividends in distribution.
Right as you go forward.
Our sales so that is in.
In order to all I would say eliminate sort of questions around that you know the board took the step to reduce the dividend to 15 cents.
Which is a very.
What we say from which which is more than covered from the shipping side alone.
Sure.
So you know.
And by that you know, we hope that as.
Given the uncertainty right now relating to the two to two those rigs sand and the charters to Seadrill then how that restructuring is playing out.
We have we have some significant contribution from those.
All their assets and while.
There are no financing right now on two of the three vessels have have financing agreements attached.
One with a more flexible cost structure and the other with more regular payments.
Of course.
The one rig with with.
The financing with a limited guarantee.
We are limited our orders they are liability is limited to that guarantee unless we agreed to do something else. So I think we have 81 vessels and rigs.
And all outside of the.
The drilling rigs here.
And we have significant cash flow from all of them and importantly, you know even if there could be issues in one you could say books here like the the on the offshore side on each of those rigs you know that.
That has no impact on the contribution.
Fusion in cash flow from the other assets.
Okay. That's helpful and one final if you allow me would just be on the west Linus can you talk a little bit any this specific terms that you were able to get in terms of the the amended.
The amended financing there that the terms around that.
Unfortunately.
I cannot give you any specific comments on that right now, but we will we will get back to that in due course, but we we have agreed more flexible terms in exchange for increasing the guarantee. This is also the rig that has a sub charter that runs through 2028.
So when you say it's up there is.
I don't have the visibility on the underlying cash flow coming from that asset.
And that's also why we for now has that has increased the guarantee on that one.
Okay, all right well, thanks very much for the time I appreciate it.
Thank you.
Our next question comes from the line of Andy given from Jefferies. Please ask your question.
Hi, gentlemen, how's it going.
Good. Thank you how are your great great.
In the past you've touted your strategy your balance sheet as.
Having the ability to buy when other ship owners in other sectors cannot right. So with that how do you view kind of your fleet today, what asset classes are most attractive clearly drybulk and tanker asset values remain depressed. So has there been any interest from drybulk.
Boehner is for sale and leaseback TSFL and then last time, we talked you wanting to expand your tanker exposure, but asset values were too high clearly those have come in as well. So how do you view, both drybulk and tankers in terms of acquisitions at these levels.
Yes. Thanks, Ed We you know we of course continue.
We continuously evaluate opportunities in in multiple sectors.
And we are we are looking at literally out opportunities in all in all this all the sectors right now.
It's what we say what we typically never comment on transactions that we don't do so we will we will notify when we do it then and then to.
Meantime, we're screening a lot we are going further than that on other deals and the and the.
Well hopefully you know we have the last 12 months concluded we have added $250 million to the backlog.
And of course, we haven't visions to grow the business also no going forward.
Certainly outside the offshore side for now while while we until the whole seadrill situation is sorted and.
Yes, you are correct I mean, we tried to be we tried to time transactions.
We tried to be mindful of cycles and we typically.
Could be careful if if segments are peaking.
I would say generally this year there was good activity good volume at the beginning of the year and then for a period I think most operators out there were more or less paralyzed I think.
By COVID-19 on and Im sure.
Property surrounding that I sense that the market is picking up more now.
What we have seen on the financing side is that we are now including financing.
Better I would say all in cost if you add margin and underlying interest.
We are we are financing ourselves to achieve.
And for that and we have seen an earlier so it was a better at least this positive. There is there is good access to capital but.
But.
We have to be mindful of course of the asset risk yeah, we take on.
But we can do many things I mean, we can do straight operating type the charters.
Yes, where we run the vessels time charter it.
But we also do deals like we did with the hunter vessels restructured.
Restructured with what was more it was more like a structured financing you can say it was really a cost of capital arbitrage for we had we could utilize our access to very actually very attractive funding.
And they were willing to pay up for that because they needed the flexibility and.
In the deals. So we got the you know like the risk adjusted return up into more of more than 20%.
On on effectively sort of around 60% rich on the assets. So so so we're looking at both those.
Inflow types of deals across the sectors, but.
But.
No. We typically will not tell you how much we will do in any single one I'd say, it's really all about trying to do the right deals and on and be open for opportunities across the board.
Okay.
And then I guess following up.
Just on the dividend you cut it from 35 cents to 25 cents, just two quarters ago, and I think the reasoning behind that was twofold. One it brought the yield closer in line to maybe 10% when your shares were trading at $10 a share.
But also it was kind of.
Hey.
Getting in front of any possible.
Risks with the drilling rigs right in kind of getting in front of that to reduce it to 25 now again you reduced it to 15 is that solely due to the drilling rigs or were there other reasons around that so just trying to figure.
Figure out why a secondary type.
What the risks are from here.
Yes, Thanks, I think when we reduced it from from 35. It was I would say more relating to general risks.
Call it caused by the whole COVID-19 situation.
Where we saw some assets.
Mr Charter rates come down sharply in some segments.
And.
And we also had the the car likely passes like the car carriers that came off charter and where we put them in layup. So instead of generating revenue. So because as you have a negative call it the cash flow by because.
You are paying for lay up cost while they don't during the money. So so so so that was really.
I've factor more relating to that.
And as we have seen.
I would say the offshore on the rig side and this is Lee of course linked also to the old price, but its been deteriorating I would say over the last few months we.
We believe that this is the boards decision of course, but we believe that it would be appropriate to effectively eliminate all call. It. The cash flows that has previously been in there from those from the drilling rigs from the distribution capacity and show that it's with a good margin.
To cash.
Generating from the other assets.
And.
And of course, depending on the outcome of the Seadrill corporate restructuring when we when we're on the other side of that of course, it's easier for the board then to to look at the distribution capacity and possibly reinstate some of that reduction that has been taken.
Hello.
So also as we as we used some.
Some cash to buy back.
The loan on the drilling rig of course, you can argue that if that hadn't been bought back you could reinvest adapt in other assets, which could have generated some contribution. So that is really you know call. It the.
Before turning around this latest adjustment.
Alright.
Well I'll leave it at that thanks, so much thank you both.
The next question comes on line.
Next please ask the question the company name.
Right.
Sam, but I cannot say Ben.
Ben.
Yes. Thank you.
On the container side of the business you mentioned potentially.
Acquiring assets not specifically.
In the container space, but the rates are pretty strong and you're benefiting there what does it look like in terms of adding assets in containers with rates so strong.
We you know we do we also look at the container market obviously.
We we when we look at the opportunity.
Great Netease, we look we look at it from a from a long term perspective of course right now certainly in the short term, we see very booming container rates and we see the liner operators generating a lot of cash flow now from the market. It's a I would say, it's a very reassuring to see and of course and given.
Sure. We have a you know a lot of container ships on a portfolio to the larger container operators.
Very happy to see that there has been a very good discipline in the market and where they have been building buffers in it amidst the uncertainty on that and the disruption caused by COVID-19.
Okay.
So so yes, we are also looking at the containership assets.
And we'd be happy to add more also in that sector.
If we if we find the right asset at the right price and where we can get structure the rod to financing around it. So it gives us a good risk.
Thats that return so yes, absolutely.
And looking at your fleet some of the smaller bulkers and tanker vessels that are not on longer term charters is that consistent or will that stay consistency in your overall strategy where.
Match the financing to.
To the contract or how does that work out in the long term.
The.
Our reasoning for having the.
Vessels that are not employed on long term charters its not because we have sort of acquired them to keep them in the spot market typically.
Vessels that we trade into in the short term market has been assets.
That has been on longer term charters and that have come off those charters and because we have an operating platform that we can manage those vessels. If we had been a pure call. It financial profile, we would have to either re charter at what we think is at the bottom of the market or sell those assets instead, we can trade.
Into market and of course, our ambition is to find longer term charters as the market improves. So so that is really the reasoning behind it. We also have a call it variable gold at cash flow from the profit share arrangements, which you can say to a certain degree a similar you agree to maybe a little lower.
Base rates in exchange for getting Optionality relate linked to profit share, which is a way for us to.
Also capitalize on our on our strengthening market, but over time I think generally if you look at it over the years, it's been roughly 10% of the cash flow.
Okay.
On average from from I would say short term charters or the spot market.
On the predominant volume.
Volume for of cash flows in SFS has been driven by the longer term.
Great. Thank you very much.
Thank you.
The next question comes from the line of Gregg only sales quick question does your company name.
Yes, hi, Thank you and good afternoon everybody.
All in realizing you cant talk much about the seadrill restructuring.
Just curious you mentioned.
And the cash account Thats building.
When post.
The last and we were they look back the last time Seadrill came out of restructuring.
How long after that they're they're re emergence from restructuring was ship finance able to access.
That capital.
Or did you receive that payment.
Yes, Im not sure if I caught your right. There was some noise on the line here, but and if I read you correctly are you asking me how long a time it to proceed with to emerge from bankruptcy. What did you know I guess chartering.
Yeah correct.
How long because we won't know that but as I think about the process and maybe deferring or being very similar to what it was last time.
Mhm.
Post the reemergence, how long was it before you before ship finance received that that cash in that in that.
Okay, Yes, sorry.
I understand well at that time and this is this is back in 2017.
The charter rates at that time was was higher.
We also had a lot more financing at the time.
Yeah.
We did receive full charter hire all the way.
Through the chapter 11 process.
It was part of what we say the pre agreement between the stakeholders at the time that we would be paid full charter hire so the adjustment into charter hire and took effect when when that when seadrill emerge out.
Out of chapter 11.
Okay, Okay, and then and then just one other one for me around this.
Realizing that it's a much smaller piece of the portfolio this time around but but really as we think about this last time. This happened despite maybe there being opportunities in the market should.
Ship finance.
Hi.
My understanding my recollection was really stayed out of the market in terms of acquiring assets.
Is there any reason to think that this time that could potentially be different.
No I would say that was more coincidental.
We.
We have no intention so staying away from the market, we took out the financing on on one rig.
And we.
We have we still have good a good capacity to do new a new deals so just.
That is certainly not our intention but of course it all it all boils down to finding the.
Deals and doing them.
And of course, we want them to be truly accretive to distribution capacity.
Perfect. Okay. Thank you.
Thank you.
So I just had a question at this time Sir please continue.
Right.
[laughter].
Then I would like to thank everyone for participating in our third quarter Conference call and also tank is asset sales team for their tremendous efforts in a challenging time the disruption caused by COVID-19 situation both onboard the vessel Sandoz.
Sure.
Situation around the drilling rigs does remain unresolved as we have discussed today, but at least to two of the harsh environment rigs are producing significant cash flows for seadrill, which is which is very positive in the circumstances and we will remain very focused on the situation in order to create the best possible outcome for us.
Sure well on our stakeholders, but.
But our rigs are only part of the puzzle there. So we cannot control the timing for this solution, but we'll of course notify you all when there are developments if.
If you do have follow up questions. There are contact details in the press release, where you can get in touch with us through the Commtouch pages on our web page W.
CW W. Dot SFL core both call. Thank you.
Okay.
Ladies and gentlemen that does conclude teleconference. Citibank is dissipating you may now disconnect your lines. Thank you.
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Thanks.
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Hello.
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