FSL Trust torpedoed by major lease defaults

Lessees have been given an ultimatum to pay until March 8 or risk repossession of the chartered vessels.

The defaulting lessees are wholly owned subsidiaries of PT Berlian Laju Tanker Tbk, and their obligations covers 12.8% of First Ship Lease Trust's total revenue for FY2011.

But FSL Trust assured that even if the defaults push through, it will still be able to service debt obligations under its loan agreement. Still, the defaults will have a "material impact" on the net tangible assets of FSL Trust, bringing it down to US$0.50 from US$0.53.

"FSL Trust Management Pte. Ltd. (“FSLTM”), as trusteemanager of First Ship Lease Trust (“FSL Trust”), wishes to announce that the lessees (the “Lessees”) of three chemical tankers, namely, Pertiwi, Prita Dewi and Pujawati (the “Vessels”), have defaulted on their lease payments under their respective lease agreements (the “Lease Agreements”) in February 2012. The Lessees are wholly-owned subsidiaries of PT Berlian Laju Tanker Tbk (“BLT”)," announced FSL Trust in a release.

"FSL Trust currently leases the Vessels, through special purpose companies (the “Vessel Owners”), under a 12-year bareboat charter each to the Lessees until 2018. Each Lessee is obliged to pay the relevant charter hire due under the relevant Lease Agreement on the first day of each calendar month. As of the date of this announcement, the Lessees have not made payment for the Vessels for the month of February 2012," it said.

"The obligations of the Lessees under the Lease Agreements are guaranteed by BLT pursuant to deeds of guarantee entered into between the respective Vessel Owners and BLT, the guarantor," it added.

"FSLTM is considering all options including, without limitation, repossessing the Vessels and enforcing the deeds of guarantees against BLT. Based on the current environment, alternative employment opportunities for the Vessels are available, albeit at lease rates lower than those contracted in the Lease Agreements. FSLTM already has technical and commercial management contingency plans in place," it said further.