Frontline Ltd.: Pumping Up the Volume

We view the recent $9.5 million en bloc acquisition by Frontline Ltd. of Cambridge’s equity interests in three special purpose tanker owning companies as the most fascinating deal of the year to date. Because the high yield debt involved in these deals is investment grade, the “reds” were circulated to a different group of investors and analysts. Further, it is interesting to note that the ratings for these deals were issued not by the shipping analysts at Moody’s or S&P, but by corporate finance analysts. One result is that details of these deals have remained largely outside of the purview of the popular shipping press.

Other than marveling at their ability to weave gold out of straw, we have taken a consistently negative view of Cambridge’s activities in the capital markets. In our opinion, long term success in shipping is achieved with real equity and real commitment to ownership. Recycled fees and commissions do not meet our definition of at-risk equity. We are uninterested in Cambridge’s motivations for selling other than to suggest that it is connected to recent activity involving Cambridge’s other deal, Navigator Gas Transport.

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